WHAT IS THE OBJECTIVE IN INSTALMENT SELLING
AN ADDRESS BY WILLIAM J. CHEYNEY, A.B., A.M.,
Executive Director Retail Credit Institute of America
Chairman: The President, Mr. Tracy F. Lloyd
Thursday, November 13, 1947
HONOURED GUESTS, LADIES AND GENTLEMEN
The Empire Club of Canada extends a warm welcome today to our guests-members of the Canadian and Toronto Jewellers Association, and this meeting of our Club has been arranged with their co-operation.
We also welcome as our guest of honour and speaker--Mr. William J. Cheyney, A.B., A.M., executive director of the Retail Credit Institute of America with headquarters at Washington, D.C.
Our guest is a graduate of George Washington University and Rutgers University and was formerly a Professor of Economics and Banking and head of the Department of Business Administration at Rider College and has been consultant and adviser to many large business organizations in the U.S.
From time to time we hear discussions in connection with the merit and demerit of installment selling and the economic and social involvements in consumer credit as a function in private enterprise. Today an expert will discuss this question.
Our guest made his initial appearance in Canada at Quebec City, where he acceptably addressed the Annual Meeting of the Canadian Jewellers Association, and I have very much pleasure indeed in introducing Mr. William J. Cheyney, A.B., A.M., who will now address us on the subject:
"WHAT IS THE OBJECTIVE IN INSTALMENT SELLING"
I doubt that one could pick a more difficult or more interesting time to attempt a talk like this. Probably the reason for the invitation to talk to the Empire Club of Canada was the interest some Canadians derived from a talk I made last winter at Quebec on the importance of continued, encouraged use of consumer credit in domestic, distribution. Some of this interest may have been aroused by the attempt I made to relate the future of an expanding use of installment credit to the world economic-social situation.
The things that have happened to our economics, yours in Canada and ours in the United States, since last February and the closing in of world conditions upon us make me feel more than ever that the philosophy behind that earlier talk is still sound, but they raise the question of whether today I should talk to you of world conditions as they relate to consumer credit or about consumer credit pictured against the greater background of world conditions. My choice of approach should depend upon a knowledge of who you are and where your own interests lie for the difference in approach is one of emphasis only.
Strangely, you may think, I believe that there is a vital relationship between the proper continued use and expansion of consumer credit and the national world situations in the era ahead. Of course, you will be thinking that the relationship between the two has a Mohammed-mountain flavour. But I think possibly you may be interested at least in exploring what I have in mind.
There was a serious editorial written recently in one of our larger newspapers commenting on a recent statement of the National Diaper Services Association in the United States. The Association said that one of the only ways to assure peace in the world tomorrow is to take the time and effort necessary to assure the babies of today of a comfortable adequate diaper service, pointing out that an irritation experienced in the earliest days of babyhood psychologically and psychiatrically may become the cause of irritability and pugnaciousness in adulthood. The editorial picked up this claim and seriously opined that possibly the Diaper dispensers had put a finger on one of the most vital, possibly most fruitful means of doing away with the underlying causes of war. The editorial warned Americans not to laugh off the chance that if the Russian children of today could be diapered properly, we may be less apt to face war with them tomorrow, that we might well consider this "need" as we spend our funds on other types of aid for the peoples of the world.
When you consider what I have to say about consumer credit, I do not ask you to forget that it is but a drop in the great bucket of national and international questions, problems, and possibilities; but just that you think with me about its ultimate ramifications.
With the Congress of the United States just about to reconvene to consider aid for Europe and the anti-inflationary safeguards necessary to make it possible, there has been a lot of talk, even a suggestion from the President of the United States and his economic advisers, that a principal point in the program should be the re-enactment of consumer credit controls. I have no interest in talking to you about federal credit controls, except to say that consumer credit in the United States was strictly controlled until November 1, was actually under control when the President made his suggestion. Whatever else may have caused our inflationary situation, consumer credit didn't. It was "under wraps" at the time. The President is in the position of saying to Congress and the people, "We face a dire emergency with respect to prices and one of the four or five major cures I suggest is to reinstate some controls which have not yet been lifted. On the face of things, it looks as if our President looks for a whipping boy, knowing the real causes of the situation are too elusive or too hot to handle politically.
