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Credit Access and Social Welfare: The Rise of Consumer Lending in the United States and France

By: Gunnar Trumbull
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Abstract

Research into the causes of the 2008 financial crisis has drawn attention to a link between growing income inequality in the United States and high household indebtedness. Most accounts trace the U.S. idea of credit-as-welfare to the period of wage stagnation and welfare retrenchment that began in the early 1970s. Using France as a comparison case, I argue that the link between credit and welfare was not unique to the United States. Indeed, U.S. charitable lending institutions that emerged at the beginning of the twentieth century were modeled in part on older French financial institutions. Three historical factors drove U.S. lenders and policymakers to push for expanded credit access for the working class. First, welfare reformers in the interwar period embraced private credit as an alternative to an expansive welfare state. Second, U.S. organized labor in the wake of World War II embraced credit access as a means to sustain industrial employment and finance strike actions. Third, commercial banks in the 1950s began offering revolving credit accounts as a means to attract new depositors at a time when banking regulation restricted the interest they could offer on deposits.

Keywords

Household Finance; Welfare State; Credit; Personal Finance; Welfare; Borrowing and Debt; France; United States

Citation

Trumbull, Gunnar. "Credit Access and Social Welfare: The Rise of Consumer Lending in the United States and France." Politics & Society 40, no. 1 (March 2012).
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About The Author

Gunnar Trumbull

Business, Government and the International Economy
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