Consume This! Plumbing of Capitalism: Credit as “Ordinary Consumption”

This month, Léna Pellandini-Simányi and Zsuzsanna Vargha make use of the practice theory concept of ‘ordinary consumption’ to consider the consumption of credit, and demonstrate the power of thinking through metaphor—in this case, plumbing!

—Jennifer Smith Maguire (Section Chair)

Revisiting the Plumbing of Capitalism: Credit as “Ordinary Consumption”

By Léna Pellandini-Simányi and Zsuzsanna Vargha

Household debt has risen all over the world in the last decades. In Switzerland, Denmark or Australia, it amounts to more than 100% of the GDP and over 75% in the US. Most of this debt is from mortgages. How do households end up with such massive amounts of debt?

Sociology and anthropology of debt and consumer behavior research suggests that for indebtedness to grow, it must be de-stigmatized and become morally acceptable. In our research into the sudden rise of mortgage debt in Eastern Europe, we expected to find such a shift in the moral meaning of debt.

Yet moral dilemmas barely featured in the stories borrowers told us of how they acquired their loans. Instead, they talked about how they started a family, moved to a new city or got divorced. They recounted how they chose the color of the walls and the floor carpeting. Mortgages were a vague memory of which most could not even recall the basic features, such as how much they were supposed to repay and what factors might change their interest rate.

Getting credit, in our interviewees’ accounts, was not a morally loaded project. It was more akin to having the plumbing sorted and getting the electricity up and running.

Indeed, the experience itself of consuming credit appeared to be more similar to that of consuming utilities, like water. We found that the concept of “ordinary consumption” in practice theory  (associated with the work of  Theodore Schatzki, Alan Warde and Elisabeth Shove) was most fitting to describe people’s relation to credit. In contrast to the meaningful consumption practices, expressive of identity or class, that is most theorized in consumption studies, “ordinary consumption” refers to consumption that does not have meaning on its own but facilitates other practices that do. For example, using water facilitates the meaningful social practice of cooking; but water would not commonly be an object of collective meaning-making.

Ordinary consumption, according to practice theory, escalates through a process of co-evolution of the meaningful practices for which it is used and the infrastructure that supplies it. For example, the expansion of the water network and plumbing system went hand-in-hand with changing cultures of bathing and cleanliness. Over time, the latter necessitated further expansion of the water network, the increased capacity of which enabled further practices with even higher water demand.

In this process, morality and the meaning of consumption are central in two instances: initially, when a resource is new or when there is a breakdown. For example, as Elisabeth Shove shows, for running water to proliferate, first the fears that it might spread typhus – an actual problem of earlier water networks – needed to be alleviated. Similarly, meanings come to the forefront when the plumbing leaks or at times of drought. However, for the most part in between, ordinary goods become taken-for-granted and devoid of meanings – a process that Richard Wilk has called “naturalization.”

In an article entitled ‘How risky debt became ordinary: A practice theoretical approach’, forthcoming in the Journal of Consumer Culture (in the special issue Postsocialist Moral Economies), we argue that mortgage debt grew through a similar process of co-evolving mortgage infrastructure and ideas of a normal life which were centered on the home. This is how increasing debt was “naturalized”: not so much by shifting its meaning but by making it devoid of meaning. The credit infrastructure expanded first with the Hungarian government’s Housing Program in 2000, targeting young couples. Interviewees recalled how this influenced their decisions to get married earlier, to have a baby, and to maximize the subsidy by moving to the largest possible house. This program started to move forward the age at which people were expected to become “independent”, elevated the living standards associated with social status and shifted the norms of what it means to be a “couple”, by linking “couple-ness” to moving away from the parents.

Changing practices that involved acquiring bigger homes prompted further expansion of the credit infrastructure. When subsidies were cut in 2003, banks broadened lending by easing conditions and offering mortgages in Swiss Franc and Euro that were riskier than local currency ones, but were available at lower interest rates. These Forex mortgages opened new horizons of even larger and nicer homes, until new standards of a “normal” life filled, and even overran the limits of the newly-expanded credit infrastructure. As one borrower recounted: “Originally, we took out 25 million [Forints] and we increased this up to 35 million in order to be able to finish everything. So, that’s what it had become in the end; it wasn’t possible to take out more.”

Credit consumption grew in a process similar to water consumption: through the co-evolution of the mortgage infrastructure and escalating norms related to the meaningful practices centered not on credit, but on the home.

The analogy with utilities does not stop here. To use resources, such as water or electricity, households must acquire “interfaces,” equipment that connects them to the national water supply network or the electricity grid – such as household plumbing or electric wiring. These decisions are typically not taken by households alone but with the help of experts. Mortgages in Hungary were experienced in a very similar way: for most people they were an obscure, yet necessary piece of interface that would connect them to the credit infrastructure; and they entrusted the largest part of the choice to experts.

This explains the puzzling phenomenon of how risk-averse first-time buyers ended up with high-risk foreign currency mortgages (documented in our project’s large-scale survey). They treated bank sales personnel and mortgage agents akin to plumbers: as qualified people who know the technical details best and call their attention to the key differences between the main options. This assumption granted great power to the sales interaction.

Unlike plumbers, however, bank agents did not assume responsibility for the technical details. This ambiguity around who is responsible for certain aspects of the risks of a mortgage allowed mortgage borrowing to grow.

This warns us that financial consumption and the system that enables it is not inherently invisible, ordinary consumption. It becomes a background infrastructure for consumers partly because of the way we access financial services. Our interviews revealed that the mortgage selling process, from initial brochures and comparison tables to the signing of the contract did much to de-emphasize the significance of this commitment, and discouraged reflection.

Consequently, consumer financial protection initiatives that focus on information disclosure and financial literacy are inadequate for credit products. Notions of financial empowerment that make individual citizens responsible for financial decisions assume that credit is, or can be turned into, a meaningful, “main” practice. Using our water analogy, it expects consumers to become expert plumbers! Our research shows that this is not only politically problematic, as critics have argued, but also unrealistic.

We propose an alternative, which is to take seriously the post-crisis metaphor of the financial system as the “plumbing system” of capitalism. If consumer-borrowers relate to credit less through calculation or morality, we should regulate financial services similarly to ordinary consumption goods like utilities.

This perspective would emphasize regulating the credit advisors, quasi-experts that connect households to the financial grid; and it would refocus the debate on who should bear the risks of the financial system.

 

About the Authors

Léna Pellandini-Simányi is Assistant Professor at the Università della Svizzera italiana, Lugano, Switzerland, and author of the book Consumption Norms and Everyday Ethics.

 Zsuzsanna Vargha is Associate Professor at ESCP Europe Business School, Paris, France and an economic sociologist working on markets and expertise in marketing, accounting and finance.