In 1941 when our credit regulation was first put into effect, top officials of the Federal Reserve System admitted that whatever might be their objective, it would thus be achieved by yoking once more the economic activities of those who are less fortunate economically, for no sugarcoated device could be found to check distribution by laying the hand of government upon the more well-to-do. All through the era of Regulation, these officials, though never publicly, kept admitting that whatever good there was in the regulation was squeezed out of hamstringing the poorer people in their everyday buying, without touching the purchasing habits of those with ready cash by virtue of earning capacity, the Grace of God or inheritance.
Now, within six months of the time Congress legislated the controls out of existence effective November 1, the Administration turns again to the poorer people, suggests that the inflationary spiral be checked, aid to Europe provided, by reinstating class-economic controls upon the common people.
Abraham Lincoln said, God must have loved the common people for he made so many of them. Benjamin Franklin, you remember, said that he was always perplexed at all the talk about the common people because he did not understand that there was any other type. But governments have always considered the less fortunate economically as pawns, the easy political guinea pigs upon which to foist regulator and experimental measures thought suitable for the protection of so-called "economics," which in times past were must, to be honest, interpret to mean the welfare of the established classes.
I am not a Socialist, I believe in the private enterprise system of economics. But in political science I believe that government must be "of the people" and not to govern the people. At Washington in the last decade our government offices have been flooded with a galaxy of men who before they came to the capital preached government by and for the people, who after entrenching themselves talk and work for government by a bureaucratic intelligentsia with rules and regulations made effective just below the economic strata in which they themselves "move and breathe and have their being."
All back through the ages and until 1920, bureaucratic government was possible without feeling public disapproval, for through these hundreds of years the ordinary people knew nothing else than to be governed. To speak out for themselves had meant death or prison. The United States was founded on a republican form of government in a democratic setting, but everyone knows today that that early government, like the economy of its day, was controlled, and until recent years, by wealthy interests who while giving lip service to government by the people considered their own few "the people." They maintained for themselves special privileges in government and in their economic fortresses. They dictated the wages men received. It was they who dictated that women should remain in the home. It was they who dictated that women should not vote. It was they who until thirty years or so ago jailed labour leaders for unionizing workers.
At any time in this earlier era it would have been extremely easy, without any fear of popular disapproval--to squeeze wages, lengthen hours of work, regulate expenditures, yes, prohibit the use of credit, if it would fill a King's treasure chest with rubies in 1700, supply foreign aid had it been in 1920, or to build a super rocket ship to communicate with Mars if Senator Brewster's Howard Hughes investigation had been ten years earlier, if it was the will of the vested interests.
Of all the time in the world's history, however, today is just about the worst for either economic royalists or newly feathered fledgling academic Washingtonian bureaucrats to say. "Now we shall finance the world's uplift by dictating to the American people what they shall or shall not do, according to our private whim or reason." It is true that the people accepted wartime controls over their purchasing on credit without much squawking, and a hundred other privations. If it would win the war, the people accepted curbs on their civil liberties. The war-time Washington official walked the streets or drove the thoroughfares with a sort of God-like assurance of power touched lightly with an air of patronizing humility. There is no war today. The people are not interested in personal curbs. Officials once more are public servants--lampooned at will by the people in their reasserted sovereignty.
Our Congress adjourned last summer. The legislators scattered to the four winds. Some went to Europe to see who needs what aid. The great majority went back home to find if the people would still support them, if they should vote billions for foreign aid. Some come now back to Washington considerably upset, startled and perplexed. Here is what they found back home. The people, particularly inland from the Atlantic seaboard are little interested in foreign aid, in anything foreign. The returned GI's, found the congressmen, don't care much either for the Europeans or the Orientals with whom they bivouacked during their traps-Atlantic and traps-Pacific service sojourns. They told the congressmen that the people of Europe are dirty, slovenly, lazy, never will be on their feet financially no matter how much we help them. When the congressmen asked the GI's, "What should we do?" the GI's told them, "Go back to Washington. Leave us alone. We have our problems. We are establishing new homes, making up for time lost while you had us in the army."
