The Consumer Credit Boom in Anglo-America:
A Cultural Political Economy
Dr Paul Langley
Senior Lecturer in International Politics
Division of Politics
School of Arts and Social Sciences
Northumbria University
Newcastle-upon-Tyne
NE1 8ST
United Kingdom
Tel: +44 (0)191 227 4481
Email: [email protected]
Draft paper – all comments welcome
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The Consumer Credit Boom in Anglo-America: A Cultural Political Economy
In the closing months of 2004, fears about the scale of consumer borrowing in the UK
reached fever pitch in the mainstream media. For the first time, the outstanding
financial obligations of households grew to over £1 trillion. While the lion’s share of
the £1.05 trillion owed by UK households at the end of November 2004 was related
to mortgage borrowing (£867 billion), it was the £58 billion owed by Britons to credit
card companies and the further £125 billion of obligations arising from other
consumer lending that attracted the media’s attention (figures from Financial
Services Authority 2005: 57). British households are far from alone, however, in their
consumer borrowing binge. US households have also extended their consumer
borrowing over the last three decades. According to Federal Reserve Board
estimates, the US household debt service ratio – that is, the ratio of required
mortgage and consumer credit repayments to disposable income – increased from
10.58% in the last quarter of 1980 to 13.75% in the third quarter of 2005. 1 Roughly
one-third of this increase is accounted for by the growth in required consumer credit
repayments. While household borrowing has expanded significantly since the late
1970s across industrialised societies as part of what Clayton (2000) terms ‘the global
debt bomb’, it is in the US and the UK that this consumer credit boom is most
pronounced and sustained. Households in the UK, for example, account for twothirds of the outstanding credit card obligations of the entire European Union
(Halligan 2005).
How are we to understand the consumer credit boom on both sides of the Atlantic?
The accounts offered by some high profile economists encourage us to focus on the
role of lax monetary, fiscal and regulatory policy decisions as the key enabling factor
(e.g. Warburton 1999). The views of these writers would seem to have been given
further credence in the first few years of the new millennium as US policymakers,
confronted by the bursting of the so-called ‘new economy’ bubble and the terrorist
attacks of 9-11, responded with a combination of interest rate and tax cuts. The
International Monetary Fund (2004), The Economist (2003, 2005) magazine and
numerous academics of finance (e.g. Garten 2005; Ferguson 2004; Swanson 2004)
provide, meanwhile, an explanation that turns on the importance of capital flows into
the US for financing a ballooning current account deficit in general and consumer
borrowing in particular. In the words of The Economist (2003), credit-fuelled
consumption in the US has become so significant to economic growth that the world
economy is ‘flying on one engine’. The dominant explanations of the consumer credit
boom in the UK and especially the US are, then, focused primarily on monetary
policy decisions and/or quantitative global movements of capital.
If we look across the social sciences for an alternative critical reading of the
consumer credit boom, two literatures present themselves. First, research in the field
of international political economy (IPE) has long stressed the ‘structural power’ of the
United States in finance (e.g. Strange 1988; Helleiner 1994; Germain 1997;
Seabrooke 2001). From the perspective taken by this literature, capital inflows into
the US to sustain consumption are not so much a consequence of the machinations
of the global capital markets, but a reflection of the centralisation of these markets in
New York and of the seignorage enjoyed by US policymakers. While questions of
power and politics are thus potentially restored to our understanding of US policy
decisions and capital flows, we nevertheless learn next to nothing about the making
of the consumer credit boom in everyday life. The story of the boom becomes a ‘topdown’ tale of the power of (US) state and financial elites. Yet as growing cross1
See http://www.federalreserve.gov/releases/housedebt/default.htm
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disciplinary research in what we might call ‘cultural political economy’ attests, the key
to understanding the emergence of the contemporary global economy is to recognise
change as necessarily situated, embedded and embodied in the spaces, practices
and identities of everyday life. I regard ‘cultural political economy’ as the wideranging attempt to reinvigorate political economy through a ‘turn to culture’. This is a
move to both respond to the neglect of ‘culture’ (understood as everyday ways of life)
in dominant and critical representations of the contemporary processes of global
change, including elevating the significance of cultural politics of dissent; and to take
‘the cultural turn’ seriously and thereby challenge the dichotomy that is typically
drawn in the social sciences between political economy approaches on the one hand
and social and cultural theory on the other. 2
Second, existing literature in Sociology that explores the development of consumer
credit would, at first blush, appear to have the potential to inform a cultural political
economy of the Anglo-American boom (e.g. Calder 1999; Klein 1999; Mandell 1990;
Olney 1991; Ritzer 1995, 2001; Shaoul 1997). The Sociology literature remains,
however, highly problematic. Derived from conceptual frameworks that are
dominated by Weber, Simmel, Bell and others, what motivates the scholars of
consumer credit is not a desire to understand consumer credit as such. Rather, they
tend to explore how the assumed inherent rationalities of credit relations bring a
semblance of order to the irrational self-gratification of consumption. Put differently,
consumer credit is understood in largely functional terms in the context of
consumption, as a material resource that makes further purchases possible and
which installs disciplinary obligations that prevent consumerism from spiralling out of
control. The result is that the current boom in consumer credit is represented as
primarily a consequence of structural changes in the economy and especially the
advance of the logics of consumer capitalism, and that the rationalities of modern
finance are assumed rather than subjected to critical scrutiny as constantly made and
remade in everyday settings.
This paper responds, then, to the somewhat paradoxical neglect of the
transformation of consumer credit itself in existing accounts of the contemporary
Anglo-American boom. Economists, the popular media, IPE scholars and
Sociologists all, in one way or another, cast the boom as a consequence of
developments or dynamics emanating from beyond the domain of finance in general
and consumer credit in particular. In what follows, I offer a cultural political economy
reading that brings together insights from those scholars of finance who draw upon
actor-network theory (Leyshon and Thrift 1997; McKenzie 2004) and the work of
Foucault (de Goede 2005; Knights 1997). This leads me to conceptualise AngloAmerican consumer credit as distinct cultural networks of modern finance made
possible through performative practices, calculative tools or technologies, and the
assembly of particular everyday financial subject positions. Changes within AngloAmerican consumer credit make possible a ‘boom’ or the lengthening, deepening
and intensification of these networks. Following the first two sections of the paper
which critically engage with the various existing accounts of the boom, the third
section outlines the innovations in the instruments and techniques of consumer credit
that contribute towards the contemporary remaking of networks of consumer credit
as rational, scientific and, therefore, legitimate. I concentrate on four calculative tools
that make the boom possible: revolving credit, authorisation and payment systems,
2
As such, ‘cultural political economy’ can be seen to include ‘cultural economy’ (e.g. Amin and Thrift
2005; du Gay and Pryke 2002), Marxist writers who explicitly engage with the ‘cultural turn’ (e.g
Jessop and Sum 2001; Gibson-Graham 1996), the rediscovery of everyday life by sociologists (e.g.
Highmore 2002; Paterson 2005), and recent attempts to create a dialogue between poststructural
International Relations theory and IPE (see, especially, de Goede, forthcoming).
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credit reporting and scoring, and asset-backed securitisation. The fourth and final
section of the paper turns to consider the assembly of everyday financial subjects in
networks of consumer credit, individuals who perform new forms of financial selfdiscipline and who express and communicate their freedom, aspirations and
individuality through the consumption of credit itself. In sum, I argue that the boom is
constituted through a transformation in consumer credit as a network of performative
social relations that combines new calculative tools with the summoning up of neoliberal financialised subjects.
Boom, Boom, Boom
Economic historian James Clayton (2000) has traced in quantitative terms the
massive growth in consumer borrowing in the G-7 societies since the late 1970s, as
increases in household borrowing outpace increases in real wages. Across the G-7
states, household liabilities as a percentage of household income rose from 53% in
1985 to 74% in 1996 (p. x). Such trends have been most pronounced and sustained
in the US and the UK. For example, US households’ outstanding obligations as a
percentage of GDP showed only a marginal increase from 11% to 12% between
1960 and 1970, exploding subsequently to reach 51% by 1980, 65% by 1990, and
69% by 1997 (p. 7). About half the total value of the outstanding obligations of US
households are accounted for by mortgage practices, with the value of credit card
obligations rising five-fold since 1980 to account for an increasing share of the total
(p. 29). By way of comparison, outstanding sovereign and corporate obligations
stood at 60% and 41% of GDP respectively in 1997 (p. 7). Put another way, during
the last three decades, US households increased their indebtedness by 450%
compared with a 55% increase for the federal government and a 17% increase for
corporations (p. 32). There is a sense, then, in which this period has witnessed a
partial repositioning of individuals and households in the financial economy. As Doug
Henwood (1998: 59) puts it, ‘In the official mythology, the credit markets exist to
collect the savings of households in order to lend to businesses that need other
people’s money in order to make productive investments that allow them, and the
whole economy, to grow’. This is no longer simply the case, as the obligations of US
households themselves exceed those of government and the corporations.
For Economists and financial commentators such as Peter Warburton (1999), the key
to the Anglo-American consumer credit boom has been the policies of the US
Federal Reserve and the Bank of England. Here the ‘victory’ of the central banks
over the last twenty years or so in taming inflationary pressures as the assumed
‘precondition for strong and sustainable economic growth’ (p. 15) is a hollow one.
Alongside the use of short-term interest rates in order to restrict bank borrowing and
slow the economy and cuts in government spending, central banks stoked the capital
markets through sovereign bond issues, de-regulation and liberalisation. A ‘cultural
transformation’ (p. 16) and ‘reckless credit expansion’ (p. 18) has followed from a
preoccupation with fighting inflation in the ‘real’ economy which, for Warburton,
leaves borrowers and the financial markets beyond the control of the sovereign
authorities.
