“That’s the whole meaning of life, isn’t it? Trying to find a place for your stuff . . . That’s all your house is — a place to keep your stuff while you go out and get more stuff. Sometimes you’ve got to move, you’ve got to get a bigger house. Why? Too much stuff!”
— George Carlin
Three of every four Americans are currently living paycheck to paycheck — no savings account, no emergency fund. Wages for the poor and middle class have remained flat against rising food and gas prices for the past four years, while 12 million Americans are still job-seeking.
Consumer spending for the month of June, meanwhile, rose 3.6%, with most of that likely winding up on charge cards. From April to May of this year, American borrowing spiked by $19.6 billion, the largest jump in 12 months. As of 2012, the average household had nearly $16,000 in credit-card debt.
While there’s no data on how much of that spending is discretionary versus necessary, our national period of post-recession saving has clearly come to an end. The housing market is on the rebound, US consumer confidence is at 81.4% and retailers reported a 4.1% rise in spending last month, the highest since January. Most analysts agree that our economic recovery remains precarious.
So, why are we still so addicted to consumer debt?
“We live with the materialistic myth that more is better, that growth is essential to a vibrant economy,” says James A. Roberts, author of “Shiny Objects: Why We Spend Money We Don’t Have in Search of Happiness We Can’t Buy.” “We are in a worse financial crisis than we think.”
‘A DESIRE CULTURE’
Our modern culture of consumption dates back to the automobile — though it took awhile. Henry Ford marketed his cars as a necessity, not a luxury, keeping the price of his Model T low, at $950 in 1908. The cost could be paid off in finite installments of seven to eight months. He had no interest in keeping consumers in debt, believing that the more money they had in their pockets, the more likely they were to pump that money back into the economy.
The problem, at least for Ford’s competitors, was that the lifetime of a car was too long, the price too low, to keep an automaker in business.
So, beginning in 1921, General Motors began changing styles every year, and the automobile became the first luxury product pitched to the masses. The company also introduced the car payment plan, through their debt service called GMAC.
The notion that the model and color of a car said something about the owner, was an extension of the self and told others who one was, or wanted to be — and could be bought even if one couldn’t afford it — was seized upon by banks, politicians and corporations.
“We must shift America from a needs to a desire culture,” wrote Paul Mazur, a top broker at Lehman Brothers, in 1927, and he expounded on this mission statement one year later in his book “American Prosperity: Its Causes and Consequences.”
“Any community that lives on staples has very few wants,” Mazur wrote. “We must learn to sell better and to advertise better. We must convert a basic economic desire — to acquire more and more things — which has no limitation, I assume, among human beings, into actual demand for goods.”
In line with Mazur’s thinking was his contemporary Edward Bernays, a nephew of Sigmund Freud’s and one of New York City’s original Mad Men. Bernays was fascinated by groupthink and the theories behind shaping and manipulating the collective consciousness. He worked for Presidents Wilson and Coolidge, and successfully pitched World War I to America as an effort to spread democracy.
Bernays later went on to work for GE, American Tobacco and Procter & Gamble — among many others — identifying consumers that corporations didn’t know existed, then connecting a product to that demographic’s deeper needs. In one of his most famous campaigns, for Lucky Strike, Bernays tied the act of smoking in public to the women’s suffragette movement, turning cigarettes into symbols of defiance and liberation.
“If we understand the mechanism and motives of the group mind,” Bernays wrote, “is it not possible to control and regiment the masses according to our will without their knowing about it? . . . A single factory, potentially capable of supplying a whole continent with its particular product, cannot afford to wait until the public asks for its product; it must maintain constant touch, through advertising and propaganda, with the vast public in order to assure itself the continuous demand which alone will make its costly plant profitable.”
It was sometime during the ’20s that the phrase “keeping up with the Joneses” — that fictional American family who always had more and better possessions than anyone else, along with presumably better lives — came into common use. Corporations and advertisers refer to this fear as “perceived obsolescence”: convincing you, the consumer, that the perfectly good car or laptop or handbag or pair of shoes you bought eight months ago is now in dire need of an upgrade. Without one, it’s not just the product that’s obsolete — it’s you.
‘CREDIT,’ NOT DEBT
In the 1950s, with the idea of car ownership well established as a rite of passage, home ownership was now framed as the definition of the American Dream. No man was a true success without one, and to quote George Carlin again: “It’s called the American Dream because you have to be asleep to believe it.”
Throughout the decade, an average of 1.2 million houses went up every year, compared with 600,000 in 1940, construction abetted by the GI Bill. In the post-WWII boom, with Americans having banked $140 billion, there was a hunger for comfort, if not luxury. In “Shiny Objects,” Roberts quotes William Levitt, founder of the first postwar community to contain affordable, look-a-like, mass-produced houses: “No man who owns his own house and lot can be a communist,” Levitt said.
Of course, all those new homes needed new things: appliances, furniture, window treatments, dishes and glassware and silverware, radios and TVs — the latter an unparalleled medium for selling ever more things.
