Another Man's Purse

'I read the news. I know our foreign trade deficit and levels of credit card debt are at historic highs. People tend to talk about these things as if they were something new, some sort of habit we're sliding into, and that's just wrong," says Daniel Vickers, chair of the history department at UCSD. On Thursday, February 16, Vickers will present a lecture at Cal State San Marcos entitled, "Lord of Another Man's Purse: America's Long History of Indebtedness." "I think the reason that we tend to look upon [borrowing money] favorably is because over the course of the past 400 years, since the colonies were founded, the American economy has performed well enough and land values have continued to rise fast enough that people have, in general, found that borrowing money works. [The same] is not true in economies that don't grow fast because people's incomes don't rise and they get themselves in trouble."

According to financial columnist Liz Pulliam Weston, politicians and the media portray an inaccurate picture of how bad the debt in this country really is. Collecting her figures from the Federal Reserve's 2001 Survey of Consumer Finances, Weston writes, "In reality, most Americans owe nothing to credit card companies...23.8 percent of American households have no credit cards at all.... Another 31.2 percent of the households the Fed surveyed paid off their most recent credit card bills in full. So together, the households that owed nothing on credit cards equaled 55 percent of the total."

"The notion of being a free person is tied up in American culture with credit," says Vickers. As England began to emerge from the late Middle Ages, serfs (agricultural workers bound to the landowners for whom they labored) bought and sold in the market in order to support themselves, which freed them from serfdom. "Inevitably, in order to get involved in the market, you've got to borrow. One's own credit became critical to becoming independent and, basically, a free person. It is from this crowd of people that American colonists are descended."

Despite the Western tradition of borrowing, Vickers believes Americans' comfort with credit could pose problems in the future. "The rate of growth over time has simply been a function of population -- as it gets more crowded, land values rise. But the rate of growth is beginning to slow. America, and really in some ways the whole West, has been living a number of centuries where, for reasons that may not last forever, we have been extraordinarily favored. Through most of human history, the most efficient economies in the world have been those of East and South Asia; they have been the most sophisticated technologically, efficient agriculturally, and extensive commercially. For years, Europeans could only buy things from the East with silver because the Chinese looked at things made in the West and laughed."

Though credit cards are a relatively modern invention, personal debt, says Vickers, "is not really anything new." After studying the fishing industry of colonial Massachusetts, Vickers found a number of fishermen who kept tabs with local merchants from whom they bought their gear. "People were in debt for ten years of income. If I were in debt to Home Depot for 800,000 or a million dollars, I'd be nervous," he says. "It's nothing to find people in debt for half a year or a year's worth of income. Though if I had 50 to 100,000 dollars in credit card debt, I would also be nervous."

In a young America, "People knew their merchants and the merchants knew them. I don't know Mr. Visa or Mr. MasterCard," says Vickers. Merchants rarely charged interest. "The price that they exacted was a degree of loyalty that could be [likened to] a demand for exclusivity. The deal was that the fisherman only sold his fish to the merchant that outfitted him. Not legally, but if you took your fish elsewhere, the merchant might say, 'Okay, pay up,' and you wouldn't be able to." In such a situation, the merchant might sue for his money. "The other side of the coin is if the merchant gets the reputation of being a tightwad who is quick to sue, fishermen will go to someone else. [Merchants] had to be willing to see their clients through the bad years. Both sides are in a sense giving up a degree of freedom -- the fisherman only sells to the merchant, and the merchant says, 'I can't just cut you off when I want to.' If I stop paying mortgage payments, a year from now I won't have a house. That sort of credit didn't exist in colonial times." -- Barbarella

"Lord of Another Man's Purse: America's Long History of Indebtedness" Lecture by economist and historian Daniel Vickers Thursday, February 16 4 p.m. Cal State San Marcos 333 South Twin Oaks Valley Road, University Hall 100 San Marcos Cost: Free; parking $3 to $6 Info: 760-750-4366 or www.csusm.edu/arts_lecture/AL/index.html