In contrast with Warburton, The Economist (2003, 2005) magazine’s recent surveys
and special reports on the world economy provide an alternative explanation of the
US consumer credit boom. Here the emphasis is on the extent to which world
economic growth has come to rest on the spending and borrowing habits of US
governments and consumers. Echoing a phrase attributed to Lawrence Summers,
Treasury Secretary under President Bill Clinton, The Economist (2003) suggests that
the world economy is ‘flying on one engine’. However, while the US contributed to
near on 60% of world GDP growth between 1995 and 2002 through its credit-fuelled
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spending (2003: 4), its current account deficit has ballooned. The single largest
creditor nation in the world as recently as only 1980, the US has become the world’s
biggest debtor and the growth in US obligations to the rest of the world continues to
accelerate. For example, US obligations to the rest the world grew by $200 billion in
1998 and by $700 billion in 2004. Put differently, the last quarter of a century has
witnessed what the magazine calls a ‘great thrift shift’ (The Economist 2005) from the
US to the rest of the world and primarily from West to East. In our terms, the US
consumer credit boom - and, given Britain’s growing current account deficit, the
Anglo-American boom – has and continues to made possible by capital inflows from
Germany, oil-exporting states, and especially Japan and the rest of Asia.
It is the sustainability of the US borrowing boom that is the greatest concern for the
International Monetary Fund (2004) who warn that a rupture in the pattern of capital
flows into the US poses the single greatest threat to what they call ‘global financial
stability’. The Economist is also currently debating the sustainability of the boom. A
few years ago, it stressed that
the world economy cannot continue indefinitely to reply on American spending.
The chances are that Americans themselves, weighed down by the burden of
high debts, will eventually start to save more. But even if they do not, foreigners
will become increasingly unwilling to fund American spending (2003: 3).
More recently, however, the magazine states that while world economic imbalances
will eventually come to an end, it is not certain that ‘foreigners’ will necessarily
become ‘increasingly unwilling to fund American spending’. This slight shift in The
Economist’s position would seem to reflect the influence on current debate of Ben S.
Bernanke, President Bush’s choice to replace Alan Greenspan as Chairman of the
Federal Reserve. Bernanke has propounded the so-called ‘global saving glut’ thesis.
This suggests that the US (and by extension, the UK) has been able to attract capital
inflows during a period in which interest rates have hit historic lows (i.e. since 2000)
precisely because saving rates elsewhere exceed rates of investment. Following
Bernanke’s intervention, The Economist and many high profile and influential
Economists are currently debating whether the savings glut is ‘a temporary and
largely cyclical phenomenon’ or ‘the result of long-term structural shifts and is likely to
last for years, perhaps decades’ (The Economist 2005: 5). For those who take the
former position, the US and world economies are heading for a so-called ‘hard
landing’, with opponents of this view such as Bernanke predicting a ‘soft landing’.
Either way, The Economist leaves us in little doubt that the key to understanding the
Anglo-American consumer credit boom lies in global capital movements in general
and capital inflows into the US in particular.
The explanations of the Anglo-American consumer credit boom offered by
Economists and the popular media that focus our attention on monetary policy
decisions and/or quantitative global movements of capital are, I would contend,
partial and limited. Whilst the rate of interest is important to borrowers and would-be
borrowers, a narrow focus on monetary policy suggests that the growth of consumer
credit is a largely ephemeral development that will disappear when central bankers
finally come to their senses. Equally, while inflows of capital into the US and to a
lesser extent the UK are undoubtedly highly significant in sustaining the consumer
credit boom, the ‘flying on one engine’ and ‘global savings glut’ theses represent the
world economy as a smooth single marketplace where power and politics do not
impinge on movements of capital. Indeed, research from the field of IPE brings a
concern with power and politics to the heart of our understanding of both US
monetary policy and capital inflows into the US. Eric Helleiner (1994) reminds us that
US state decisions to withdraw from the Bretton Woods system of fixed exchange
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rates, devalue the dollar, and set in motion the deregulation of financial markets from
the early-to-mid 1970s were an expression of US power and seignorage. Not
dissimilarly, Randall Germain (1997) suggests the shift in the position of the US in
global capital markets that began in the 1980s - from the single largest creditor to the
single largest debtor nation - reflects a transformation in, rather than loss of,
American power. Both Helleiner and Germain draw on and reinforce Susan Strange’s
(1988) highly influential thesis that the US enjoys significant ‘structural power’ in
finance. In sum and contrary to The Economist, for IPE scholars it is not an irony that
the position of the US as ‘consumer of last resort’ in the world economy is financed
by those outside the US, but a direct consequence of US power.
Despite the undoubtedly contribution of IPE scholars to research into US financial
power, the consumer credit boom rarely features explicitly in their work. One notable
exception is Len Seabrooke (2001) who understands the borrowing by US
consumers over the last three decades through the lenses supplied by Strange’s
notion of ‘structural power’ and Weberian historical sociology. For Seabrooke, US
state power in finance rests on both the global reach of Wall Street and the inclusive
socialisation of disintermediated saving and borrowing practices (or what he calls
‘direct financing’) in America during the 1980s and 1990s. As such, he characterises
expanded consumer borrowing during the period 1982-91 as an important
contributory factor in on-going US structural power in finance (pp. 112-150). In his
terms,
… new levels of indebtedness increased the need for financial innovations and
embedded finance further into American society, particularly the American
middle classes. Ongoing national activism forced intermediaries to compete
against each other and to produce innovations in the domestic system that then
provided competitive advantages in the international system. The 1980s were
thus an era of indebted innovation (p. 113).
While providing an insightful analysis, Seabrooke’s account of the ‘embedding’ of
finance in US society, including the making of the consumer credit boom, remains
extremely limited from a cultural political economy perspective. Despite an expressed
Strangean interest in ‘structural’ as opposed to ‘relational’ forms of power, power
here continues to appear as ‘power over’, a resource wielded in a centralised and
rational utility-maximising fashion by the US state as the key collective agent. For
Seabrooke (2001: 17), for example, power is defined as the capacity of the US to
access capital and shape the preferences of other states in the making of global
finance. So, although IPE scholarship begins to restore questions of power and
politics to our understanding of the policy decisions and capital flows that contribute
to the consumer credit boom, we nevertheless learn very little about the making of
the boom in everyday life. The story of the consumer credit boom becomes a ‘topdown’ tale of the power of (US) state and financial elites, and the constitution of the
boom in the spaces, practices and identities of everyday life is regarded, at best, a
second order issue.
The Sociology of Consumer Credit
Existing literature on the Sociology of consumer credit would seem, at first blush, to
be well placed to contribute towards an alternative cultural political economy reading
of the contemporary boom. The Sociological literature remains nevertheless highly
problematic when it comes to understanding the constitution of the boom. What is
perhaps most striking about this literature is that, for the most part, it is not motivated
by a desire to understand consumer credit as such. Rather, its starting point tends to
be a concern with the place of credit within consumption. Developments in consumer
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credit are, therefore, understood in largely functional terms as the outcome of the
advance of the structural logic of consumerism. A particularly stark example is
provided by Clayton (2000: 51):
Over time, consumption has come to hold a position of exclusive predominance
among competing interests. It drives all before it. Our rapidly expanding
entitlements are derivative of this larger desire to consume. Debt is the vehicle
by which greater consumption is made possible … particularly when real
incomes are falling. Therefore, if we really want to understand the
fundamentals of debt, we must consider … them as part of the larger drive
toward ever increasing consumption.
Meanwhile, for Medoff and Harless (1996: 15-6), it is only the struggle to ‘maintain a
standard of living’ based on ‘consumer habits’ that can explain why US individuals
and households have continued to spend despite falling real wage rates. Similarly,
for Klein (1999: 3) ‘consumer acceptance of credit cards and instalment debt’ is
‘directly linked with the desire for symbolic goods in a consumer society’.
While appearing in the first instance in somewhat functional terms as a material
resource that makes consumerism possible, consumer credit is also understood in
the Sociology literature as giving rise to disciplinary obligations of repayment. Seen
through a range of conceptual lenses that feature Weber, Simmel, Bell, Veblen,
Durkheim and others, inquiry tends to focus on how the assumed inherent
rationalities of credit relations bring a semblance of order to the irrational selfgratification of consumption and thereby prevent consumerism from spiralling out of
control. For Calder (1999), for example, the moral legitimation of a credit boom lies in
the creation of a widespread awareness that consumption on credit is not simply a
self-indulgent and ‘easy’ option, but actually requires ‘discipline, hard work, and
channelling of one’s productivity toward durable consumer goods’ (pp. 30-1). He
continues, disagreeing with Daniel Bell’s (1976) classic work on the apparent
disjunction between cultures of consumerism and economies of work, arguing that ‘if
there is a hedonism in consumer culture, it is a disciplined hedonism’ (p. 31). This is
because, as he puts it,
consumer credit has done for personal money management what Frederick W.
Taylor’s scientific management theories did for work routines in the factory. It
has imposed strict, exogenous disciplines of money management on
consumers … Because ‘easy payments’ turned out to be not so easy – work
and discipline were required to pay for them – consumer credit made … the
culture of consumption less a playground for hedonists than an extension of
Max Weber’s ‘iron cage’ of disciplined rationality (Calder 1999: 28-9, my
emphasis).
