Hire Purchase (1955)

From the June 1955 issue of the Socialist Standard

“To Have and Have Not”

It is often said that Punch is the great social historian of the last 100 years. Since comic journals thrive on aptness rather than humour, they do in fact provide a minor guide to changes in manners and morals.

A joke that has entirely disappeared now is the one about “the instalments on the furniture.” Continually, in magazines of the 1920’s little boys blurted out that the settee wasn't paid for, and men called to take back the chairs when guests had come to tea—the psychology being that, 25 years ago, to buy on hire-purchase was to have a guilty secret.

All different nowadays, of course. There are even good, wise reasons for instalment buying: for example, if the thing goes wrong the firm will see to it. Hire-purchase is an accepted social fact. Last year, half the radio sets, seven-tenths of the furniture and bedding and vacuum cleaners and TV sets, and nearly all the refrigerators and washing machines sold in this country were bought on hire-purchase. “Cash only” shops are the exceptions now, and very recently the instalment system has spread as far as air travel and holidays.

That is not to say all reprehension of hire-purchase has ceased. Generally, there have been two sorts of objections to it. The one voiced by most working people in the past was strictly practical: “I’m hanging no millstone of weekly payments round my neck,” said the poor, poverty-hardened man in Love on the Dole. The other objection was that to have something before paying for is wrong—apparently a moral view but in fact only cash customer’s attitude. The people who largely held that view were the better-off, professional and black-coated workers; since the war their position has declined, and so consequently has their moral objection to hire-purchase. Many of the “swell” shops, in fact, now advertize hire-purchase facilities.

Hire-purchase trading has gone on for at least a century. Before 1914 it was mainly a hole-and-corner business (nevertheless, plenty of suits were bought at a shilling a week). Its growth between two wars went with the mass-production of cheap luxuries—gramophones, bicycles, radio sets; the first legislation to regularize it in this country was in 1938. The great boom in instalment buying came after the second war, however. Some idea of its extent is given by the banks’ statement of their loans to hire-purchase finance companies. The total in February, 1955, was £30,493,000, compared with £11,188,000 in February, 1954. The sum actually was greater, since many loans for general trading went mainly into hire-purchase; and in the same period several of the companies made capital issues.

Few shops finance their own hire-purchase trading—in fact, only the very big ones. Most of them borrow from hire-purchase credit companies, which often buy the goods themselves, receive the instalments themselves, and leave the shopkeeper as little more than an agent. There are several organizations for checking on prospective buyers. Every hire-purchase customer has his particulars filed (including how he pays); investigators discover all they can about him, and the information is filed for future reference. In America, according to a recent Picture Post article, the files include; “. . . intimate details and frank character assessments. Facts include positions and salaries of all members of a family, bank balances, litigation records, all past time buying deals, estimates of business or professional prospects, value of house or mortgage position, or amount of rent and how paid, local reputation and probably social habits. Police records are included.”

Hire-purchase buying is dear. It has to be. There are the book-keeping and the postage and the enquiry fees and the advertisements (last year the Gas Council and Hoover Products each spent about a quarter of a million pounds on advertizing); the “free” maintenance is really, of course, covered in the cost. The rates of interest range from five to ten per cent. At least, those are the nominal figures: calculated on a diminishing debt they are much higher—over two years, the usual period for furniture, they actually average out at something like 20 per cent. The number of bad debts is said to be small, and hire-purchase firms try everything before resorting to court action, which usually is fruitless for them.

Outside the main stream of instalment trading, there are innumerable related concerns; for example, the cooperative societies’ “mutuality shares,” where vouchers are issued to be exchanged for all sorts of goods. Then there are the clothing clubs, and a host of door-to-door easy-payment salesmen—many of the latter charging rates of interest which are exorbitant even by hire-purchase standards, and having no advertizing or accounting costs to speak of. Incidentally, cars do not figure in hire-purchase as much as would be imagined; most are bought by bank overdraft and re-mortgaging houses.

From the economists’ point of view, instalment buying is simply the form taken by the demand for certain sorts of goods today. Thus, when the number of new contracts fell last year in America, the Government hurriedly urged traders to get things back to normal. And in this country the recent restrictions on hire-purchase were headlined by the Manchester Guardian as “Plans to Limit Demand for Goods.” A fair enough estimate; with the minimum deposit raised to 15 per cent., the demand for furniture has fallen to not much more than half what it was a year ago.

