The Shift To A Consumption Based Economy Fueled By Credit Card Debt – Has It Been Good For America?
Sharon L. Secor
October 08, 2007
There has been a marked shift in the American attitude towards spending during the past century, one that has resulted in concepts of thrift being tossed to the wayside, as consumption rises up to rule the day. While this change had its roots in the late 19th century, as the Industrial Revolution really began to take hold in America, it really came into its own in the early part of the 20th century, when the mass production of goods became technologically possible. The buy now and pay later mode of spending that began fueling the consumption of consumer goods at the turn of the 20th century has been transformed to crushing credit card debt at the beginning of the 21st. It could lead one to wonder whether the shift to a consumption-based economy has been good for America.
A Change In The Philosophy Of Spending And Debt
With the sharp increase of consumer goods available in America in the early years of the 20th century, primarily due to technological advancements that made mass production possible on a much greater scale, came a change in the philosophy of spending and debt. With the ability to mass-produce came the need for mass-consumption. In order for the population to consume enough to support the new levels of production, a significant shift in the cultural concept of debt had to occur. Mass marketing was born.
In a New York Times article published on June 11, 2006, The American Way of Debt , Jackson Lears mentions a book by E.R.A. Seligman, written in 1927. Lears wrote that the book, The Economics of Installment Selling , played a significant role in “the abolition of the distinction between "productive" and "consumptive" debt.” He also pointed out that there were other benefits to encouraging the public to let go of the concept that one should refrain from taking on debt for things beyond the essential or engaging in debt that is nonproductive and purely consumptive. After all, as Lears wrote when discussing the ideas of economist Simon Nelson Patten, in his 1907 book, The New Basis of Civilization , “indebtedness could discipline workers, keeping them at routinized jobs in factories and offices, graying but in harness, meeting payments regularly.”
A productive debt is for something like a business or education, something that will produce or provide income. Debt for essentials would include a modest home. Consumptive debt is for things that would be nice to have, but are not necessities. Rather than saving for saving for nonessential goods and luxuries, practicing the sort of delayed gratification that is the foundation of sound fiscal planning, the spending trend took a decided turn towards the instant gratification of buy now pay later, never mind the interest rates or finance fees. Mass media helped to alter perceptions and expectations about what was necessary and normal. Mass marketing helped to blur the line between need and want. Profit increases were well worth what was spent on psychologists and social scientists to develop advertising campaigns and sales techniques to achieve those goals.
What The Shift Has Meant To Financial Health
With the surge in advertising designed to appeal to those with bad credit or no credit in need of loans, it would seem that the shift in spending behavior has not been particularly good for the financial health of the average person. In recent years, the level of personal savings has fallen into the negative numbers, something not seen to such a degree since the Great Depression . Yet, the number of homes with multiple televisions, often one for every room, wide screen televisions, multiple new vehicles, an assortment of electronics and gadgets, etc., has risen dramatically – as has consumer debt, despite the double digit rate of interest that accompanies a great deal of that debt.
Not only has the line between need and want been so effectively blurred that it seems perfectly reasonable to many to go into debt to have a large screen, plasma, high definition or some other technologically advanced television – an entertainment item – when there are two or three other perfectly working, albeit smaller, televisions in the house, but also have such perspectives affected even productive debt. The house that the average middle-class family of today believes it needs is much larger than those of half a century ago. That, of course, means that the mortgage consumes a greater percentage of the income and incurs a higher rate of debt. The concept of spending one’s way to prosperity is a myth and the culture of consumption has done nothing good for the financial health of the average American.
The Social Cost Of The Shift
There has been more than just a financial cost associated with this change of spending philosophy. Mass consumption has played a big role in what so many people today call a fiscal necessity – the two-income family. With both parents at work, the world has changed for children, and not for the better. Aside from all of the numerous difficulties and problems that result from a lack of supervision and having to be content with the leftovers of their parents energy and time, there is the simple fact that from the very start most American children are taught by example that things are more important than people.
In many cases, that second income goes primarily for consumptive debt. During the era when it was common for one parent to be at home raising the children, if that added income wasn’t absolutely necessary to provide essentials, life was lived in a much simpler fashion. Those parents felt it was worth not having a second car, a television in every room, and other assorted luxuries, in order to ensure that the upbringing of the children was done by someone who loved them, as opposed to a minimum wage stranger.
The statistics speaks for themselves in regard to how good for children this shift has been. The rates of child suicide, depression and other mental disorders, crime, pregnancy, STDs, drug use, and other social ills have increased steadily during the past 6 decades. How many Columbine-like shootings were there 50 years ago? 100 years ago? And, think about how much easier it was for children to access firearms back then. Many children received them as gifts from their parents. Families have not been served well by their membership in the cult of consumption.