Klein (1999: 2) concurs, casting consumer credit as ‘creating social control through
implicit and explicit controls on the consumption of material and experiential social
products’. The latter refers to the ‘tourism and subsequent escapism’ offered by such
attractions as the Las Vegas casinos, Disneyland and the Epcot Center. For him, a
‘significant dialectical relationship’ (p. 3) is created through consumption on credit:
‘On the one hand, our lives benefit greatly from the privileges of acquiring much
needed products without instant financial responsibility. …Individuals can live
spontaneously and fulfil their momentary desires. On the other hand, …consumer
credit can potentially control our lives’. Not dissimilarly, Ritzer (1995, 2001) considers
the rationalization of consumer society that is carried forward by the credit card
industry. Rationalization in this sense is a de-humanising process whereby systems
are put in place (i.e. credit scoring) that focus narrowly on the optimum means to
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ends. As he asserts, ‘The general trend within rationalized societies is to take
decision making power away from people (customers, shopkeepers, and credit card
company employees alike) and give it to nonhuman technologies’ (Ritzer 2001: 88).
Overall, the strong tendency within the Sociological literature to understand
consumer credit almost exclusively in relation to consumerism undercuts its capacity
to provide the basis for an adequate understanding of the Anglo-American consumer
credit boom. From the perspective of this literature, changes in consumer credit itself
are largely a function of and determined by the on-going development of consumer
capitalism as a unified totality. Not dissimilarly, a recent paper by Montgomerie
(2005) draws on the work of regulation theorists such as Boyer (2000) to view the
boom as a function of the structural transition of capitalism from one (Fordist,
productionist) growth regime to another (post-Fordist, ‘finance-led’) growth regime.
Yet, as Thrift (2005) is at pains to stress, it is highly problematic to ‘see capitalism as
a kind of metaphysical entity, a grid of power relations rather like interconnected ley
lines which lie under the social landscape and dictate much of what it is about’ (Thrift
2005: 1). Rather, emphasis should be placed on the contestation, contingency,
mutation and performance of contemporary capitalism ‘as a set of networks which,
though they may link in many ways, form not a total system but rather a project that
is permanently “under construction”’ (p. 3).
Furthermore, as cultural political economy approaches to finance that draw on actornetwork theory (Leyshon and Thrift 1997; MacKenzie 2004) and Foucault (de Goede
2005) suggest, networks of consumer credit are themselves made possible through
performative practices, calculative tools and technologies, and the assembly of
financial subject positions (see Langley 2005a). While rationality is indeed a strong
tendency in modern finance, it nevertheless has to be made and remade in specific
forms in more or less discrete networks. Understanding the Anglo-American boom
requires, then, that we examine the ways in which changes in the networks of
consumer credit have and continue to support a ‘boom’ or the lengthening,
deepening and intensification of those networks. It is to these changes that the paper
now turns.
The New Calculative Tools of Consumer Credit
While the expansion of consumer credit is ultimately a function of consumption for
the Sociology literature, what also comes through is a sense that innovations in the
techniques of consumer credit are also necessary. Lendol Calder’s (1999) Financing
the American Dream makes it apparent, for example, that the roots of many
contemporary innovations are to be found in what he calls ‘the credit revolution’ (p.
291), a period that began in the 1920s and which, after considerable interruption by
the Depression and world war, flowered in the 1940s and 1950s. Innovations in what
Calder calls the ‘methods’ and ‘sources’ of consumer credit, most notably the
instalment plan and new market entrants such as car producers and department
stores (p. 17-20), were key to consumer credit relations during this period. Here
Calder deliberately builds on Daniel Bell’s (1976: 21) observation that ‘the greatest
single engine in the destruction of the Protestant ethic was the invention of the
instalment plan, or instant credit’. Calder’s focus on the 1920s is also shared by
Olney (1991) in her study of the consumption of durable goods, although she is
careful to suggest that the initial development of the instalment plan by General
Motors was motivated primarily by seasonal production fluctuations and not by the
instigation of a mass marketing strategy. Looking at the similarities between the
credit revolution and the contemporary period, Calder (1999: 291-2) thus identifies
the presence of ‘more methods’ (e.g. revolving credit, the all-purpose credit card) and
‘more lenders’ (e.g. large retailers, third party payers such as American Express, and
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non-bank credit card issuers such as General Electric) (see also Mandell 1990;
Ritzer 2001).
Understanding the significance of such innovations to the consumer credit boom
requires, however, that we subject their place in the networks of consumer credit to
some further theorisation and analysis. Approached from a cultural political economy
perspective, the instruments, techniques and institutions present in different financial
networks should not be abstracted from the representations through which they are
constituted and made possible. As such, different financial networks ‘depend for their
upkeep on often distinctive concepts, texts and instruments’ which must be
‘constantly practised’ (Leyshon and Thrift 1997: 189, 191). More specifically, as de
Goede’s (2005) Foucaludian-inspired intervention reminds us, historical processes of
representing and knowing modern finance are necessarily bound up with the
exercise of power and tend to exclude alternative conditions of possibility. Depoliticising and technologising processes are at work which, no matter how
contingent, controversial or contradictory, tend to create modern financial networks
as ‘normal, natural and, most importantly, scientific (p. 3, original emphasis). Key to
the representation and constitution of modern financial networks as scientific is,
following Callon (1998), the performance of calculations that are embedded in and
configured through ‘calculating tools’ that are more or less specific to particular
networks. In this section of the paper, then, I want to stress the ways in which the
Anglo-American consumer credit boom is constituted through the development of
four calculative tools or technologies: revolving credit, authorisation and payment
systems, credit reporting and scoring, and asset-backed securities.
Revolving credit
While store cards provided by retailers and later by oil companies and the airline
industry date from the early twentieth century, these early forms of credit card were
essentially ring-fenced instalment plans settled on a monthly basis. The universal
third-party credit cards that emerged in the post-war period provided, meanwhile, a
portable line of credit that was extended by a financial institution and not by the
producer or retailer as merchant. The first universal third-party credit cards - the
Diners Club Card of 1949 and the American Express (Amex) card of 1951 in the US
and the British Hotel and Restaurant Association (BHR) card in the UK – were
conceived of as a useful facility for the subsistence and accommodation
requirements of the travelling salesman. The ‘universality’ of these cards was heavily
circumscribed, and issuers or providers were non-banks who earned fees from both
cardholders and merchants in return for bringing them together. As with store cards,
the outstanding balances of the holders of the first third-party credit cards had to be
settled at the end of each month (Mandell 1990: 1-10). The place of the universal
credit card in making possible the contemporary consumer credit boom turns, then,
on its reconfiguration through the calculations that provide for revolving credit. As
Montgomerie (2005) stresses, revolving credit creates a distinct and ongoing network
of relationships between individuals and card issuers and companies that are not
mediated by the merchants that sell the goods and services that are purchased on
credit.
The first universal credit cards with revolving credit facilities were provided by Chase
Manhattan and Bank of America in 1958, utilising a tool that had been used in the
late 1940s by the likes of Gimbel’s and Bloomingdale’s on the accounts of low-tomiddle income store cardholders who struggled to settle their accounts at the end of
each month. The embedding of revolving credit calculations within the consumer
credit network has, however, been subject to considerable contingency and therefore
took several decades. For example, Chase Manhattan’s credit card plan which
9
featured 350,000 cardholders and 5,300 retailers by the end of its first financial year
in 1958/9 collapsed in 1962 due to high operating costs and bad debts (Mandell
1990: 29; Klein 1999: 28). More broadly, issuers’ opportunities to profit from universal
credit cards with revolving credit facilities remained circumscribed by several factors
during the 1970s including regulations (e.g. interest rate ceilings 3 , limits on lending
by income category), relatively high rates of inflation, and the attitudes of the main
merchants who shunned universal cards in favour of their own store cards (Manning
2000; Mandell 1990: 48-9). It was not until the 1980s that the performance of
revolving credit calculations by issuers and cardholders became the norm in
consumer credit networks. In the US, for example, the total value of outstanding
revolving credit increased from $30 billion in 1977 to over $627 billion by 2000
(Durkin 2000), and has subsequently continued to rise.
For the issuers of universal cards, revolving credit calculations have become
increasingly central to the profitability of their business. As Guseva and Rona-Tas
(2001: 635) put it, ‘the goal of the credit card business is to extend for as long as
possible the period during which interest is charged on a purchase, as interest is the
richest source of profit’. Issuers of cards can make profits in three main ways: by
charging annual fees to cardholders, through receipt from merchants of a small
percentage (usually 1-2%) of the value of each transaction made using their cards,
and from the interest paid by cardholders each month on their unpaid or revolving
balances (Ritzer 1995: 35-6). In the US, where the major card issuers such as
Citigroup, Chase Manhattan, Bank of America, Maryland Bank of North America
(MBNA) and First Chicago have come to face stiff competition from non-banks such
as General Electric (GE Capital) since the mid-1980s, the charging of annual fees is
now rare on standard cards. Similar competitive pressures are also at work in the
UK, where Barclays, HSBC, Lloyds TSB, Natwest and Halifax face challenges from
issuers as diverse of Virgin, Marks & Spencer and Tesco. That said, penalty fees for
late payment or exceeding credit limits have, for example, become more common
(House of Commons Treasury Select Committee 2003: 30; McGeehan 2004). The
growing volume of purchases made on credit cards more broadly has also put
pressure on transaction fees. However, the experience of the 1980s proved highly
significant for the credit card issuers. The relatively high interest rates that prevailed
for much of the decade appeared to have little effect on cardholders who continued
to increase their unpaid monthly balances. The issuers took advantage, and as the
‘eighties wore on, the interest they charged on revolving credit came to bear little or
no relation to the prevailing rate of interest. For example, between 1980 and 1992,
the Federal funds rate fell from 13.4% to 3.5% while the average credit card interest
rate actually rose from 17.3% to 17.8% (Medoff and Harless 1996: 12). Credit card
issuers also shifted the focus of their marketing campaigns from so-called
‘convenience users’ who pay off their account in full at the end of each month to
‘revolvers’ who were offered increased credit limits, reward schemes, loyalty
programmes and, more recently, interest free periods on balance transfers from one
card to another. By the mid-1990s, then, 80-90% of the profits made by credit card
issuers came from interest paid by cardholders on their unpaid balances (Medoff and
Harless 1996: 12; Guseva and Rona-Tas 2001: 636).