To see hire-purchase as something which—vide Fyfe Robertson in Picture Post—"puts real wealth, which otherwise would not be acquired so quickly, into consumers’ hands and raises living standards,” is to grasp flight appearances, however. It is easy enough to point to all the television sets, but television is only the newest replacement for the piano, and pianos were a far greater luxury in their heyday. Before the wireless era, one cost as much as a television set today—that is, anything between £40 and £70, at a time when money wages were much lower.

But to consider living standards in terms of luxuries is to succumb to advertizers’ patter. The fact is that working people obtain luxuries only at the expense of other things. How can a family with £8 a week get them otherwise? The other things may, of course, be minor luxuries themselves—drinking, pictures, smoking; a small boom in smoking cures has accompanied the big one in hire-purchase. They may, on the other hand, be necessities—food and clothing; or the “solution” for a good many families is the wives’ going to work. Whichever way it is, there is not much to confirm the idea of better, more gracious living for the working class.

“Luxuries” is the wrong word, anyway. There is nothing luxurious about buying clothes by instalments, knowing they will be half worn-out before they are paid for: “pay as you wear” has the sound of eternity. True, furniture is more durable—it is outmoded instead of wearing out in two or three years. A favourite sneer of precious suburban aesthetes is that working people lack taste. An ignorant untruth, as the beautiful little gardens in the dingiest surroundings show; but in any case, there is no scope, for modishness when things are bought over two years to last for 20. Most people, in fact, buy furniture only once in their lives—as the hire-purchase advertisements, with their single-minded appeal to the newlywed testify.

Probably the best example of this sort of thing is the way in which television sets have superseded one another since the war. Each latest model, gaining its owner the maximum of prestige, has been rendered inferior long before the final payment. There cannot be much feeling of luxury about having given up smoking to buy a set with a nine-inch screen five years ago and finding it primitive by today’s 17-inch standards.

The truth is that hire-purchase is a monument to poverty, not a pillar of prosperity. People can buy more things, by whatever method, only if they have more money. For a year or so after the war there was no hire-purchase; it began as the briefly spectacular spending of the gratuity era faded. It is hard to believe that anybody enjoys paying instalments—indeed, these commitments add to the tension of modern living. There is no alternative except going without, however. It is all very well to think people can save up to buy, but it doesn’t work out like that—and in any rase, it means going without just the same. The rise of hire-purchase and the decline of the pawnshop are probably not unconnected.

The average gross wage of male workers today is just under £9; for women, it is just over £5. According to the Chancellor of Exchequer in November last year, there were 8,600,000 receiving less than 96s. a week. Compare those figures with pre-war ones, remembering the cost of living today as 2 1/3 times what it was in 1938. In that year, 63.2 per cent, of the families in Britain received under £5 a week, and 11.8 per cent, between £5 and £10. About the same time, John Strachey did some calculations—slightly tortuous, admittedly—in “The Theory and Practice of Socialism” to show that “the real earnings of the working class in 1934 were only 91.1 per cent., of what they were in 1900.” The only conclusion is that the buying power of working people is much the same as it has always been—small; hire-purchase is the latest manifestation of the smallness.

One other aspect of hire-purchase needs to be mentioned. It helps to discipline the working class. The man with heavy commitments—or the American worker who values his “credit rating”—is the man who must keep his job at all costs. Bernard Shaw’s Andrew Undershaft preferred religious workmen because they were sober and honest and amenable; nowadays his ideal would be the employee buying a dining-room suite. The recent Government Economic Survey mentioned that more than a quarter of industrial operatives worked overtime last year, and it is a sad but fair comment that more than a quarter probably want to work overtime this year, too.

Ours is the age of mass-production. One would imagine it to be an age of plenty, but it is not so. It is a queer reflection that, in this world of science and power, the majority of people have to buy trashy products bit by bit and perhaps abstain from necessities in the process. Profit is often imagined as the greatest incentive to progress; in reality, it is the fetter. The hire-purchase system is a fresh pointer to the outstanding contradiction of capitalism: the inability of a productive system which has industrialized the world to perform the only real function of production—the satisfaction of people’s needs.

Robert Barltrop