While there’s not much that an individual can do about the overall trends in society, it is possible to change his or her own financial perspective and take charge of spending habits and debt. The old-school method of avoiding consumptive debt may be a step in the right direction, because clearly the new-school style of instant gratification via credit card debt and buy now and pay later has not been good for America, not in the broad societal sense and not for the individual.
A Change In The Philosophy Of Spending And Debt
With the sharp increase of consumer goods available in America in the early years of the 20th century, primarily due to technological advancements that made mass production possible on a much greater scale, came a change in the philosophy of spending and debt. With the ability to mass-produce came the need for mass-consumption. In order for the population to consume enough to support the new levels of production, a significant shift in the cultural concept of debt had to occur. Mass marketing was born.
In a New York Times article published on June 11, 2006, The American Way of Debt , Jackson Lears mentions a book by E.R.A. Seligman, written in 1927. Lears wrote that the book, The Economics of Installment Selling , played a significant role in “the abolition of the distinction between "productive" and "consumptive" debt.” He also pointed out that there were other benefits to encouraging the public to let go of the concept that one should refrain from taking on debt for things beyond the essential or engaging in debt that is nonproductive and purely consumptive. After all, as Lears wrote when discussing the ideas of economist Simon Nelson Patten, in his 1907 book, The New Basis of Civilization , “indebtedness could discipline workers, keeping them at routinized jobs in factories and offices, graying but in harness, meeting payments regularly.”
A productive debt is for something like a business or education, something that will produce or provide income. Debt for essentials would include a modest home. Consumptive debt is for things that would be nice to have, but are not necessities. Rather than saving for saving for nonessential goods and luxuries, practicing the sort of delayed gratification that is the foundation of sound fiscal planning, the spending trend took a decided turn towards the instant gratification of buy now pay later, never mind the interest rates or finance fees. Mass media helped to alter perceptions and expectations about what was necessary and normal. Mass marketing helped to blur the line between need and want. Profit increases were well worth what was spent on psychologists and social scientists to develop advertising campaigns and sales techniques to achieve those goals.
What The Shift Has Meant To Financial Health
With the surge in advertising designed to appeal to those with bad credit or no credit in need of loans, it would seem that the shift in spending behavior has not been particularly good for the financial health of the average person. In recent years, the level of personal savings has fallen into the negative numbers, something not seen to such a degree since the Great Depression . Yet, the number of homes with multiple televisions, often one for every room, wide screen televisions, multiple new vehicles, an assortment of electronics and gadgets, etc., has risen dramatically – as has consumer debt, despite the double digit rate of interest that accompanies a great deal of that debt.
Not only has the line between need and want been so effectively blurred that it seems perfectly reasonable to many to go into debt to have a large screen, plasma, high definition or some other technologically advanced television – an entertainment item – when there are two or three other perfectly working, albeit smaller, televisions in the house, but also have such perspectives affected even productive debt. The house that the average middle-class family of today believes it needs is much larger than those of half a century ago. That, of course, means that the mortgage consumes a greater percentage of the income and incurs a higher rate of debt. The concept of spending one’s way to prosperity is a myth and the culture of consumption has done nothing good for the financial health of the average American.
The Social Cost Of The Shift
There has been more than just a financial cost associated with this change of spending philosophy. Mass consumption has played a big role in what so many people today call a fiscal necessity – the two-income family. With both parents at work, the world has changed for children, and not for the better. Aside from all of the numerous difficulties and problems that result from a lack of supervision and having to be content with the leftovers of their parents energy and time, there is the simple fact that from the very start most American children are taught by example that things are more important than people.
In many cases, that second income goes primarily for consumptive debt. During the era when it was common for one parent to be at home raising the children, if that added income wasn’t absolutely necessary to provide essentials, life was lived in a much simpler fashion. Those parents felt it was worth not having a second car, a television in every room, and other assorted luxuries, in order to ensure that the upbringing of the children was done by someone who loved them, as opposed to a minimum wage stranger.
The statistics speaks for themselves in regard to how good for children this shift has been. The rates of child suicide, depression and other mental disorders, crime, pregnancy, STDs, drug use, and other social ills have increased steadily during the past 6 decades. How many Columbine-like shootings were there 50 years ago? 100 years ago? And, think about how much easier it was for children to access firearms back then. Many children received them as gifts from their parents. Families have not been served well by their membership in the cult of consumption.
While there’s not much that an individual can do about the overall trends in society, it is possible to change his or her own financial perspective and take charge of spending habits and debt. The old-school method of avoiding consumptive debt may be a step in the right direction, because clearly the new-school style of instant gratification via credit card debt and buy now and pay later has not been good for America, not in the broad societal sense and not for the individual.
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