The term “finance” often conjures thoughts of distant power and abstract wealth. It is the world of Davos and Wall Street, of options and derivatives. Yet finance has long been an essential part of working class life as well, in the small loans, store credits, and pawned goods that have helped poor people to weather misfortune throughout the modern era. In City of Debtors, Anne Fleming, a professor of law at Georgetown University, examines the struggle to govern small-sum finance in twentieth-century New York. The book is a careful study of regulatory politics that broadens our understanding of state-market relations while highlighting political-economic challenges that endure into the present.
At the center of Fleming’s narrative is the industrial household and its often inadequate income. Shelves could be filled with scholarship on campaigns to ease the wage-earning condition through labor organizing, private charity, and the welfare state. As Fleming reminds, however, working people have routinely dealt with economic need in a far more prosaic way: they have borrowed. City of Debtors charts the history of encounters between straitened New Yorkers and the personal finance industry from the turn of the century to the 1990s. At the beginning of the period, factory and railway workers contract with salary and chattel loan companies, often to pay for household goods and medical expenses. By the end of the era, a diversified community of urban borrowers are in thrall to installment sellers, check cashers, rent-to-own proprietors, and other fringe financiers, in part as a salve for stagnant wages.
That these relationships required regulation was generally agreed upon by lenders, debtors, and liberal policymakers, albeit for different reasons. Creditors tended to welcome the legitimacy conferred on their business by the stamp of modest government oversight. Liberals saw state supervision as important for keeping the lifeline of small-sum finance available to the poor without permitting it to add to their poverty or render them public charges. How to thread the needle of governance, however, proved perennially vexing. There were substantive questions of what precisely should be regulated – interest rates, risk disclosure, or collection practices – in order to tame creditors without choking off the possibility of fair profit. There were institutional and jurisdictional issues centered on where regulation should come from – the legislatures or the courts, state government or national law. And there were innovations in debt itself and the problem of whether new forms of borrowing (such as installment plans and revolving credit accounts) should be ruled by codes that were created to manage older forms of finance (such as cash loans secured by wage assignments).
Fleming deftly guides the reader through these complex and consequential dilemmas. The book traces novel regulatory evasion schemes, such as the countless loans transacted in the 1910s by Stella Blanding, a twenty-seven-year-old Maine resident to whom New Yorkers often inadvertently gave power-of-attorney in order to borrow at interest rates prohibited by their home state. It follows the plight of poor debtors as it was taken up by philanthropists, consumer rights advocates, and anti-poverty warriors, finding a measure of relief in the provisions of the Progressive-Era Uniform Small Loan Law, for example, or the postwar jurisprudence of unconscionability (in which courts refused to enforce credit contracts deemed unduly exploitative). Ultimately, the book is less an account of change over time—though avenues for borrowing and lending did multiply across the century—than of patterns of ambivalent results. The project of making the working-class debt relation just and fair routinely struggled against the challenges of federally-divided power; the speed with which financial practices evolved beyond rigid regulatory categories; and the fact that debt, despite often aggravating the problems it was meant to solve, also stood as one of the “sturdiest life rafts available to those drowning in the choppy waters at the edges of the economy.” (p. 253)
City of Debtors is an illuminating history of credit as an instrument of working-class survival and a thorny legal puzzle. In contrast to vague historical narratives of “financialization” – a term which tends to suggest a dichotomy between the New-Deal-industrial past and the postmodern, market-driven present – Fleming demonstrates the persistent, intimate ties between wage-earning, liberalism, and the (expanding, regulated) financial marketplace. This is an evolutionary tale that helps scholars to appreciate small-sum debt as a development within industrial capitalism rather than as a speculative alternative to it. Additionally, by holding her focus on the material debt relation, Fleming is able to attend to regulatory power across multiple levels, from city and state authorities (both legislative and judicial) up to the Supreme Court and Congress. Federalism tends to fade as a theme in twentieth-century U.S. historiography, surfacing, if at all, often as a tactical obstacle to the civil rights campaigns of the 1950s and 1960s. City of Debtors models a sophisticated analysis of the unique features of modern jurisdictional division, rendering locality relevant not in a microcosmic framework but as constitutive of major economic change. Along with the emerging scholarship of Vanessa Ogle (on archipelago capitalism), Dara Orenstein (on foreign-trade zones), and others, it gestures toward a decidedly spatial turn in the history of finance capitalism.
In opening the neglected archive of small-sum lending, Fleming’s study invites further consideration of several important issues. One involves the ideological significance of the debt question. What did it mean for progressive reformers and, often, corporate employers to join in castigating the “loan shark” in the 1910s and 1920s? Or for national policymakers to denounce the scourge of “high charge ghetto merchants” in the 1960s and 1970s? Fleming is primarily interested in how these discussions shaped the course of financial regulation in New York and the nation. One might also ask, however, what cultural work was performed by casting small-sum lending as an urgent problem in the midst of discussions of labor unrest or urban decline. Relatedly, debt can be thought of as one solution to a set of needs that might also be addressed by direct state provision. In the 1920s, for example, philanthropic studies found that a considerable amount of borrowing was undertaken to weather unemployment or to pay for medical services—two experiences that progressives would attempt to socialize in various ways and with limited success throughout the twentieth century. A sense of exceptionalism tends to surround interpretations of the American welfare state—uniquely underdeveloped—and American finance—uniquely overdeveloped. To what extent might these facets of national political economy be positively intertwined?
Such questions are raised by Fleming’s captivating study of working-class debt and the long struggle to govern it. By burrowing into the arcana of small-sum credit, City of Debtors enriches our understanding of twentieth-century social and economic policy while highlighting important new avenues of research into the relationship between class and finance.