The nature of debt, and our attitude to it, has changed significantly since the nineteenth century. While the debtors’ prison used to spark fear into people’s minds, we are now, in Britain, living with a £1.3 trillion debt mountain. The cause of this change to the perception of debt can be traced to growing affluence allowing people to have mortgages, and the creation of the Welfare State leading to the entitlement mentality.

To assess the modern debt culture, it is necessary to consider how people’s attitudes to debt have changed. In the late-seventeenth and eighteenth centuries when banking and credit systems developed most people were too poor to gain credit. As such, there grew a popular image that only dishonest businessmen and the feckless upper classes were able to fall into debt.
This attitude toward debt changed in the late twentieth century as more people were able to gain credit. With growing affluence and the desire to own one’s own home, mortgage debt became more common. Thus, debt lost its association with the greedy and frivolous as it became just as common among hard working families. However, because debt was no longer stigmatised, people were able to abuse credit systems for their own self-indulgence.

The idea of using credit to support a lifestyle beyond one’s means is derived from the culture of entitlement that began with the creation of the Welfare State. The Welfare State is based on the idea that everyone has an equal entitlement to certain things, most notably, education and health care. However, this precedent has led some people to believe that they are ‘entitled’ to a standard of living that is beyond their means. Thus, credit is seen as a right because it liberates people from the limits their income places on their lifestyle. The most common example of this is mortgages. Although house prices have outstripped the increase in real wages, people remain unwilling to accept that they cannot afford the same quality of house as they may have done ten years ago. The result is more excessive debt.

Of course, this is not the only reason. In addition, the credit card has transformed the way people view money. Instead of conducting transactions directly with real currency, people are now paying virtually. The result is that people’s perception of their wealth and their spending is reduced. Moreover, it can be argued that banks and loan companies have accentuated the problem of debt by offering larger loans to those who cannot afford the repayments. Nevertheless, this must not distract us from the central fact that excessive debt and its social acceptance is a manifestation of the modern culture of entitlement.

On one level, the process of changing people’s attitude to excessive debt and its acceptability has already begun. There are increasing signs that the economic climate is changing for the worse. In structural terms, a debt-based economy relies on liquidity in order to pay off, and take out, loans quickly and efficiently. Thus, the recent ‘credit crunch’ and its adverse effects, most notably on Northern Rock, demonstrates the flaws of a debt-based economy. Moreover, the Citizen Advice Bureau has pointed out that the number of people making debt enquiries has doubled in ten years to 6,600 every day. In all, people are increasingly aware that excessive debt breeds instability and cannot be supported in a period of economic turmoil.

Nevertheless, it must be appreciated that changing the mentality of entitlement is key. This is a long process with no certain means of implementation. However, in general, people need to be instilled with a sense of social responsibility. This can only be achieved by making people realise that they cannot rely on the government to solve all of their problems, but that sometimes they need to use their own initiative. We need to do away with the ‘people dreaming of systems so perfect that no one will need to be good’ as described by T.S. Eliot.

In conclusion, as mortgage debt became more common, debt in general lost its stigma. Some people were then able to abuse this liberal attitude to debt by borrowing money to live the lifestyle to which they thought themselves entitled; a mentality derived from the Welfare State. The solution is to make people appreciate that they cannot support excessive debt in a period of economic instability, of which it itself is a cause. Moreover, more generally, it is necessary to combat the mentality of entitlement by instilling a concept of social responsibility.

Tags: debt, entitlement culture, welfare state

This entry was posted by James Arthur Sharpe on Sunday, September 30th, 2007 at 6:01 pm and is filed under Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.