Authorisation and payment systems
3
Prior to 1978, many US states imposed ceilings on the interest rates chargeable on unsecured credit.
These usury laws came to an end, in effect, with the Marquette decision taken by the Supreme Court in
that year. The decision held that usury laws only applied to credit card issuers in the state in which they
were located, and not the state in which the cardholder was located. Issuers therefore re-located their
credit card operations to those states without usury laws, thereby undermining the effectiveness of laws
elsewhere (Watkins 2000).
10
As Jeacle and Walsh (2002) make clear, the first store cards issued by US
department stores in the 1920s corresponded with highly significant transformations
in authorisation and payment arrangements. The numbered cards provided a means
for identifying the cardholder, creating a ‘de-personalised’ alternative to simple
familiarity between the merchant and their customer. Cardholder’s accounts were
also reorganised, as individualised index card systems replaced the store-wide
ledger. This made it possible to simultaneously check the credit lines of customers
and record payments at the point of sale. The gradual introduction of today’s
universal third-party credit cards and their revolving credit facilities has similarly
required the development of authorisation and payment technologies, namely and
primarily the systems operated by Visa and Mastercard.
Bank of America’s BankAmericard operation was the first to begin to establish a
national network in the US from 1966. In one respect and in the context of regional
banking restrictions, this national expansion rested on the BankAmericard symbol
and brand being licensed to other issuing banks. Indeed, by 1971 National
BankAmericard Inc. (renamed Visa in 1976) was established as a separate legal
entity from Bank of America, a joint venture involving member banks in a structure
that limited the obligations and liabilities of the partners. Today Visa has 21,000
member financial institutions across 300 countries and territories. 4 Indeed, the rebranding of BankAmericard as Visa was explicitly motivated by a strategy to shed its
obvious American heritage for the purpose of global expansion. In a parallel set of
developments, other card issuers formed a competing US national network called the
Interbank Card Association which became known as MasterCharge in 1969 and
MasterCard in 1980 (Mandell 1990: 31). Barclay Card, which was the largest single
national network in the UK at the time, linked up with Visa in the 1970s, while the
UK’s Access universal card system shortly afterwards became part of the Interbank
and then MasterCard network.
While the national and global expansion of Visa and MasterCard rests in part, then,
on their standing as credit card brands that are franchised to issuing banks, it has
nevertheless also required the installation of vast authorisation and payment systems
which link the terminals, tills and ‘cash registers’ of retail merchants that read the
individual information on each card’s magnetic strip. In the words of Visa’s corporate
vision, for example, they seek to be ‘The World’s Best Way to Pay’:
Visa … is more than a card and more than credit. Visa-branded products and
services represent the most secure, convenient and reliable forms of payment
that enable consumers to freely conduct commerce anytime, anyplace, by any
means. 5
It is now the widely accepted common sense amongst retailers that the introduction
of terminals in order to enable credit and debit card transactions will increase sales
volume – the amount of cash in a wallet or purse places a ceiling on the value of a
possible purchase. Such a set of assumptions are, for example, currently driving the
introduction of wireless terminals by mobile merchants (e.g. plumbers and pizza
delivery companies) (Kingson 2005). More broadly, the whole edifice of so-called ‘ecommerce’ as a ‘cashless economy’ has entailed massive investment in the
development of specific and ‘secure’ online authorisation and payment systems. Yet
the widespread introduction of terminals and systems and, therefore, the embedding
and reconfiguring of consumer credit networks, has been gradual and was initially
4
5
http://www.usa.visa.com/about_visa/about_visa_usa/index.html
http://www.usa.visa.com/about_visa/about_visa_usa/corporate_profile.html
11
highly contingent. For example, credit card use in America’s principal department
stores only took hold once J.C Penney signed an agreement with Visa in 1979 and
began to introduce terminals and accept cards (Mandell 1990: 48-9). Store cards and
credit cards issued by the main US retailers continued to outnumber those carrying
the Visa and MasterCard logos through to the mid-1980s, while the total value of
sales paid for using Visa cards doubled between 1985 and 1988. 6 Meanwhile, in the
UK, the major high-street retailer Marks & Spencer refused to accept third-party
credit cards into the late 1990s.
It is perhaps easy to forget that the act of swiping or inserting of a credit card at a
merchant’s terminal - probably the signature performance of the Anglo-American
consumer credit boom - is only made possible by the intermediary technologies of
Visa and Mastercard which, in effect, bring the merchant, their bank and the card
issuing bank together in a calculative moment that typically lasts between 8 and 20
seconds. From initial swipe to the completion of the sale, checks on whether the card
is known to have been stolen and whether the sale breaches the credit limit of the
card holder or deviates from their usual purchase patterns serve to authorise the
transaction. Confirmation of identity is provided by the cardholder through either
signature or the entry of a ‘personal identification number’ (PIN). The obligations
between the card issuer and the merchant’s bank that arise from a sale are,
furthermore, cleared through payment systems which offset the sum of the multiple
obligations that are likely to exist between the two institutions (Mandell 1990: 61-2).
Should a purchase be made using a debit card, these payment systems provide for
the instantaneous transfer of funds. VisaNet, the world’s largest authorisation and
payments system, currently processes more than 3,700 transactions every second at
its peak and comprises enough fibre optic and communications cable to encircle the
globe nearly four hundred times. 7
Credit reporting and scoring
Alongside revolving credit and authorisation and payment systems, the calculative
tools of credit reporting and scoring have made possible the transformation of
consumer credit networks and the associated boom in borrowing. The significance of
these tools to the contemporary networks of consumer credit arises from the ways in
which they enable issuers to address uncertainties over whether cardholders will
meet their outstanding obligations in the future. Based upon a critical reading of
Frank Knight’s (1921) classic investigation of indeterminacy, the category of ‘risk’ can
be seen as distinct from ‘uncertainty’, the former as the statistical, rational and
predictive calculation of the future and the latter as non-calculable future volatilities.
Techniques and tools for calculating ‘risk’ – in this instance, credit reporting and
credit scoring that figure and manage so-called ‘credit’ or ‘default risk’ - thus provide
a means for feigning control over a necessarily uncertain future (cf. Reddy 1996). As
Guseva and Rona-Tas (2001: 623) have it, ‘Unless uncertainty is transformed into
risk so that rational calculation becomes possible, general-purpose, revolving
consumer credit cannot develop on a mass scale’.
Through to the last few decades of the 20th century in the US, uncertainties
surrounding future repayments by consumers tended to be managed by the
merchants themselves who kept open-book accounts for long-term and well-known
customers. The significance of ‘trust’ and ‘reputation’ in lending decisions was
supplemented by early forms of credit reporting, that is, (at this time) the practice of
collecting information about borrowers’ character and habits from key members of
6
7
http://www.usa.visa.com/about_visa/about_visa_usa/history.html
http://www.usa.visa.com/about_visa/about_visa_usa/index.html
12
their communities (e.g. attorneys, bank clerks, postmasters, etc.) (Guseva and RonaTas 2001: 629). Uncertainties arising from lending through store cards and the first
universal third party credit cards were managed in a similar manner. In the UK,
meanwhile, retail bank networks and their managers provided local sites for the
gathering of embodied tacit knowledge on prospective borrowers through to the
1980s (Leyshon and Thrift 1999: 441). It was not until 1965 that Credit Data
Corporation (CDC), based upon information provided by the large California banks,
produced the first nationwide computerised US credit bureau that provided an
accessible bank of standardised information on the financial situations of existing and
potential credit cardholders. Today, there are three national providers of credit
histories in the US: Experian, TransUnion, and Equifax. Each maintains around 190
million credit files, and taken together, they issue about 1 billion credit reports
annually (Guseva and Rona-Tas 2001: 629-30).
The first credit scoring techniques were also developed in the mid-1960s, although
their roots extended back to screening techniques used by mail order firms in the
1930s. The aim of credit scoring is to calculate the probability that an applicant for a
credit card will default given their employment, financial and residential/family
histories (Ritzer 2001: 84-6). Specifically, probabilities are calculated for ability to
pay, intent to pay, and so-called ‘stability’ and ‘accountability’, and all (weighted)
scores are summed and then compared against an upper- and lower-threshold by
the card issuer. In Ritzer’s (2001: 85) terms, credit scoring therefore reduces ‘the
individual quality of credit worthiness to a simple, single number that “decides”
whether or not an applicant is, in fact, worthy of credit’. In the US, a credit score is
also known as a FICO score, short for the Fair Isaac Corporation of Minneapolis that
undertakes much of the scoring. A maximum FICO score is 850 and the minimum
300. The average is 720, and a score below 620 places an individual in the ‘risky’
category (McGeehan 2004). Making an application for a credit card has thus become
highly standardised and largely impersonal, requiring that details on occupation,
length of time in current residence and so on are provided on an application form.
Information from this form is combined with credit reports and, if necessary,
verification of income, in order to arrive at a credit score.
The gradual shift over the last three decades or so from the more directly relational
and ‘face-to-face’ management of uncertainty to credit reporting and scoring as
technologies of risk is characterised by Leyshon and Thrift (1999) as the rise of ‘at-adistance’ means of distinguishing between ‘good’ and ‘bad’ customers. Yet credit
reporting and scoring tools took time to become embedded into consumer credit
networks and into the procedures of credit card issuers. For example, in the US, it
was only in the wake of the rampant fraud and defaults that followed from the card
issuers’ unscreened and unsolicited mass mailouts of credit cards that credit
reporting and scoring began to take hold. In the UK, meanwhile, it was not until ‘a
period of experimentation that began in the 1980s’ and through ‘a process of trial and
error’ that credit scoring became a tool employed by the financial services industry
(Leyshon and Thrift 1999: 436). Again, this was a period in which defaults and bad
debts were on the increase following a phase of intense market competition, but in
the UK established credit scoring tools could be imported from the US (Ibid. p. 4434).