The congressmen did not find strong sentiment against European aid. What they did find was apathy toward the whole question. Apathy toward government itself
The responsible organizations in the States, churches, veterans' groups, trade associations and labor unions, all favor immediate aid for Europe as a matter of good business judgment and a humanitarianism. This represents the voice of American leadership. The rank and file told the congressmen, "You take care of the miscellaneous world problems. Let us alone. But do not make any mistakes!" What troubles congressmen today is that unfortunately, the leaders have few votes. The millions have a great many. Even the women whom they thought would show the strongest humanitarian sympathies, backed their men folk, saying, _ "Let us get our homes in order. We have lost six years. We are busy. Don't bother us. LET US ALONE."
Now let me go back and bring up another thread of reasoning. In February I told the jewellers of Canada at Quebec of reading an account about communism spreading in Central and South America twice as fast as it ever spread in Russia. I congratulated you people of Canada that the United States stands as a strong buffer between you and this growing northward surge from below our southern border. I imagine a hundred Canadian businessmen either came to me at Quebec or wrote after the talk to explain that there is a northern infiltration of these "isms" directly affecting you here in Canada, that the United States cannot and does not stand as an effective buffer state. I was told where communism is filtering into your country, of certain spots in which it has become very strong. Naturally through your newspapers you have a good idea of how, it is filtering into the United States, forgetful of our southern border.
When ordinary peace-loving, satisfied folk like the citizens of our two nations are approached by an alien, foreign, unknown ism, the chances are strong that they will throw it off with an easy shrug .of the shoulders. That is the type most Canadians and Americans are. Then how in the world can you account for the fact that on every hand thousands of workers are on strike, thousands more are congregated in the public halls and parks, listening raptly to honey-tongued speeches of foreign agitators.
Gentlemen, the answer is fairly simple, so simple that it is staggering in its impact. People listen to these agitators and foreign ideologies either when they are hungry or when they are dissatisfied.
In our two countries, fortunately, we have reduced the hunger element to a world minimum. Even at that, I expect there are many folk who have been influenced to believe a foreign doctrine because it has been so hard in their present straits to feed and clothe their families. However, millions upon millions of our working people now enjoy reasonable income which relegates this fear to a somewhat less important place.
Since 1900 the Western world has seen the development -of the thousand and one comfort-giving, labor-saving and enjoyable products which fill the shop windows of today. More than in any other category this development has taken place in consumers' durable goods. I think it was at the turn of the century that we had but five thousand bathtubs in the city of New York. The modern plumbing which we all take for granted came into the average home within the last fifty years. Even yet a large percentage of our homes is not so provided. The refrigerator, washing machine, radio, electric light--all of these in an earlier era were considered luxuries only the rich could hope to enjoy.
A few hundred years ago each country was made up of a handful of wealthy nobles, a handful of skilled craftsmen and great masses of common folk, the peasants. In a whole lifetime, the masses never touched with their hands the luxuries enjoyed by the rich. The handful of artisans and craftsmen made such products, and to some extent derived enjoyment in the pure satisfaction of creating, but not possessing them. Nonetheless it was from these guildsmen or craftsmen that a new middle class emerged, more wealthy than the peasants, paid well by the rich for their paternalized service. I want you to see the difference in today's society.
The craftsmen of today, who make the products of our age, which put to shame, in scientific achievement At least, the finest craftsmanship of the ages, number millions. They are the rising masses. Millions of men and women now touch, fashion and produce the magnificent products so well known to us all.
It was an easy matter for the nobility to deny to the peasants even the right to touch the finer products of that by-gone time. Today, no man, however rich, would dare suggest such effrontery to the lowly common man. He is now an independent citizen, a union worker, a voter. He goes on strikeyour mills and stores shut down. I shall restate what has become a positive philosophy with me. We have come to the time when the hand that makes has the power not only to demand adequate wages, but the power to take--meaning the power to take the product--itself and use it as and for its own.
