University of Göttingen, Germany
Debt and credit are central to nearly all economic processes, but they have become particularly vital to the functioning of modern consumer economies. While there are many forms of debt, this entry will focus on the development of household debt and consumer credit in the modern era, neglecting public debt and commercial loans. Consumer debt expanded dramatically during the twentieth century, when a variety of new financial products and technologies, from installment loans to credit cards, became important marketing tools that facilitated the spread of mass consumption. Traditional social, moral, and legal restrictions on debt increasingly gave way to a widespread acceptance, starting in the late nineteenth century, of debt as an integral part of middle-class consumption. Proponents of credit expansion have pointed to its role in smoothing life cycle consumption, in fostering aggregate demand, and in “democratizing” access to a growing world of consumer goods. Critics, by contrast, point to the growing phenomenon of overindebtedness and personal bankruptcies, the precarious nature of a debt financed lifestyle, the degree of surveillance and disciplining involved with new modes of credit scoring and reporting, as well as to the overall lack of sustainability of a consumer economy built on debt, as evidenced by the financial crisis of 2007–8.
Personal debt for consumption purposes, however, has ...