Louis Hyman's "Debtor Nation"

Louis Hyman attended Columbia University, where he received a BA in History and Mathematics. A former Fulbright scholar, he received his PhD in American history in 2007 from Harvard University. His dissertation received the Harold K. Gross Prize for best dissertation in history at Harvard and the Krooss prize for best dissertation in business history nationally. His new book, Debtor Nation, was revised and based on that dissertation during a fellowship at the American Academy of Arts and Sciences.

Hyman applied the “Page 99 Test” to Debtor Nation and reported the following:

Personal debt, over the past century, has moved from capitalism’s margin to its center, from the backrooms of loan sharks to the boardrooms of multinational corporations. Debtor Nation, the first history of personal debt to span the twentieth century, explains the connections between consumer borrowing, business investment, and government policies. My central argument attempts to answer the question, “Why are Americans of today so deeply in debt?”

Consumer credit, as we know it today, did not pre-exist the mass production economy after World War I, when usury laws were relaxed, commercial banks invested in consumer debt, and retailers began to profit on financing and not just selling goods. The true sea change in debt practices, however, followed World War II, as suburban Americans left mortgaged homes in financed cars to shop on retailers’ credit at shopping centers. The history of American debt practice, then, fundamentally entwines with the post-war prosperity, reshaping how we ought to think about that period’s economic legacy. My book shows how Americans came to be so comfortable with, and then dependent upon, borrowing during the postwar prosperity. Though in 1959 Nixon may have bragged to Khrushchev about the wonders of the modern kitchen, he left out how much was owed on the appliances.

On page 99, I am half-way through a chapter on World War II and the the attempt by the Federal Reserve to regulate consumer credit in war-time ― the now forgotten Regulation W. Regulation W restricted nearly all major forms of consumer credit during the war, but missed one that was to become the defining form of credit ― revolving credit. Revolving credit, the forerunner of today's credit cards, was so novel as to fall outside the regulation. “As the war wore on, businessmen who initially agreed to Regulation W in the name of patriotism saw opportunities to obey the regulation in name but to break it in practice,” spreading this new form of borrowing across the country. I shift the story of the origin of the credit card away from the odd expenditures of traveling businessmen (Diner's Club) to the main consumers in the economy ― housewive's shopping. In doing so, the true origin of credit cards can be in seen in “the larger structures of capitalism and public policy.” Though “Regulation W successfully curtailed the growth of consumer credit while it was in effect, [it] produced unexpected consequences for how businesses and consumers practiced debt, ultimately fueling the postwar credit boom.”

Debtor Nation shows how our contemporary financial practices arose, from the credit card to the mortgage-backed security, illustrating how the choices of policymakers and businessmen ― not the inevitabilities of the market ― brought our debt-driven economy into being.

Read an excerpt from the book, and visit the official Debtor Nation website.

--Marshal Zeringue