Thus it is that no economic society, no government in the Western Hemisphere dares to deny the common people, the working masses, the right to possess these great products.
When I was a boy, a few rich men had fine gold watches. Everyone else had a "Dollar Ingersoll". No one raised an issue. No one questioned the situation, or so it seemed. Yet, today the man who fits together the transmission of a motor car, the man who works in a drug store, the one who walks behind the plow insists upon his right to a "solid gold" Elgin, Bulova, Waltham, Benrus, Hamilton or Longine. Tell these men that it is their prerogative to own a Dollar Ingersoll, no more--and they will throw down the transmission, walk out of the drug store and abandon the plow in anger. The independence of individual men has reached a place where it is dangerous to tamper with.
These new independent men do not, of itself, hate wealth. They are not even inclined to hate the wealthy. They are inclined to believe in private enterprise. They are inclined to think democracy is good.
But the economic system and government of today have not given them good reason to believe that all or any of these Western principles are sacred. You who are the Leaders of Canada's private enterprise have given them no real cause to love the system you would have them support for you. Private enterprise has given them a living. It has not given them wealth. They acquiesce to wealth but are not ready to fight for it, nor argue too long for its continuance.
Thus spins the second thread of my-argument. Free men today are not wildly excited about continuing the private enterprise system most of us in this room view as almost God-given. But they acquiesce so long as they are neither hungry nor denied their right to possess and use the things their own hands make. Yes, if we clearly establish their right to possess-they will believe in our system as theirs.
So through two divergent threads, I bring you to the point where I hope you will recognize our only safeguard against the encroachment of foreign isms until our own beloved system is undermined to the point of failure and oblivion. We live in nations where private ownership was thought to be almost worshipped. Yet we wake up today to find that what you and I think of as ownership is not the private ownership pictured and desired by millions of, our fellow men.
To them private ownership means owning a home, a washing machine, refrigerator, sewing machine, diamond ring, a necklace, a cross and a little chain of fine gold, a set of dishes, a rug or two, nice clothes and the right to spend one's meager income as he chooses. This to the average man today is private enterprise and private ownership.
To you in this room, private enterprise and private ownership mean the right to own a store, to buy and sell and make a profit, the right to stake out gold claims and to mine the precious metal at a profit unmolested by some fellowman who has the right only to watch you dig. To you it is the right of a few men to create a great corporation, perhaps to control or almost control the distribution of consumers durables throughout the Dominion of Canada, or to create a great store to distribute two hundred million dollars worth of American products in New York City and other cities. It is the right of a few men to create a General Electric Company and own it, deny others access to it by virtue of "property rights," private ownership. It is the right of a few people to create an air line or a steamship company or to gather together a great aggregation of motor car manufacturing companies and name the aggregate "General. Motors." Private property to those who believe this way entails the right of protection of the state against the instrusion of our fellow men. Do you for one moment care to deny that these two greatly divergent views are widely held today in the United States and Canada? Both under the title, "Private Ownership, The American Way."
The thought I want you to consider is this. If you who want to own a store, develop a gold mine, run a railroad or build a motor car desire to hold sacred your right to these things and desire millions of fellow Canadians and citizens of the United States to protect you in this right, then by all that is sound judgment, wake up!
Guarantee to the man in the street the right to private property as he sees it, the right to h%s private property. Help him get a home of his own. Never through government nor private enterprise do anything to deny him the refrigerator, washing machine, radio, diamond ring, the cross or his watch. If you do let any mistaken law or business habit deny him these luxuries of his sphere of life, these symbols to him of private enterprise, if you let either government or business deny him these things, then look well to your own private property for it is going by the boards. There are ten million men who view private property as the man in the street views it to a thousand who view it as you do. There is no way under Heaven, not even through governments nor wars nor armies and navies to protect private property and private enterprize as you see them unless you positively guarantee to these millions of others the right to enjoy private property as they see it.
