"The real S&L crisis [of the 1980s] was not a few deregulated hucksters but the complete shift of Americans' savings from banks to markets... In a titanic shift in the organization of American capitalism, banks had become service providers, not capital providers."
-- from "Borrow: The American Way of Debt"
The dynamism of a nation's economy means that it is constantly changing -- new products and services, expanded markets, creative entrepreneurship -- sometimes for the better but possibly also for the worst. The rise and fall of opportunity and output may be cyclical, prosperity and recession may be due to factors outside the economy, such as war or a changing birthrate. Sometimes economic development contains the seeds of decline; the dot-com revolution of the 1990s was one more example of an imploding technological revolution. And now the American economy is in a slow climb out of "the great recession" that saw the first decade of the 21st centuy fall victim to the souring of forces that made much of the 20th century a period of growth and optimism.
The ravenous beast was debt -- as nasty a four-letter word as any that shouldn't be spoken around children. The abundance of credit cards, home mortgages, auto loans and other forms of individual, corporate and government debt has become such a common burden that it may come as a surprise that until recently falling into debt was considered a serious moral failing, though one that the average person was unlikely to qualify for. Consumer debt is a distinctly 20th century product. The history of debt -- where those mortgages, charge accounts, credit cards and layaway plans came from and how they work -- has now been told in "Borrow: The American Way of Debt" by Louis Hyman, assistant professor in Cornell University's School of Industrial and Labor Relations. It is a companion volume to Dr. Hyman's earlier book "Debtor Nation: The History of America in Red Ink".
"Borrow" tells "how personal credit created the American middle class and almost bankrupted the nation." The book ranges from the activity of loan sharks to the contrasting policiesin the early days of Ford and General Motors, through the role of debt in bringing on the Great Depression of the 1930s and then to supercharging the post-war recovery. "The postwar suburb was a debtor's paradise," writes Professor Hyman. "Credit assumed a new role in this more volatile age, making up the difference between what we wanted and what we had." That consumer debt could be "securitized", made into bonds that could be traded like so many hog bellies.
"Borrow" sets out a number of changes to bring debt under control and to return the American economy to prosperity. "East access to creditis neither a good thing or a bad thing;" states Professor Hyman, "it depends on context. Credit is just one part of American capitalism." He proposes a Bureau of Business Security to establish standards of soundness in investment.