Today, the reach of these ‘at-a-distance’ techniques is such that more than 80% of all
the credit cards in the US are, for example, issued by banks to cardholders with
whom they have no other financial relationship (Guseva and Rona-Tas 2001: 627-8).
As credit reporting and scoring replace the discretion of loan officers with the
rationality of statistical analysis, they figure in new ways what is deemed to be
knowable about the likelihood of defaults. Written in to the procedures of card
13
issuers, credit scoring has thus ultimately made possible a massive expansion in
both the numbers of cardholders and the revolving credit facilities at their disposal.
Common in this regard is so-called ‘risk-based pricing’, whereby interest rates paid
by different holders of the same card vary according to their credit scores as the
primary means for measuring their credit/default risk. Such variations in interest rates
are in addition to the different rates that apply across the ranges of cards offered by
issuers where, for example, Platinum cardholders will typically pay lower rates of
interest than those who do not hold such ‘premium cards’. The on-going surveillance
of the financial activities of cardholders by credit bureaus also provides information
which may be used to alter the interest rate pertaining to that card (McGeehan 2004).
For example, a cardholder who fails to meet a required monthly payment on a car
instalment plan becomes a greater ‘risk’ to the card issuer to whom she also has
obligations and may be penalised accordingly.
A representative of Barclaycard told the UK Treasury Selected Committee (2003)
that risk-based pricing meant that they could ‘offer cards to people who would not be
offered them under a system where there was only one rate’ (on p. 27). Indeed,
confidence in their capacity to measure credit risk has led some specialist lenders to
actually target the ‘risky’ who have poor credit reports and scores. For example,
Provident Financial, the UK’s leading ‘door step’ lender with a colourful history that
stretches back to 1880, has recently expanded its operations through Yes Car Credit
and Vanquis Bank. The former offers to finance car purchases across a dedicated
network of showrooms at a typical APR on 19.9%, while Vanquis Bank’s credit card
charges a typical APR of a staggering 49.6% on a £250 limit. Furthermore, credit
scoring tools actually build in a tendency to extend the revolving credit that is
available, as past approvals for consumer credit are counted as signs of
creditworthiness. Such dynamics of ‘financial superinclusion’ (Leyshon and Thrift
1996) are furthered more broadly by credit scoring, which also facilitates complex
marketing and pricing strategies based upon the segmentation of consumers
according to various age, gender and geographic profiles.
Asset-backed securitisation
The final technique that I wish to highlight as important in constituting the AngloAmerican consumer credit boom is asset-backed securitisation (ABS). ABS is the
practice of ‘bundling’ or ‘pooling’ together a stream of future repayments arising from
everyday borrowing to provide the basis for the issue of, and payment of interest and
principal on, securities (typically fixed-rate bonds). The first significant growth in ABS
practices took place in the US in the late 1970s and 1980s, with residential
mortgages providing the underlying repayments bundled together – so-called
‘mortgage-backed securities’ (MBS). From the mid-to-late 1980s, ABS on both sides
of the Atlantic has come to embrace a wide range of everyday obligations for which it
is possible to forecast future cash flows – e.g. car loans (the ‘CARs market’), credit
card receivables (the ‘CARDs’ market), student loans, and even phone bills.
According to Bond Market Association figures, the value of outstanding bonds in the
US CARs market increased from $59.5 billion to $227.4 billion between 1995 and
2005, with the value of the CARDs market increasing from $153.1 billion to $365.2
billion over the same period. 8 Centralised lenders and non-banks who depend of the
wholesale markets to raise capital are amongst the largest originators of nonmortgage ABS programmes in the US, including General Motors Acceptance
Corporation (GMAC) for CARs and MBNA, GE Capital and Capital One for CARDs.
For example, MBNA issued seven securitisations worth $2.7 billion in the third
8
http://bondmarkets.com/story.asp?id=84
14
quarter of 2004, increasing the value of its outstanding asset-backed securities to
$12.9 billion at 30th September 2004 (MBNA 2005).
The undoubted contribution of ABS to the transformation of Anglo-American
consumer credit networks and the associated boom hinges on, and is closely related
to, three calculative tools that make ABS itself possible. First, the accounting practice
of quantitatively measuring the performance of financial institutions through the
humble tool of the balance sheet is pivotal to ABS, since it is the balance sheet that
determines that borrowers repayments are ‘assets’ that have to matched or balanced
by ‘liabilities’. ABS is thus a particular form of ‘off-balance sheet’ accounting, whereby
assets are isolated, repackaged and sold on the capital markets and liabilities are
thus reduced. The movement of assets off-balance sheet therefore enables credit
card issuers and consumer lenders to issue new lines of credit (and make profits
from increases in the volume of revolving credit) whilst holding only a relatively small
capital base (whether in the form of personal savings, capital market borrowing, or
share capital). Indeed, an on-going ABS programme is impossible without a growing
portfolio of underlying assets. The capacity of non-banks to enter consumer credit
markets and expand their lending considerably since the mid-1980s has, then, rested
on ABS and off-balance sheet accounting tools in particular. Similarly, the common
practice by banks of separating out their credit card businesses from the rest of their
operations (and thus from their liabilities in the form of personal savings) is only
possible due to off-balance sheet accounting. Such moves are highly profitable, as
the rate of interest paid by card issuers to investors in asset-backed securities is
typically and roughly half that paid by cardholders.
Second, the techniques of ABS rest upon the calculative tools of risk and asset
management, such that consumer lending comes to be understood by practitioners
through the prism of ‘risk’. While credit reporting and scoring provide the means by
which card issuers rationalise the uncertainties of cardholders’ repayment as
‘credit/default risk’, ABS also transfers those credit risks from card companies to
those investors that come to hold the bonds issued. The interest paid to investors
who hold asset-backed securities is, in effect, their reward for taking on and bearing
credit risk. 9 Investors’ motivations in taking on asset-backed securities have,
furthermore, been constituted through the performance of the asset management
theories that have come to dominate the capital markets over the last couple of
decades. At the centre of asset management theory is the use of investment models
such as modern portfolio theory which start from the calculative assumption that
rates of return from assets are commensurate with the risks of different investments.
It follows that a larger and more diversified investment portfolio is likely to both
generate greater returns that reflect trends across the whole financial market, and
reduce overall risk. For institutional investors in ABS, asset management theories
thus identity ABS both as providing relatively high returns by comparison with similar
low-risk investment opportunities such as corporate bonds, and as enabling the
further diversification of their portfolios. Banks and other consumer lenders involved
9
In addition, so-called ‘payment risk’ is a particular issue for investors in CARDs. Bonds issued in the
CARDs market are typically at a fixed-rate and maturity, but are underpinned by assets (i.e.
repayments on revolving credit balances) that are of a fluctuating value and indefinite maturity. This
may create particular payment problems, and require so-called ‘credit enhancement’ measures to
mitigate the risk. For example, the possibility that the issuer will experience difficulties should a point
be reached at which the claims of investors are not backed by cash flows from the underlying assets
typically leads to a third party agreeing to provide the required funds. In addition, card companies are
generally given the flexibility of substituting in new receivables to replenish the pool upon which the
issue is based in the event of early pay-offs by card holders.
15
in the issue of ABS also become important investors in ABS because these
instruments provide, for US regionalised institutions for example, a means of
diversifying their own portfolio of assets
Third, the calculative judgements of the principal bond rating agencies – most notably
Standard & Poors Ratings Group (S&P), Moody’s Investor Services (Moody’s), and
Fitch Investors’ Service – bring a semblance of authority, surveillance and trust to
asset-backed securities. Their authority is derived from their apparent expert
deployment of the seemingly neutral and objective calculative tools of credit rating
which lead them to assign a letter symbol to each bond that is issued through the
practices of ABS. Once rated, a set of bonds (certificates for amortising revolving
debts) issued in the CARDs market, for example, thus become relatively transparent
financial instruments for investors, comparable at a glance and in terms of risk both
with MBS, corporate and sovereign bonds on the one hand, and with other bonds in
the CARDs market on the other. To follow the example through, the credit scores of
the cardholders whose repayments are bundled together to provide the basis for the
bond issue form an important point of reference for the rating given to the bonds
themselves. As Guseva and Rona-Tas (2001: 632) put it, ‘The calculation of the risk
of a security on the secondary market rests on the primary calculation of the risk of
the card debt portfolio’.
Overall, then, the embedding of the various calculative tools that make ABS possible
has, in turn, prompted a reconfiguration of and boom in the Anglo-American
consumer credit networks. Claims made by organisations such as the America
Securitization Forum (2005) that ‘consumers like securitization’ because it ‘makes
more credit available to customers’ and ‘lowers the cost of credit’ should not,
however, be taken at face value. There are indeed indications that ABS has enabled
lenders to put in place more inclusive practices and offer credit to borrowers who, in
previous times, would have been considered poor risks. So-called ‘sub-prime’
mortgage lending grew at an average annual rate of 25% in the US between 1994
and 2003, with key sub-prime lenders such as Ameriquest, New Century Mortgage,
and National City also the major issuers of sub-prime MBS in a market where the
value of outstanding bonds grew from $11 billion to $200 billion over the same period
(Kirchoff and Block 2004). Similar developments are underway in consumer lending
more broadly, as ABS makes it possible for specialist sub-prime lenders to provide
credit and sell on the (high) risks to the capital markets. That ABS ‘lowers the cost of
credit’ is certainly not the case for sub-prime borrowers. Just as risk-based pricing
leads borrowers who are deemed ‘risky’ to pay more in interest, so investors receive
higher interest rates for purchasing the sub-prime bonds issued on the back of their
borrowers’ repayments.
