Rosa-Maria Gelpi, Francois Julien-Labruyee. The History of Consumer Credit: Doctrines and Practices. New York: St. Martin's Press, 2000. xx + 190 pp. $59.95 (cloth), ISBN 978-0-312-22415-8.
Reviewed by Lendol G. Calder (Department of History, Augustana College, Rock Island)
Published on EH.Net (August, 2000)
Is credit good for us? Dante didn't think so. In his Inferno, we find usurers consigned to the seventh circle of hell, doomed to "roam round and round" among their fellow inmates, the blasphemers, murderers, sodomites, and others who practiced violence against God and nature. Dante doesn't say so, but he leaves us free to speculate that moneylenders continue to practice their trade in hell, lending money at interest to the damned. If so, it would make Visa's claim to be "everywhere you want to be" seem a little too modest! But enough of this credit bashing, plead the authors of this little volume on the history of consumer credit. According to Rosa-Maria Gelpi and Francois Julien-Labruyere, credit is too often made to be a scapegoat during times of social and economic crises, so that even today when we look more kindly on credit than Dante, consumer credit continues to be blamed for everything from business recessions to personal bankruptcies to society's moral degeneracy. It's enormously unfair, argue Gelpi and Julien-Labruyere, who invite us to accompany them on a "stroll through history" that will reveal just how good credit really is for us. As "the cornerstone" of economic growth (p. 84), as "one of the greatest promoters of social mobility" (p. 171), and as the "single greatest factor of social integration" (p. 95), they conclude that consumer credit is one of the most reliable indicators of advanced civilization, if not an important cause of it.
But if all this is true, why has consumer credit had to battle so hard and so long against a shameful stigma of wastefulness and wrongdoing to achieve a moral and economic legitimacy? Gelpi and Julien-Labruyere present their history as a search for the origins of the cloud of bad feeling that surround this most crucial institution of modern consumer societies. The crux of their argument is that present day attitudes about credit-attitudes rarely stated as propositions but that operate instead as a "mute yet active unconscious"-are outmoded and debilitating "hangovers" from an earlier era in the history of western societies, an era when social practices were inspired by theology and ethics rather than by the economy of free markets, as they increasingly are today. In other words, consumer credit struggles against a massive case of "cultural lag." The volume's subtitle-"Doctrines and Practices"-neatly summarizes the tale told in this book. Through the sixteenth century and beyond, legions of shortsighted theologians and philosophers tried to strangle credit in the noose of religious dogma, with the end result that credit was "more or less forbidden but more or less practiced because more or less necessary" (p. 95). But since the Reformation and Enlightenment, and primarily through the shining example of the Americans, religious doctrine has been replaced by economic practice as our fundamental social gyroscope, so that lending and borrowing are increasingly viewed more properly as economic concepts, free of unnecessary moral baggage. Today, in societies where economic "practice" is given primacy over moral and religious "doctrines," a bright future is being built on the basis of economic growth, responsible household budgeting and greater "self-actualization" through credit-financed consumption.
If all this sounds like a textbook case of the "Whig interpretation of history," well, it is, though of a refined and smartly written sort. Both authors are high-ranking officers for Cetelem, the French personal finance company that over the last five decades has worked to modernize European household credit on an American model (Gelpi is also Professor of Economics at the Free University of Lille). Given their day jobs, the authors' spirited defense of consumer credit is hardly surprising. Of the criticism of credit there is no end, which means that Gelpi and Julien-Labruyere are following a well-worn path blazed in the United States in the 1930s by the economist Morris Neifeld, who worked as a credit analyst for Beneficial. Neifeld, whose Personal Finance Comes of Age (1939) resembles the work under review here, labored tirelessly though his writings to elevate the status of his profession. But in terms of eloquence and wit, The History of Consumer Credit sets a new standard for defenses of consumer credit.
Still, glorifying the present at the expense of the past has its costs, and they are manifest here. The biggest problem is that the authors never really succeed in helping us to understand why so many otherwise smart people-from Aristotle to Ezra Pound-opposed on principle the lending of money at interest, or why their ideas resonated so long in the public mind. Consider the treatment given to John Calvin, himself an innovator when it came to new thinking about credit: "[Calvin's] work consisted in giving a new faith to the classes who, through their social skills, were destined to dominate the future. This supposes a relatively advanced economic organization, and Calvin built his moral system on such an organization" (p. 50). A page later, we are told, "For Calvin, the only good deed was worldly success" (p. 51). Reductiveness on this scale is not easy; one has to work hard at it. When every person and system of belief is viewed through the narrow lens of what is good for the development of credit, when economic progress and "social integration" into the wonders of consumerism are the only ends that count, it becomes impossible to understand what all the fuss over usury was really about.