Consumer credit, the right of a man to utilize his good name to spread out over a period of income his purchases of the major products which he is making today is the only effective device which you in private enterprise have developed for the ordinary individual to acquire the private property to which he thinks he is entitled and for which--at least up to now, he is willing to work. It is a good method. No other has' been devised that fits the need and smacks of private enterprise. This is true, isn't it?
You dare not pass a law offering to sell him these products for cash. He will laugh in your face, knowing that you are the only ones who have the cash. Those who are wealthy have had it for ages. He never has had it.
You cannot pass a law requiring him to save in advance, for while you think you saved in advance, you have never done it. Nine-tenths of the great wealth in the world has been inherited, not earned nor saved. Do not complacently think of it as saving when you inherit a million dollars and put it in the bank vault in the form of securities. You have saved nothing. You have called upon the state to preserve what is left to you. You have called upon society to protect what you have from your fellow men. You haven't saved. You dare not ask the man in the street to save before he can own. You didn't! You never intend to.
Do not get the notion that you can ask the man in the street, this new day American, to grant you special rights and social privileges which he cannot have. Never expect him to permit you to dictate changes in his social outlook, changes in his method of handling his pay envelope; changes in his view of private ownership.
No, you must create for him a system by which private enterprise, your private enterprise, offers to him and his theory of private property a mechanism that takes his meager income and stretches it out so that he can acquire these products which a generation ago would have been called your luxuries-now not "called" but known as his necessities.
Wear your spats, dust off your high hat if you choose, but get it out of your heads that to be able to wear them denotes the right to utilize the world's present-day products to the exclusion of the worker who makes them with his hands. Fail to help him get these products into his home and you can be the most blue-blooded aristocrat of private enterprise, yet your enterprise will topple with the rest.
If you are a store merchant or if you are a manufacturer, or banker or lawyer who until today have thought you had no special interest whatever in consumer credit, in the installment plan of buying, forget such a notion, for without installment credit or some equitable substitute in the United States and Canada you will have communism, and in that phrase I mean to say your prized private enterprise will go. Your cash store cannot exist in either Canada or the United States-if you permit free, open-handed, installment distribution to be denied our millions. Your great manufacturing company, your bank, your law business, if it is based on private enterprise, will fail if you do not take an interest and a part in the development of some "installment" method whereby the common man can acquire what he believes to be the private property so sacred to the thinking of this age. This is the only private property he will struggle to preserve-and your best bet is to tie on to his coat tails-not to try to lead him by yours.
The communists are telling our working people that you have no interest in their type of private property, that you have no idea of guaranteeing them any such right of ownership, that you will not go out of your way to foster a system whether it be installment credit or something else by which they can own the things they want and need. This is what they are telling the workers who support you must have to preserve capitalism. This is how communism comes to flourish right here under our noses, too dangerous to be ignored.
Finally, be careful lest in paying lip service to installment credit as a bulwark of private enterprise against communism, you fall into the trap of setting the standards too high, of making the system too rigid, so that lesser men cannot use the plan you would develop. Let it develop practically. Let individual human beings make credit transactions with other individuals. Let buyers go away after each transaction feeling that the great system of private enterprise once more has clicked, once more has opened its doors to them, has considered them -a part of it. Let every customer, whether he buys for cash or on the longest terms available, go back to his home saying to the communist or other agitator, "My friend, you are nuts. I am a part of private enterprise. I and the banker and the manufacturer and the retailer, we are all part of what we call 'the American system of production and distribution.' I vote for the government that supports my private right to own my private property. I am the friend of the retailer and manufacturer, who, while I work for them, and make their products, know full well that I have my own right to own them for my family.
This gentlemen, is the philosophy of consumer credit in a world of private ownership, and enterprise. Do away with consumer credit, make it rigid so it will not supply the common man and family, and in your haughty judgment you will have mistakenly sown the seeds of unrest, dissatisfaction, akin to hunger itself, and the harvest will be a holocaust upon your own private rights and privileges.