Retail Financing and the Origin of the Post-Fordist Transition

In the late 1950s, department stores transformed the way in which their customers could borrow, which ended up transforming the centers of profit in the US economy. Competitive sales pressures between stores in the booming days of the late 1950s drove the expansion of consumer credit. As retail firms expanded their credit offerings, they also expanded the accounts receivables that their customers owed to them. Caught in a financial Catch-22, retailers had to expand their sales through credit, but in doing so confronted the limits of their own capital. This paper shows the slow steps in the changing thinking and practices of credit managers who created the credit policies of these firms, as well as the flows of capital which made these innovations possible. Different retailers resolved their crisis of capital shortage differently, but in solving this shortage, they all fundamentally altered their businesses and the way in which Americans practiced debt. Despite their different institutional aims and incentives, the necessities of capital stitched together the disjointed elements of postwar manufacturing, retail, and finance. The early 1960s witnessed the beginning of the transition from the installment credit economy of the Fordist era to the revolving credit economy of the Post-Fordist era. In the Fordist era, finance companies made marginal profits but enabled large manufacturing concerns to realize their profits on production. In the post-Fordist era, profits on the financing became an end in themselves. Understanding the transformation of retail credit practices helps locate one of the sources of this broad transformation in American capitalism.