Just as any new technology seems, upon introduction, to be a luxury — the telephone, the radio, the car, the TV, central air, the personal computer, the cellphone — they all swiftly become necessities. The number of US households that had a television jumped from 9% in 1950 to 90% in 1960, and it was during this decade that Americans, en masse, eagerly adopted another luxury-turned-necessity: the credit card.
Though widely available credit dates back to at least the Industrial Age, it wasn’t until the Diners Club introduced their card in 1950 — followed by American Express and Bank of America’s cards in 1958 — that the general public began purchasing with plastic, quickly adapting to the buy-now-pay-later model.
“Banks and credit-card companies were very successful at selling debt as credit — like it was an honor to be given it,” says Charles R. Geisst, author of “Collateral Damaged: The Marketing of Consumer Debt to America.” “Advertising cooked that up: A $250,000 line of credit sounds a lot better than being $250,000 in debt.”
Also in 1958 came the first student loans, and not long after the introduction of the 30-year mortgage (most nations offer only 15-20 year home loans). Both of these were pitched to the upwardly mobile American consumer as “good debt,” which, paradoxically, would facilitate wealth in the long term: A college education would result in higher earning potential; a home not only provided security but a strong rate of return.
CONSUMING CULTURE
After middle-class Americans found themselves with more lines of credit than actual things to buy, they began doubling up on homes, cars, phones, TVs: In 1960, 2 million families had second homes, and in 1970, 29% of families had at least two cars. As that new decade approached, credit had been folded into the list of things that now constituted the American Dream.
‘The American concept of growth is that everything’s got to go up,” Roberts says. “We like to live well. It’s considered our right.”
And though the nation soon suffered through the stagflation of the 1970s — the oil crisis, high rates of unemployment and inflation, a Jimmy Carter diagnosed national “malaise” that, he scolded Americans, shopping could no longer fix — the trauma was short-lived. By 1978, Congress had eased the few limitations placed on credit-card companies, and the invention of mail-order catalogs, home-shopping networks and malls promulgated shopping as a leisure activity on par with sports, reading or vacationing.
By the 1980s, teenagers, college students and low-income workers were targeted, via direct mail, by credit-card companies.
“I first got credit cards at 18 or 19,” says Avis Cardella, author of “Spent: Memoirs of a Shopping Addict.” “It was ridiculous having access to credit at that age. It sets you on the path of thinking that having debt is perfectly acceptable and normal.”
And the platforms for selling stuff only proliferated. Though product placement has existed at least since the advent of movies, it reached its apex in the early ’80s, when Steven Spielberg struck a deal with Hershey’s: He’d prominently use one of their products in his next film in exchange for $1 million worth of advertising. In 1982, millions of Americans watched as an alien called “E.T.” gobbled some Reese’s Pieces. (Sales of the candy increased 65% in the aftermath; today, the average American is exposed to 5,000 ads per day.)
The 1980s remains defined by conspicuous consumption: American Express introduced its Platinum card, allowing the user to silently broadcast their greater-than-average income and credit line. “Dynasty,” Donald Trump, logo-mania, Madonna’s “Material Girl,” Gordon Gekko’s credo “Greed is good,” the birth of the yuppie and the cheeky exhortation to “Shop ’til you drop” — acquistiveness for its own sake was the latest addition to the American Dream.
This philosophy held right through recessions and wars and terrorist attacks — after 9/11, George Bush and Rudy Giuliani told America to shop, which we’ve since continued to do. Except now, we’ve been manipulated to believe our consumerism is an expression of our virtuousness: Few things are considered more laudatory, more responsible, than eating at farm-to-table restaurants, buying artisanal, seeking out the local, the authentic, the handmade. Our relatively new, self-congratulatory fetishization of food is the ultimate in conspicuous consumption.
CAN’T GIVE IT UP
Perhaps it shouldn’t be a surprise, then, that a global financial crisis, the collapse of the banks and the stock market and the housing market — all propped up by credit — hasn’t been enough to stop us, the consumers, from buying things we don’t need with money we don’t have.
And really, why should we? There has yet to be a serious national discussion about whether there really is such a thing as “good debt” anymore, whether college is necessary for every high-school graduate, whether renting is smarter than owning — let alone a serious re-examination of what constitutes the American Dream.
When FDR spoke about “freedom from fear,” he meant geopolitically, but what could greater express the American Dream than freedom from fear of being in debt to credit-card companies — their perfect customer being someone who is always in debt?
Meanwhile, as the housing market begins to rebound, Bloomberg News reported last week that several new companies have sprung up to provide interest-only mortgage loans to borrowers who would otherwise never qualify — in other words, the same kind of practices that helped birth the real-estate collapse of 2008.
“There are plenty of borrowers who are eminently responsible people,” said Raj Date, who went from writing new regulations for the Consumer Financial Protection Bureau to giving loans to the very consumers he helped to block. “But [they] fall outside of the bright-line boundaries.”
As for why we never learn our lesson, no one really knows. America has always been a starve-and-binge society, and it seems our cycles of sacrifice and satiation grow ever shorter — this past one lasted only two years.
“We have people so bent on defining themselves by where they live, or what they drive,” Roberts says. “I’m hoping there will be a cultural shift to a more simple lifestyle. But I don’t see it.”