PREREQUISITES FOR THE GROWTH OF CONSUMER INSTALMENT CREDIT

Abstract

CONSUMER CREDIT IS an ancient institution. In one form or another it has existed in most money-using societies known to history-it may even be older than money-and today it is used not only in the economically developed countries but also in the relatively less developed ones. Consumer instalment credit, on the other hand, is a relatively recent development. Instalment selling, it is true, is also known to have existed a very long time ago, but only in exceptional instances. Thus in ancient Rome houses were once sold on the instalment plan, while in seventeenth-century Britain Scottish weavers sold suit lengths on instalments on a door-to-door basis to wage earners in the north of England. In its modern form, however, consumer instalment buying dates back to the middle of the nineteenth century. At that time furniture, sewing machines, pianos, and even encyclopedias began to be sold on the instalment plan not only in the United States but also in most western European countries and in some of the overseas countries of the British Commonwealth. Today, of course, instalment credit is very much more important in this country than abroad. The revolution in consumption that made it possible and that in turn was accelerated by the growth of instalment credit in this country is admirably described in the study by the Federal Reserve Board of Governors of consumer instalment credit, in a chapter prepared by Robert Solomon.' In this paper I have been asked to look outside the United States and to discuss the factors behind the much slower and very uneven expansion of consumer instalment credit abroad. The basic prerequisites for the growth of such credit can best be discussed under three headings: (1) the fundamental economic factors, of which the most important is a standard of living well above the subsistence level; (2) the community attitudes; and (13) the financing facilities.