Review: Debtor Nation

Hyman, Louis. Debtor Nation: The History of America in Red Ink. Princeton: Princeton University Press, 2011.

In Debtor Nation, Louis Hyman provides a history of personal debt in America. His story begins in the early twentieth century, when debt was first institutionalized in the United States, and ends in the late twentieth century, when debt took on its contemporary form. Hyman’s thesis can be divided into two parts: first, he argues that the transformation of personal debt into a “legal, sellable, and profitable” enterprise, made possible by credit, was central in shaping the contemporary economic system (1); second, he insists this transformation was the result of individual decisions that led to both intended and unintended consequences. In other words, he argues that the economic system of debt that we have today, characterized as it is by indebtedness, was not a foregone conclusion; rather, it was the product of government policy, the need to make credit profitable, and consumer desires. As Hyman puts it, “this dependence on credit was the creation, intentional and unintentional, of the sometimes unlikely choices of government, business, and consumers” (281). In a sense, then, the history of debt as presented in the book is a history composed of opposing forces—of intention and accident, of action and reaction, of wealth and debt. Understanding this history and its consequences is the larger project of Debtor Nation. As Hyman affirms, “to understand today’s credit system requires understanding the history of how consumer credit and twentieth-century American capitalism co-evolved to create both our prosperity and our insecurity” (9).

The story unfolds in seven chapters supported by an introduction and an epilogue. Each chapter is overflowing not only with history but also with the encyclopedic and sometimes technical vocabulary of finance. This is not so much a critique of the book as it is a warning to the unsuspecting history student who may be unfamiliar or uncomfortable with the language of finance; nor is it a suggestion to that same student to avoid the book. In fact, the finance jargon, if I must call it that, is indispensable to the book, just as mathematical jargon would be indispensable to any history of mathematics. Hyman has a firm understanding of the vocabulary he uses, and he integrates it into his history as seamlessly as financial terms can be integrated into an engaging historical narrative. If this seems a small point, I encourage any of the book’s readers to attempt to integrate discussions of rate caps, option accounts, asset-backed securities and adjustable-rate mortgages into their next books in a similarly readable manner. It is not at all surprising that the seasoned journalists at the Wall Street Journal and The Economist are able to do so, but it is surprising when historians do it, even economic historians. It is the unfortunate burden of economic historians to weave the emphatically unliterary terminology of economics into a story that is at once informative and captivating—a burden political and social historians surely take for granted. Hyman handles the burden well, and this book should be used as a writer’s reference for any economically inclined historians.

Hyman also does a good job at utilizing his sources to narrate debt’s complex history. He pulls from newspapers, financial magazines, annual reports, economic reports, surveys, and speeches, to name just a few of his sources, to tell the story of debt’s development over time. However, although his source usage is good, two aspects of the book stand out above the rest. The first is Hyman’s use of his footnotes. In a book like this, heady as it is, it is imperative that the author keeps the argument in the main part of the text as tight as possible, yet that same headiness also necessitates a judicious use of footnotes, which allow the author to explain concepts further or extend his argument in important ways that cannot or do not necessarily contribute to the argument as constructed in narrative form. For example, after writing in the body of the text that “the average length of a mortgage [in the 1920s] was three to five years, and was not amortized” (47), he clarifies this in the footnote:

To amortize a loan means that every month the borrower pays back both the interest on the loan as well as some fraction of the principal. “Un-amortized” means that there is no structured way for borrowers to repay the borrowed funds. Borrowers have to exert discipline and save up the principal. It is standard today, but in this period was primarily found in installment purchasing plans, as made clear in Chapter 1(303n10).

This is not insignificant material. Although Hyman does define amortize in the body of the text, the information in the note is clearer and expanded. This footnote is representative of the type that Hyman writes for all his chapters, which are unique for their clarity and relevance for understanding the main topic.

The second aspect of the book that stands out is Hyman’s use of statistics. It is no secret that historians have a certain allergy to quantitative methods, so it is quite shocking when a historian not only uses statistics, but also uses them extensively. Justifying his use of statistical analysis, Hyman writes (in what is hands down the best footnote in the text), “while quantitative methods have fallen into disfavor among historians, I think that when used as part of a historian’s tool kit they can answer questions other methods cannot” (330). Indeed they can. Nonetheless, recognizing that some readers may not be comfortable or knowledgeable in statistics, Hyman explains that “for the less technically inclined reader, explanations of some of the statistical methods will be in the notes. For the more technically inclined reader, p-values of relevant tests and regressions have generally been put in the notes” (330-331). Obtaining meaning from large amounts of raw data is one of the powers of statistics, and Hyman’s use on this power helps him in ways unimaginable without it, especially in Chapter Five. Debtor Nation could have been written without statistical analysis, of course, but it would have been a lesser book without it. Read the book for its in-depth history of institutionalized debt, or read it for a lesson in the craft of financial history; either way, you will learn a great deal.


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