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How Did We Get So Indebted and What Can We Do About It?

Over the last century, over-borrowing has gone from shameful to commonly accepted. An expert explains what changed.

This story originally appeared at Salon.

In the US today, debt is ubiquitous. Whether it’s paying back thousands of dollars in student loans, using your Visa card for a pack of gum when you’re out of cash, or taking out a mortgage on a first home, it’s been woven into our financial system so tightly, that even when we suffer the sometimes cruel and unusual detriments of borrowing, we have little to no realistic impetus to stop. But it wasn’t always this way. In fact before the 20 thcentury, debt was a taboo, feared, shameful, and kept in the shadows. So what events and institutions brought debt from its meager beginnings to its central role in American life?

In his new book,  “Borrow: The American Way of Debt,” Cornell professor Louis Hyman writes, in essence, a biography of American debt. He traces debt through American history: from the late 19 th century, when unpaid dues meant public ignominy, to the 1920s, when the auto industry changed the face of borrowing to the mortgage fallouts that led the Great Depression to the invention of the credit card as we now know it, all the way to the current shambles of our national economic livelihood. Along the way we meet characters like the Henry Ford, the xenophobic inventor of the Model T whose scorn for the liberal age of borrowing got the best of him, and Lower East Side grocery clerk Joseph Miraglia, whose miraculous $10,000 spending spree in 1965 made history as one of America’s heftiest credit card blunders.

Salon got a chance to speak with Hyman last week about America’s long road into debt, the problem with applying morality to economics and, of course, that scene in “Pretty Woman” where Julia Roberts goes on a shopping spree.    

Your background is in history and mathematics. How did you become interested in debt?

When I was in graduate school I was fishing around for a history topic that hadn’t been done or worked on before. This was in 2003, before financial history became fashionable again and before people knew there was going to be a crisis.

Little did you know… or maybe you  did know, what would happen with the recession?

Unfortunately, as a historian of labor and business, I noticed that a lot of working people were struggling with debt. I thought it was a good topic to get some perspective on.  As I got into the topic it was something that lent itself well to the kinds of questions I that interested me. Historians look at how things actually are, rather than economists who are interested in how things ought to be. My work is in people’s choices, and how our choices are constrained by institutions. It lends itself to a more readable history than just a history of charts and graphs.

In the first chapter of the book you discuss how debt was extremely stigmatized in the 1920s. What was society’s moral view on borrowing then as compared to now?

People approach their checkbook not from a math point of view, but from a moral point of view. I think that’s really a key to understanding all of this. It is shocking how commonplace debt is today, but another difference between then and now is the financial infrastructure of debt. We are told that our grandparents didn’t borrow. That’s not true. People borrowed in the 19 thcentury, they just did it surreptitiously, illegally, or at the margins. It was always stigmatized. That stigmatization arose out of the belief that a mortgage or a debt could easily bankrupt you, or the economy would change, and you would lose everything. In the 1930s, ’40s, and ’50s the atmosphere around debt changed: New federal programs and financial institutions, from the FHA to department stores, enabled people to borrow more safely. So that fear that everything could be lost went away in the middle of the 20 th century. In the last 30 years that changed again. Those institutions born in this era of growth have persisted into our era of stagnation.

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