From Consumers on Credit to New Financial Subjects
In this final section of the paper I want to turn my attention to the financial subjects
that are summoned up in contemporary Anglo-American consumer credit networks,
and argue that the performance of these new subject positions by self-governing
individuals is highly significant in constituting the lengthening, deepening and
intensification of those networks (i.e. to the consumer credit boom). Put differently, I
want to understand the boom as not only embedded through a transformation in the
calculative tools and technologies of the networks of consumer credit, but as also
embodied in novel, important, and contradictory ways. My focus on financial subjects
and the argument that I make rests on three theoretical moves.
First, I reject what I would characterise as the ‘consumers on credit’ understanding of
the subjects of consumer credit. This follows from the existing Sociology literature on
16
consumer credit that I discussed in the second section of the paper. As I made clear,
the Sociology literature contains a strong tendency to concentrate on consumerism in
the first instance, and to view consumer credit as a material resource that powers
consumption and as set of rational obligations and control mechanisms that install a
semblance of order to the irrationalities of consumerism. Put differently, power in
consumption is recognised to operate in a productive manner, but in consumer credit
necessarily operates as a binding restriction. As a consequence, there is little
consideration of questions of financial identity as such, as individuals are defined
almost exclusively as consumers of commodified goods and experiences. It follows,
for example, that understanding the advertising and marketing campaigns of
consumer credit providers hinges on the ways in which they are replete with images
of the objects and experiences of consumerism (e.g. cars, clothing, holidays, etc.)
(e.g. Manning 2000). While consumer credit is intimately bound up with the purchase
of particular goods and services, this should not obscure that consumer credit itself is
a more or less distinctive network of practices and subject positions to be performed.
We need to look beyond the obligations that arise from consumer credit relations to
recognise that the financial subjects of consumer credit are not simply rational and
dominated or manipulated, but themselves have to be called up and mobilised (cf.
Miller and Rose 1997).
Second, once we accept that the financial subjects of contemporary consumer credit
should be an important focus for inquiry in their own right, it is only a short theoretical
step to re-cast revolving credit, credit scoring and so on not simply as ‘calculative
tools’ but as techniques of governance in a Foucauldian sense. As Callon (1998: 46
my emphasis) himself notes, ‘The extension of a certain form of organized market, an
extension which ensures the domination of agents who calculate according to the
prevailing rules of a particular market, always corresponds to the imposition of certain
calculating tools’. Several authors have taken a Foucauldian perspective in order to
explore the interrelationships between disciplinary power, knowledge and the body in
consumer credit. For example, Jeacle and Walsh (2002) offer an account of the
emergence of accounting techniques in US department stores in the 1920s that
provided ‘alternatives to local knowledge’ and ‘centred on the construction of a
numbered and defined space for each credit customer … classifying and monitoring
the credit customer according to deviations from norms of payment behaviour’ (p.
738-9). The first store charge cards, the allocation of an account number to the
cardholder, the introduction of associated index-card accounts and charga-plate
systems all, taken together, established the financial subjects of credit as ‘governable
persons’ (p. 756). Similarly, drawing in particular on the modern forms of panopticism
emphasised by Foucault’s (1984) Discipline and Punish, Stephen Gill (1997)
explores the contemporary informational databases that electronically trace, store,
sort and evaluate ‘everyday transactional activities’ (p. 60). For Gill, such intensified
surveillance is leading to new disciplines that include, for example, the maintenance
by individuals of their credit score. While I do not wish to downplay the hierarchical
and disciplinary nature of contemporary consumer credit networks as suggested by
these writers, I am nevertheless convinced that understanding the embodiment of
these networks requires that we pay much closer attention to the specific subject
positions and practices that are summoned up.
Third, I would contend that critically interrogating the financial subjects of the present
consumer credit boom requires that we draw not so much on the Foucault of
Discipline and Punish, but on his concept of ‘governmentality’ (Foucault 1979; cf.
OTHERS ETC). The concept of governmentality permits scrutiny of (neo)liberal
programmes of government that hinge on the government of the self by the self.
Contemporary neo-liberalism can be characterized as ‘a political rationality that tries
to render the social domain economic and to link a reduction in (welfare) state
17
services and security systems to the increasing call for “personal responsibility” and
“self-care”’ (Lemke 2001: 203). What marks out neo-liberalism from previous liberal
programmes of government is that the neo-liberal state plays not only a supervisory
role in relation to the market, but also stimulates processes of individualisation and
promotes and shapes subjects who, self-consciously and responsibly, further their
own freedom and security through the market in general and the financial market in
particular. Martin (2002) terms these changes the ‘financialization of daily life’, a
process where finance becomes subjectivity and moral code across a range of
networks. On the savings side, everyday financial practices and identities associated
with the making of ‘the investor’ who embraces the risks of the stock market have
come to prevail through privatisation schemes, the rise of mutual funds (unit trusts in
the UK), and the individualisation of responsibility for pension provision (Aitken 2005;
Langley, 2007). At the same time, homeowners and mortgagors are being
represented in the context of the housing market boom on both sides of the Atlantic
as (leveraged) investors in property. Specific manifestations of the residential
property investor include ‘flippers’ (owner-occupiers who regularly ‘trade up’ the
‘housing ladder’ in a rising market) and ‘buy-to-let-investors’. A new mass investment
culture prevails in Anglo-America which is increasingly replacing traditional forms of
prudence and thrift, a culture associated with the rise of a dedicated financial and
property media (magazines, TV stations and programmes, special sections in daily
newspapers), the so-called ‘financial literacy’ initiatives undertaken by government,
and burgeoning array of ‘personal finance’ books and advice present in book stores
and on the internet. This making of neo-liberal financialised subjects is manifest in
the Anglo-American networks of consumer credit in several new and important ways.
Revolvers
The calculative technologies of revolving credit call up ‘revolvers’ who extend their
credit card borrowing and tend not to meet their outstanding obligations in full.
Roughly two-thirds of Americans regularly make use of revolving credit facilities and,
in effect, perform the subject position of the revolver (cf. Ritzer 1995: 34).
Representations of the revolver clearly play on the relationship between money and
freedom noted by Simmel and others, such that consumer credit appears as ‘a
source of freedom from the bondage of the need to earn and save before purchase
becomes possible’. (Shaoul 1997: 81) It follows that the holder of a large number of
credit cards with sizeable revolving credit limits on each feels particularly liberated. It
is worth observing in this regard that the average American in 1999 had eleven credit
cards, up from seven in 1989 (Clayton 2000: 90). The revolver has, then, an
important Other, a subject for whom the inability to access credit results in a serious
curtailment of freedom. Yet the subject position of the revolver cannot be divorced
from what we might call the ‘responsible borrower’ who is simultaneously summoned
up through the technologies of credit reporting/scoring and authorisation/payment.
Indeed, a successful revolver must also necessarily make at least minimum
repayments in order that their line of credit is extended and that they become the
target for additional credit card issuers.
Knights’ (1997: 224) suggestion that neo-liberal programmes of government entail
‘financial self-discipline’ – that is, a form of discipline ‘which has economic rationality,
planning and foresight, prudence and social/moral responsibility among its cardinal
virtues’ – is an important one, then, in terms of contemporary consumer credit
networks. Certain rational and calculative practices such as, for example, the regular
payment of obligations in the context of fluctuating patterns of income and
expenditure, come to be normalised. Routine but partial repayment is a rational
practice by a cardholder given that such practices are often rewarded with an
increase in the amount of revolving credit available that, in turn, appears to provide
18
for greater economic freedoms. Meanwhile, card-holders are fully aware that
deviation and the failure to meet at least minimum repayments is likely to be
punished. Such deviation is represented as irrational, as the credit ratings of socalled ‘delinquents’ are downgraded and their access to credit dries up.
The financial self-disciplines of revolving credit hinge not simply on making and
planning repayments, but on the rational and calculative management of outstanding
obligations more broadly. First, practices that substitute credit card obligations for
alternative repayments at lower rates of interest – so-called ‘debt consolidation’ – are
being undertaken. As Aizcorbe et al. (2003: 25-6) note, anecdotal evidence suggests
that mortgage refinancing and housing equity withdrawal in a rising residential
property market often features in such practices of substitution and consolidation.
Roughly one-quarter of those who have refinanced their mortgages in recent times in
the US have increased their obligations in order to pay off consumer debts (Moss
2004). Rates of interest on mortgages as secured debt are, of course, lower than
those that prevail for unsecured credit card debt. Second and related, self-governing
revolvers have, in effect, lengthened the time horizons across which they meet their
outstanding obligations, with the consequence that the overall ratio of debt payments
to family incomes remains largely unchanged despite the boom in borrowing (Clayton
2000: 7). In the UK, for example, the average duration that cardholders take to clear
their outstanding balances increased from 3 months in 1997 to 5 months in 2002
(House of Commons Treasury Committee 2003: 45). Third, as the response to the
recent change in bankruptcy laws in the US illustrates, the rational management of
outstanding obligations may include filing for bankruptcy. The law, signed by
President Bush in April 2005, ensures that individuals who earn more than the
median income in their state and are capable of making repayments of at least
$6,000 on outstanding obligations over a five year period will no longer be able to
have the debts wiped out for a fresh start as under the Chapter 7 provisions of the
bankruptcy code. Instead, they will have to seek protection under Chapter 13 of the
code which requires a repayment schedule, and undergo a newly-introduced
financial counselling programme (Egan 2005). Between April and the laws
introduction in mid-October, a rush and then scramble to bankruptcy ensured that
filings were up by around 20% on the previous year (Dash 2005).
