Buying on credit in 1920s America
Buying on credit in 1920s America
Borrowing Money to buy stuff? Nah! What’s that all about?
Talking about the Credit System, and how its changed America
You wake up in the morning with the birds chirping a wonderful song. You get out of bed with the hope of a brighter, better day. The paper sings of times roaring with a boom in the economy, finance, and assets. You have food, shelter, and clean water. Your life, as the times of today, is roaring. Ladies and gentlemen, we have officially entered our roaring the twenties. And good news for the middle class: it seems to be their era.
A consumer economy
That is what the experts are calling the economy of today. Today, the population has been acquainted with appliances, electronics, and conveniences that seemed but a distant memory some years ago. The end of the war made it possible for us to concentrate on industrial and economical development and ushered in a new era of concepts that have been foreign to us till now.
The most profound impact has been on the middle class, for whom household work has been revolutionized. The rolling up, dragging and beating of carpets has been replaced by vacuum cleaners. Electric irons have reduced the time taken to heat the iron on the stove to smoothen out your clothes. Washing machines have saved housewives the trouble of washing clothes by hand in a tub. What is most exceptional is that it all has been made incredibly affordable for the middle class (ushistory.org, 2015).
Still, there are some commodities that are considered luxury, and buying that would put a dent in a simple, blue-collar pocket. For a family with a single bread winner and many mouths to feed, it seems impossible to grace their home with the pleasures of technology. That, ladies and gentlemen, is where credit comes in to help you out.
What is credit?
While the concept of borrowing to buy something you want is frowned upon by many, the credit system has opened up numerous avenues for the average American of today. Buying on credit, or installment buying, refers to purchasing a product that you pay off gradually over a period (Sullivan, 2015). The product can be anything from television, washing machine, or even iron. All you have to do is approach the local retailer and demonstrate the ability to be able to pay off the product in installments. While the idea of borrowing appall many, the “buy now, pay later” notion has stuck with many, and is becoming increasingly popular in the current age (Credit History: The Evolution of Consumer Credit in America).
How can you buy on credit?
The process is incredibly easy: as mentioned before, all you need to do is demonstrate to the retailer that you will pay the product off in a period. Numerous departmental stores have opened lines of credit to facilitate the same. Additionally, you may also be offered installment plans, which will provide you with various options to pay off your debt to the retailer. The most common of these is the “twelve payment plan”, which will allow you to pay off the commodity in small installments payable on an agreeable date on every month, lasting for a year. Thus, if you find yourself unable to afford the lump sum, you may opt for clearing your debt within the span of a year (ushistory.org, 2015).
Productive and Consumptive debt
While the population of the nation might still be having trouble coming to terms with the idea of being in debt, moralists have debated the terms productive and consumptive debts, thus elaborating on the concept of credit even further.
Buying on credit to finance a venture that has considerable chances of being profitable is considered productive debt. For example, if the good dairy owner Mr. Smith buys land on credit for the purpose of setting up farm for his cattle, he goes into productive debt, because the land that he “borrowed” is being put to good use (Smith, 2015).
However, buying to satisfy personal wants is supposed to be consumptive. The practice is still frowned upon by many rural families, but the presence and the continued necessity of the latest appliances and services in almost every home have turned even the most stringent rural American over a new leaf. Now, families are venturing into larger debts, and not just ones from local departmental stores (Smith, 2015).
Has credit changed the definition of buying?
Who would want to splurge on a television up until some years ago? What middle-class woman would dream of fine chin knowing very well that her husband would never be able to buy it without going bankrupt? How many would frequent the neighbor’s house to listen to the daily news broadcast on the radio, because their home was devoid of one?
As the definition of need and want has changed, so has, experts say, consumer behavior and buying. What we considered a luxury had today become a necessity. What we considered spoils for the rich are now within reach of the middle class and essential for everyday work (Democrat, 2008).
It was only a few years ago, towards the end of the eighteen hundred, that borrowing to splurge on expensive items was an act favored by the rich. Those wanting to keep fine china, expensive appliances, or throw lavish parties were more inclined towards lending or taking money than the common man. The latter considered the same unimportant and non-essential. However, the difference that has arisen between the words “luxury” and “non-essential” has prompted even the common American to consider buying pricey commodities to keep in his or her house (Credit History: The Evolution of Consumer Credit in America).
Can we live without buying on credit? Probably yes, but it would hamper the development of the most important part of the great nation of America: the middle class. With more and more households buying televisions, an increasing number of Americans now have the chance to keep themselves abreast with news and entertainment anytime they want. With a significant rise in the purchase of washing machines, more American housewives will now have the chance to clean clothes without losing precious time, or money. The radio will reach a larger sect of people, and so will the refrigerator, thus eliminating the need to fill up the cooler time and again (Credit History: The Evolution of Consumer Credit in America).
The keyword here is more: everything is selling more, being purchased more. More money is being brought in, and convenience in winning out over struggle. With easy access to the credit system, families and people all over America now have a chance to buy better products and services with the option to pay for them as they can (Credit History: The Evolution of Consumer Credit in America).
In the long run, this system might become the backbone of the economy that is America today. The continuous inflow of cash every month will make sure that the retailer does not fall into poverty by loaning out his products. The increase in demand from customers will serve to keep up production, thus boosting the economy.
For the first time in history, more than fifty percent of our population is living in urban areas. More Americans are working in manufacturing than agriculture. Thirty-five percent of all households in the country have telephones. Thirty-nine percent have a radio. Work hours have decreased. Moreover, what has made all of this possible is the ability to be able to buy and have continued access to any commodity without the fear of having to sell oneself to afford it. The credit system has consolidated the economy to become one continuous, working clock that will only move faster to take America to new heights (Credit History: The Evolution of Consumer Credit in America).
BIBLIOGRAPHY Credit History: The Evolution of Consumer Credit in America. (n.d.). Retrieved July 17, 2015, from https://www.bostonfed.org/education/ledger/ledger04/sprsum/credhistory.pdf
Democrat, N. D. (2008, July 14). The 1920s Credit Bubble . Retrieved from Daily Kos.com: http://www.dailykos.com/story/2008/01/14/436037/-The-1920s-Credit-Bubble#
Smith, S. (2015). The American Dream and Consumer Credit. Retrieved July 17, 2015, from American Radio Works: http://americanradioworks.publicradio.org/features/americandream/b1.html
Sullivan, N. (2015). American Economy in the 1920s: Consumerism, Stock Market & Economic Shift. Retrieved July 16, 2015, from Study.com: http://study.com/academy/lesson/american-economy-in-the-1920s-consumerism-stock-market-economic-shift.html
ushistory.org. (2015). A Consumer Economy. Retrieved July 16, 2015, from U.S. History Online Textbook: http://www.ushistory.org/us/46f.asp