Have you ever wondered how we became a nation of debtors? When did credit become something we take for granted?

Here’s a passage from a book called Ain’t We Got Fun? that reveals how credit rose to prominence. I’ve annotated the passage with links to supplementary material.

[During the 1920s] an ever-increasing proportion of the population became urban dwellers, leaving behind the isolation and grueling routines of farm life. Spread out before these workers in the city was a dazzling array of goods, housing, comfortable restaurants, luxurious movie houses, and shiny new cars. An era of national advertising and installment buying gave desirable objects an even greater appeal.

Whereas at the turn of the century there were a very limited number of products that were nationally known or that could be purchased anywhere in the country, the Twenties witnessed the unprecedented triumph of advertising campaigns for nationally available products. A look at the for fortunes of Lambert Pharmaceutical Company, makers of Listerine, readily demonstrates the effectiveness of one advertising strategy.

In 1922 the son of the owner of the company, Gerald B. Lambert, was $700,000 in debt. Determined to improve the sales of Listerine, a mild antiseptic developed in 1879, he and two employees of the firm’s advertising agency launched a campaign designed around a word they had come across in the British medical journal Lancet: “halitosis“. The resulting advertisements proclaimed, “Even Your Best Friend Won’t Tell You”, and the profits poured in. By 1928 Lambert’s debt had been paid off and his company’s advertising budget was five million dollars a year.

Closely linked to aggressive advertising campaigns was the use of installment-plan buying. After the consumer had been convinced of the desirability of that new refrigerator, radio, washing machine, or vacuum cleaner, the next important step in the sales process was to persuade him to make his purchase as soon as possible.

Prior to the 1920s the public had held generally negative attitudes toward credit purchasing. Young people were warned against burdening themselves with a lifetime of debt and were made fearful of losing their possessions should they fail to make payments on time. In the Twenties all that was turned around.

Advertisers promised an acquisitive public that it needed no money down and could get liberal terms. Millions of ready buyers were convinced that there was no need to deprive themselves of the magnificent new appliances and machines of this age of progress. In 1927 six billion dollars’ worth of goods (about 15 percent of all sales) were bought on installment plans. And the factories kept on producing more merchandise.

The general sense of prosperity, coupled with the disillusionment of wartime idealism, became the basis of a new theme that dominated the age. The mass of Americans believed that they had an alienable right to the good life and particularly to “a good time”. And a good time they determined to have.

Never before had a generation set out to be so self-consciously different from their forebears.

Urbanization, marketing, and the rise of mass media produced a powerful combination capable of separating the working stiff from his cash. I hope this wasn’t too dry — I find it fascinating.

Enough intellectualizing! Back to your regularly scheduled personal finance blog.