Perhaps the signature practice of the self-disciplined revolver is, however, the
transfer of an outstanding balance from one credit card to another in order to take
advantage of the reduced introductory-offer interest rates (‘teaser rates’) provided by
issuers who are keen to attract business. Many of the personal finance sections of
the major newspapers, as well as the countless money advice websites, provide
tables listing the best available current offers that, for example, provide 0% interest
payable on balance transfers for a twelve month period. Nearly 4.5 million
cardholders in the UK have, for example, taken advantage of interest rate offers and
transferred their revolving balances to another card (Meyer 2005). The frustrations of
the credit card industry with those who regularly and routinely transfer their
outstanding balances from one card to another and so on, leading them to label such
individuals ‘rate tarts’, has furthermore only served to reinforce such practices. The
‘rate tart’ who searches on-line for the best deal on a balance transfer is, by
implication, gaining some considerable pleasure and enjoyment at the expense of a
less permissive Other in the course of their performance. Some leading credit card
issuers in the UK such as Barclays, Egg, and MBNA responded in mid-2005 by
imposing charges of around 2% on balance transfers, but the majority of issuers
continue to make it possible at present for savvy revolvers to regularly move their
balance from one card to another at no cost.
19
A further illustrative example of the summoning up of self-disciplined revolvers in
consumer credit networks are the ways in which individuals are represented as
financial subjects who seek to improve their credit score. From the burgeoning array
of ‘personal finance’ literature now available in book stores, publications such as
Rose’s (1997) The DIY Credit Repair Manual provide assistance to those who find
that their credit report/score is an obstacle to securing access to credit. The central
principle here is that your credit report is your passport to credit and, significantly, to
being offered lower rates of interest on that credit. In the words of
moneysupermarket.com, the UK’s leading price comparison website for finance,
‘Your credit history is a valuable asset because it allows you to take advantage of the
competition between lenders – meaning you can shop around for the best rates or
terms on the market’. 10 In the US, the Senate Banking Committee has considered
proposals that would require lenders to provide potential borrowers with a free copy
their credit report/score should they be turned down for credit, and it is currently a
requirement that card issuers who propose to charge a new cardholder a higher rate
of interest than that which they applied for provide new customers with a copy of their
credit report to check and possibly amend. 11 The main credit agencies such as
Equifax, Experian and Fair Isaac Corporation offer individuals the opportunity to
purchase access to their credit reports/scores, and in return provide additional tips
and guidelines on how to improve your credit score. For example, Equifax
encourages individuals to ‘level the playing field’ with potential lenders by purchasing
what they call ‘Score Power’, an individualised package of report and tools for
management that feature the ‘Interactive Score Simulator’ to show how certain
actions may change a credit score. 12 The FICO Score Simulator, meanwhile, offers
six kinds of financial conjectures including hypothetical balance transfers, the ‘maxing
out’ of a card, regular repayment, and missed repayments. 13 Such simulators are
also being used by credit counselling agencies as an educational tool (Bayot 2003).
Financial consumers
The neo-liberal financialised subject in consumer credit networks is not just a selfdisciplined revolver who rationally manages their credit report/score or an individual
who enjoys the pleasures of being a ‘rate tart’. The subjects of consumer credit
networks not only seek to secure and extend their individual freedom through
financial self-discipline, but also express and communicate their autonomy, wealth
and ‘success’ through finance. The calling up and performance of financial
consumption itself has, then, been a significant and distinctive feature of the
embodiment of the Anglo-American consumer credit boom. In particular, the role of
the credit card in authorising the identity of the cardholder takes on an interesting and
significant twist. This is especially the case where the signs and symbols of the credit
card itself become associated with particular processes of identification. As Mandell
(1990: 141) puts it, ‘From its very inception, the primary function of the credit card …
has been identification. The card identified the bearer as the legitimate owner of a
particular credit line’. As the physical form taken by the card itself has moved from
paper cards and dog-tag-like plates to plastic cards with magnetically encoded strips,
so the opportunity to play and communicate particular identities through the card has
developed. In simple sense, cards have come to be different colours often as a
10
http://www.moneysupermarket.com/refusedcredit/RefusedCreditGuide.asp
See Senate Banking Committee on The Accuracy of Credit Report Information and the Fair Credit
Reporting Act (July 2003).
12
https://www.econsumer.equifax.com/consumer/sitepage.ehtml?forward=cps_detail&pageMod=prod
Mod
13
See ‘products’ on http://myfico.com. CreditXpert also offers the ‘What-If Simulator’ (see
‘consumers’ page on http://creditxpert.com
11
20
means of communicating the size of a particular holder’s line of credit. Neo-liberal
subjects are summoned up who define themselves not just by the freedom to
purchase and by what they buy, but by the plastic that they use to make a purchase.
Credit cards in and of themselves are all the same, providing the holder with access
to a line of credit and possibly a range of other benefits. There use value, apart from
perhaps as a tool for removing ice from a frosted car windscreen or for chopping a
line of cocaine, is extremely limited. But the ‘value’ of a particular card to its holder
goes far beyond these uses, standing as an important symbolic good, that is, objects
owned by individuals as a means of constituting their subjectivities and signalling and
communicating those with others. Holding a particular credit card signals the
attainment and enables the projection of a particular sense of self.
The manner in which the credit card has come to stand as a significant object in the
mediation of consumption, used in a communicative manner by consumers to say
something about ‘who’ or ‘what they are’, is recognised to some degree by Klein
(1999) who offers an analysis of the representations of financial consumers present
within credit card advertising campaigns. According to Klein (1999: 29), by the late
1970s and especially the 1980s, ‘Each credit card became an individual commodity
subsequently marketed as painstakingly as the facilitated purchases of consumer
products or experiences’. For example, Mastercard, Visa and American Express all
‘established a target consumer group and particular image. The Mastercard image
was always the average consumer and family living; Visa concentrated on travel and
self-actualization; and American Express was usually orientated towards the
business traveller’ (ibid.). There is, then, ‘a science within the process of selling credit
cards …Advertising agencies sample consumer demand through focus groups …
testing completed commercials through storyboard research analysis, and
commissioned studies through consumer research organizations’ (p. 84).
Nevertheless, Klein continues to suggest that understanding the consumer credit
boom requires that we focus on the making of subjects of (non-financial)
consumption in the first instance. Klein’s detailed analysis, for example, concentrates
on Visa’s TV advertising campaign of the early 1980s such as ‘Back To School’
which featured a woman cardholder in her forties overcoming barriers to college
access, and ‘Houseboat’ which was based around a family of four purchasing a run
down boat, making the necessary alterations and sailing off into the sunset!
A recent television advertising campaign in the UK by Amex for their Blue Card
provides a particularly illustrative example of the summoning up of the financial
consumer. The soundtrack for the campaign was provided by New Order’s ‘Blue
Monday’, the highest selling 12” single of all-time and widely regarded as one of
dance music’s classic records. The ‘cool blue’ images from the campaign similarly
represented the card as the choice of the upwardly-mobile, fashion-conscious nightclubber. It is in the so-called ‘prestige cards’ market, however, that we find the
earliest and perhaps most sustained attempts to utilise the credit card as a means of
constructing and communicating particular identities. With the launch of their first
‘gold cards’ in the early 1980s (Mandell 1990: 81-3), Visa and MasterCard created a
means of distinguishing those with the greatest access to credit from the ‘normal’
cardholder. Subsequent initiatives have focused on the production of platinum cards
as an advance on gold and, most recently, on the introduction of black cards.
The views of holders of the American Express Centurion Black Credit Card, perhaps
the most desired of prestige cards at present, are particularly revealing as to the
summoning up of financial consumers 14 The Centurion card is targeted at those who
14
The following views all appear as reviews of the card on http://reviewcentre.com, a website that
claims to offer ‘unbiased reviews written by consumers helping you make better choices. The site
21
travel extensively with their work, offers a range of benefits such as hotel upgrades
and concierge services in return for an annual fee of $2500 in the US and £600 in the
UK, and is available by invitation only to those who have held an Amex Platinum
Card for some time. The relationship between the cardholder and card, especially in
terms of the constitution and communication of subjectivities (often those to whom
they are presenting the card for payment) is clearly apparent in cardholder’s reviews.
For example, Fa Shizzle Ma Nizzle of Compton USA writes ‘A lot of celebrity’s have
them, the shopping perks are hot, the look on peoples’ faces when you slap the card
on the counter and they recognise what it is’ (11/09/05). Similarly, for Moneypac from
Australia, ‘the number of times comments are made by those accepting the card as
to its status is very frequent indeed but sometimes this can also be embarrassing’
(3/05/05). Rn1814 warns, however, that ‘others may not realize the prestige that is
associated with the Centurion. Some people actually don’t even know the Centurion
exist’! Interestingly, remarks by one reviewer (rocketqueen of Connecticut on
8/07/05) that cardholders can ‘close down Saks of 5th Avenue’ provokes a response
from other reviewers that clearly centres on the symbolic nature of the card. Kcr1967
of New York (22/07/05) states that while it might be possible to ‘close down Saks for
shopping trips’ in small suburban stores, ‘You’re dreaming if you think you can walk
into Saks and close it down; they’d simply smile. Black cards are not as exclusive as
one would think’. Sparkle953 (9/08/05) also suggests that rocketqueen ‘is trying to
feed the rumour that Amex Black is still a status symbol – when its definitely not’!
Some reviewers concentrate, meanwhile, on how to become a cardholder, and the
cards exclusivity. Hotbill from Kent in the UK states (in some particularly poor
English) that ‘To earn one you need to be a loyal prompt paying customer. I was
surprised to be upgraded but I started at Gold, then Plat and so on. Always paid on
time and spent lots, then you get one. There is no short cuts I’m afraid’ (3/06/05).
