Sunday, March 2, 2014

The Way We Live Now vs. The Germination of McCloskeyian "Betterment"

The Way We Live Now vs. The Germination of McCloskeyian "Betterment"

While Deirdre McCloskey made some very persuasive and intriguing points, I found myself wondering how different the current financial environment is from the one that germinated the "Great Enrichment," or the "Betterment" that she describes. Since she, like Marx, uses historical examples to theorize about the future, it seems worthwhile to consider how the variables might have changed. 

First, since 1971, our money has been divorced from the gold standard. In contrast, from what I understand, the nineteenth century witnessed an international movement in the opposite direction, as multiple countries agreed to use gold to back up money. I’m not sure exactly what the ramifications of this might be (Dammit Marx, I’m a literature student, not an economist!), but this seems worth mentioning.

Second, credit and debt seem to have worked quite differently in the nineteenth century than they do now. Although debt problems rose alongside Victorian commodity culture, I don’t think that this sort of “negative money” was accrued in the same way that it is now. I’ve been extraordinarily lucky, but I know that a terrifying number of students finish college tens of thousands of dollars in debt. This type of poverty tends not to be readily visible, as these people still find places to live and money to buy groceries, yet their debts accumulate. They don't end up in debtors' prisons, yet this “less than zero” balance could prevent them from owning a house, renting certain apartments, or getting certain jobs. This would certainly inhibit the bourgeois Betterment that McCloskey envisions. This dearth of the upwardly mobile would have consequences not only in terms of their potential enrichment but their potential consumption.

Debt at the Beginning of the Great Enrichment
So how did debt work at the beginning of McCloskey’s Great Enrichment? This is my understanding, pieced together from varied readings... Stores often established credit for customers based on their understanding of their clients’ social status (Rumors of aristocratic connections do the trick for Lydgate in Middlemarch). Toward the end of the century, with the popularity of traveling to larger cities to shop, store owners would have to rely on newspapers and trade papers to judge when to sell on credit. (Plus, loans could also come through pawnbrokers, business owners, and friends, as in Crime and Punishment and, again, Middlemarch).

However, creditors could sometimes be evaded. There were no electronic debt-tracking systems or phone-calling debt collectors, although there were humans who tracked debtors (Think the bailiff who hunts down Harold Skimpole in Bleak House). But the growing cities—abounding with strangers from a variety of different places—offered anonymity to people willing to make a completely fresh start and clever enough, or deceptive enough, to find a position without comprehensive or entirely credible references (Lady Audley’s Secret and Bleak House come to mind. And “How to Live Well on Nothing a Year” in Vanity Fair outlines how Becky and Rawdon elevate their social status through conspicuous consumption, under-the-table dealings with a moneyed aristocrat, and deceiving creditors.)  

Of course, the consequences of accruing debt could be dire. Entire families moved into debtors’ prisons, and many languished and died there. In many ways, it seems to have been more of a family problem (centralized through the patriarchy) than an individual one. Wives did their shopping on their husbands’ credit (Think M. Heureux in Madame Bovary), but their debt would shift to their husbands (although I think that in some cases, husbands could free themselves of this debt by proving they hadn’t given their wives permission to spend the money). Eldest sons could capitalize on expected inheritances and go into debt gambling at gentlemen’s clubs or outfitting themselves at tailors’ houses (Think Buddenbrooks, Middlemarch, or The Way We Live Now). On the other hand, sons could also contribute to paying off the family's debt. As a child, Dickens worked miserably long hours in a blacking factory while living in a boarding house to pay off his father’s debts, while his parents and younger siblings lived in the debtors’ prison with his father.

The Way We Live Now
It seems like a lot of modern debt falls on individuals, especially young students without the means to repay it in a timely fashion. It is still a problem for established households, but the worst situations seem to be those of isolated young people whose balance drops further into the negative at an alarming rate. This debt seems more hidden, somehow: I never see men hauled away to debtors’ prisons or debt collectors removing furniture from the homes of once-moneyed, now down-on-their-luck aristocrats.

The continuation of McCloskeyian Betterment seems to depend on the formulation, commodification, and accumulation of new ideas. Although the successful college drop-out has almost become a cliché in the realm of new technologies, this success seems somewhat out of reach even to the most intelligent college drop-outs. So, accepting McCloskey’s major premises, if we consider that college is represented as a necessity to intelligent, innovative young people, and many of them cannot afford to attend without student loans, then the continuation of the Great Enrichment might have some major obstacles.

I know this post might be a long one to get through, but does anyone have any ideas? 

How might our divorce from the gold standard inflect McCloskey's logic or projections? Would it strengthen her point that the world isn't a zero-sum equation, since we don't have to be held to a limited amount of gold? What about the difference in the way debt works now vs. at the beginning of McCloskey's "Great Enrichment?"

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