If the history is whiggish, it is also mostly recycled, at least through the first eight chapters. Gelpi and Julien-Labruyere begin their story in Mesopotamia, where the Code of Hammurabi (1792-1750 BC) established the first known law defining and regulating usury. Moving briskly on, they describe the business of credit in ancient Greece, the Roman Empire, Gothic Catalonia (where we see the first documented case of a European pawnbroker, 1000 AD), medieval Italy (which established the first public pawnshops, known as monts-de-pietes, in the fifteenth century), northern Europe at the time of the Reformation, and the United States, whose experience is "central" to the history of consumer credit because, beginning in the nineteenth century, it "offered to build the future" on the installment plan. Based on standard secondary sources, this part of the story involves a familiar cast of villains and heroes. Among those who come off looking particularly stupid or close-minded is Aristotle, who, declaring money to be sterile, decried interest as being a revolt against nature (silly old Aristotle, who "has only value judgments to offer when it comes to economics" (p. 8). Other villains in this tale include the Hebrews, the first people to condemn interest-bearing loans; the Church Fathers, especially Saint Basil, who began more than 1000 years of a total ban on interest by the Church; Charlemagne, who declared the first secular bans on usury; Dante, of course; the Inquisition at the time of the Councils of Lyon (1274) and Vienne (1312); and Catholic Europe after the Reformation, which doomed southern Europe to centuries of economic decadence, thereby offering "a lesson in how to fail to modernize an economy, while retaining one's guilt feelings!" (p. 66).
Opposed to this deadwood are the heroes of modern credit, men who were smart enough to see through Aristotle and brave enough to relativize the Scriptural prohibitions against interest, recognizing that a new type of economy was coming into being where wealth was created, not just plundered or commandeered. These include Scholastic theologians such as Thomas Aquinas, the Reformers Luther and Calvin, and greatest of all, Enlightenment champions of reason and liberty such as Jeremy Bentham and Anne Robert Jacques Turgot. Lengthy quotations from the latter two figures are included in the text, as Gelpi and Julien-Labruyere recommend that all who are interested in contempor ary debates over consumer credit can do no better than to read Bentham's Defense of Usury (1787) and Turgot's Memoir (1770), which will persuade clear-thinking persons that the strict regulation of credit markets hurt the poor most of all while making criminals of everyone else.
Beyond the assertive and lively prose (which is marred in this English edition by a poor job of copy editing that allows too many misspellings and missing words), the strength of this book lies in the final two chapters. It is only recently that consumer credit has begun to receive from historians the attention it deserves. Part of the reason for this is that credit is a commerce deeply cloaked in confidentiality (as Gelpi and Julien-Labruyere point out, until recently the guiding principle of public relations for lenders was "to live happily you must live in secret"). What Gelpi and Julien-Labruyere bring to the history of consumer credit is valuable insiders' knowledge about the credit business in Europe over the last hundred years. Much of this information is interesting and new. For example, I was surprised to learn just how closely the European development of consumer credit has mirrored the history of credit in the United States, though with significant time lags between countries. Great Britain passed its first laws affecting consumer credit in the late nineteenth century, while Italy only did so in 1992!
This book seems to have been written primarily to influence the opinions of European policymakers in Brussels, who the authors would like to see taking a hands off approach to credit markets so governments can treat the causes of economic woes (e.g., high taxes, low investment) rather than mere symptoms (e.g., overindebtedness). This is a defensible wish, but there are risks involved when looking for a usable past, risks the authors seem unaware of. When packaged with facile claims such as this-"A healthy morality always coincides with commercial wisdom" (p. 55)-or with shaky historical claims such as this -- "The history of consumer credit in the United States is almost entirely free of historic influences" (p. 119) -- some readers will find even the credible claims in this book rather suspect.
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Lendol G. Calder. Review of Gelpi, Rosa-Maria; Julien-Labruyee, Francois, The History of Consumer Credit: Doctrines and Practices.
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