Finally, one reviewer is clearly not a cardholder but is ‘very proud’ of his dad because
he has ‘such a card’ (roblaviv of Massachusetts, 28/12//04).
Aside from prestige cards, so-called ‘affinity cards’ also provide financial consumers
with an object through which to attain and project a particular sense of self. Affinity
cards date from the mid-1980s, as issuers sought to market cards to a greater
number of Americans and to reach out to those who might, for the first time, consider
holding more than one card or switch from a previous card. Three types of affinity
card have subsequently emerged (Mandell 1990: 80-1; Klein 1999: 33). So-called
‘product benefit cards’ offer bonuses or what are known in the industry as ‘rebates’
(e.g. air miles, savings on branded products) for usage. While these cards may be
held by those who wish, for example, to construct and communicate themselves as
regular, upwardly-mobile air travellers, ‘lifestyle cards’ and ‘personality cards’ are
perhaps more explicitly symbolic goods by design. ‘Lifestyle cards’ seek to respond
to and enable the manufacture of certain interests by the cardholder, especially in
charitable causes which receive donations when the card is used. For example, at
present the market-leader in affinity cards MBNA offers a range of what they describe
as ‘environment and cause-related credit cards’ that feature stunning pictures and
the logos of the likes of Defenders of Wildlife, the National Wildlife Federation, and
features a wide range of ‘review categories’ such as cameras, cars, computer hardware and software,
stereos, films and movies, hair and beauty, mobile phones, sports equipment and so on. ‘Credit cards’
features within the ‘financial products’ review category, alongside ‘personal loans’, ‘mortgages’ and
‘car insurance’. On day of access on 18th October 2005, there were 28 entries or reviews relating to the
American Express Centurion Black Card. ‘Consumer contributors’ or reviewers are asked not to use
their own names, but to become members under their own pseudonyms or a identity given to them by
the website. Dedicated financial consumer websites also include http://moneysupermarket.com,
http://creditcardexpert.co.uk and http://which-credit-card-4u.co.uk.
22
Ducks Unlimited. 15 ‘Personality cards’ meanwhile are typically embossed with photos
of celebrities or the colours of a favourite sports league or team. For example, MBNA
also currently offer an Elvis Pressley card and NFL, PGA and NASCAR cards.
Concluding Remarks: From Boom to Bust?
In a particularly critical section of their relatively recent survey of the UK credit card
industry, the House of Commons Treasury Select Committee (2003: 37) state that
Whilst it is not in the interests of the industry to lend money to those who
cannot afford to repay, certain sections of the industry are currently engaged in
practices which can give rise to some consumers “sleep walking into a situation
of over commitment” where a small change in circumstances can turn
manageable debt problems into disasters.
The ‘practices’ to which they refer include the automatic and unsolicited increase of
credit limits, offering teaser rates and reducing minimum monthly payments, and the
“sleep walking …” quote is taken from a submission to the Committee by a
representative of Citizens Advice. Despite such criticism, however, what is noticeable
is that the Committee focus their recommendations on the transparency of pricing
structures and marketing methods, and call for action from the Office of Fair Trading
and the Department of Trade and Industry to protect the consumer. This was also
reflected in the content of the Committee’s (2005) more recent follow-up report. The
work of the Committee is, then, particular illustrative when viewed in the context of
the argument made here. For the Committee, ensuring that the consumer credit
boom does not burst requires more extensive application of the calculative tools that
have been so central to constituting the boom. For example, it recommends closer
scrutiny of credit reports/scores before a credit limit is extended. The Committee also
places considerable faith in the capacity of neo-liberal financialised subjects to show
further self-discipline when it calls for standardised and transparent information on
interest rates, for example, in order that rational and informed decisions can be
made.
Is the faith of the Committee in the capacity of individuals to continue to perform the
financial self-discipline justified, or will the consumer credit boom ultimately lead to a
bust? It is important to stress that the neo-liberal financialised subject is not a
monolithic but rather a multifaceted and uncertain economic identity (see Langley
2005b). The performance of various subject positions is consequently shot through
with important tensions and contradictions. Consider, for example, the juxtaposition
of the self-disciplinary revolver with that of the retirement investor. Under neo-liberal
programmes of government, the good financial citizen has a duty to the self to be
enterprising and responsible, at once a prudential borrower in the present and an
investor for the future. To date, however, the tensions and contractions of the neoliberal financialised subject have tended not to surface within the networks of
consumer credit. While there are clear indications that some households and
individuals are increasingly struggling to meet their obligations and perform the
practices of the self-disciplined revolver, the consumer credit boom in Anglo-America
has yet to produce widespread defaults and bankruptcies. Why is this the case?
Let us begin by considering the relationship between consumer borrowing on the one
hand and wages and other assets on the other. The embodiment of the consumer
credit boom through the summoning of the neo-liberal financialised subject has taken
place in a situation of stagnating real wages, such that costs of consumption have
15
See http://mbna.com/creditcards/enviro_causes.html
23
increasingly been met through credit. According to Federal Reserve figures, the
growth in consumer credit (excluding mortgages) financed 23% of the growth in
consumption between 1950 and 1997, while for the period 1991-1997 the figure was
29% (in Henwood 1998:65). The combination of stagnating real wages and extended
borrowing to fund consumption has, at the same time, led to a decline in household
saving rates. Between 1990 and 1998, US household saving rates fell from 5.5% of
disposable income to less than zero (Clayton 2000: 78). For Medoff and Harless
(1996), then, the stagnation of real wages alongside extended consumer borrowing
ensures that the boom will inevitably come to a very sticky end for a large number of
American families who, in effect, are ‘spent out’.
Yet for many households the relationships between consumer borrowing and wages
and income are not as straightforward as Medoff and Harless would suggest. During
the so-called ‘long bull run’ of the 1990s, around half of American households
became ‘investors’ and came to own a slice (however meager) of the stock market.
Consumer borrowing was fuelled by the so-called ‘wealth effect’ and ‘consumer
confidence’ of rising stock prices and, furthermore, was at least in part motivated by
those rising prices as roughly a quarter of new borrowing funded the purchase of
securities at the peak of the ‘new economy’ in the late 1990s (Economist 2000: 21).
Sharp rises in house prices since the turn of the century have similarly fuelled,
prompted and, in effect, funded increased consumer borrowing. It is perhaps no
surprise that in their review of the state of US household finances based upon
comparison of the Federal Reserve Board’s Survey of Consumer Finances of 1998
and 2001, Aizcorbe et al. (2003: 1) stress that ‘The level of debt carried by families
rose over the period, but the expansion in equities and the increased values of
principal residences and other assets were sufficient to reduce debt as a proportion
of family assets’. Indeed, comparison between 1989 and 2001 reveals that, despite
increased consumer and mortgage borrowing during this period, the overall ratio of
family debts to assets is roughly the same at just over 12% (p. 21). In our terms,
rising stock and property markets on both sides of the Atlantic over the last decade or
so have ensured that, for many, the performance of the multiple financialised subject
positions of neo-liberalism – primarily ‘the investor’, ‘flipper’ and ‘buy-to-let investor’
on the one hand and ‘disciplined revolver’ and ‘financial consumer’ on the other have been complementary as opposed to contradictory.
Once we recognise the importance of rising asset prices as a conducive conjunctural
context for the performance of the subject positions of the disciplined revolver and
financial consumer, two implications follow. First, attention is drawn to the majority of
individuals and households who not only have low wage levels but are, of course,
also least likely to own significant assets whether in the form of financial instruments
or residential property. What is noticeable here is that it is these members of society
who have increased their consumer borrowing most in recent times. For example, in
the UK, figures from the Bank of England’s British Household Panel Survey show
that while unsecured borrowing as a percentage of income had increased for all
income categories between 1995 and 2000, far and away the greatest increase took
place in those households with income less that £11,500 (from 17% to 36%) (in
House of Commons Treasury Committee 2003: 35). It is also worth recalling that the
inclusion of these (often so-called ‘sub-prime’) borrowers within networks of
consumer credit also results in them paying relatively high rates of interest. While the
average household in the UK spends 7% of disposable income on consumer credit
repayments (House of Commons Treasury Committee 2003: 32), for example, this
average conceals the significant problems that are and will be experienced by the
poorest households by income and assets. The work of the DTI Taskforce on
Overindebtedness (reports of 2001 and 2003) is particularly revealing in this regard,
identifying 5% of UK households where over 25% of gross income is spent on
24
meeting consumer credit obligations as particular likely to experience repayment
problems.
Second, the significance of rising asset prices to the consumer credit boom also
raises the issue of what happens when prices stagnate or fall? Existing analyses of
bankruptcy and repayment problems stress common but nevertheless highly
individual factors. Sullivan et al.’s (2000) study of individual’s filings to the federal
bankruptcy court, for example, suggests that bankrupts are a fair cross-section of the
American middle classes, and that in most cases bankruptcy is caused by loss of
employment, the financial implications of divorce, spiralling medical costs, as well as
by a failure to successfully perform the practices of the self-disciplined revolver. By
implication, as they suggest, ‘even the most secure family may be only a job loss, a
medical problem, or an out-of-control credit card away from financial catastrophe’ (p.
6). The House of Commons Treasury Committee’s (2003: 36-7) findings on
‘overindebtedness’ broadly concur, suggesting that changes in individuals
employment, health and family circumstances are the most likely sources of
problems for those who find themselves unable to meet their outstanding obligations.
Against these evaluative and individualised analyses we would thus stress the
importance of a general fall in asset prices to collective capacity of the middle
classes to meet their obligations. In sum, the performance of financial self-discipline
and the embodiment of the consumer credit boom more broadly has been made
possible by conjunctural factors and the rise of stock and housing prices.
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(2005)
Investor
Presentation
and
Webcast,
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