BOOK REVIEW
BY GREGORY DL MORRIS
The Engine of Enterprise: Credit in America
By Rowena Olegario Harvard University Press, 2016 301 pages, with extensive notes and index, and a few illustrations
Because the United States of America is so big and so rich, it also tends to be provincial. Thus, it is always useful to get an outside perspective. That is just what Rowena Olegario has provided in this slim and plainly written volume. She is a senior research fellow at the Said Business School, University of Oxford. Her theme, though not overtly stated, is that credit makes the world go’ round and that the development and evolution of both business and consumer credit in the United States were instrumental in making this country so wealthy.
In particular, Olegario does an excellent job of tracking the development of bankruptcy law and practice as it shook off the shackles of shame and moral failure, and grew to embrace the ideas of orderly disposition and a fresh start. If credit is a tough topic to animate, bankruptcy is even more so. But from the origins of“ bankruptcy” and“ insolvency”— two different concepts at one time— through the fits and starts of shifting ideas of protecting lenders to protecting creditors, Olegario makes a clear case for a greater good developing.
One unsung pivotal date in US financial history that the author has rescued from obscurity is 1841. It is not only the year an important bankruptcy reform law was enacted, but also the year of the first formal credit report.
“ The Bankruptcy Act of 1841 was a watershed,” Olegario wrote.“ For the first time, debtors could fail voluntarily: they could initiate their own bankruptcy by turning over their assets to courtappointed assignees and be discharged from their debts. Creditors could contest a voluntary filing only by proving that the debtor had committed fraud.”
To be sure, there were many more advances and not a few retreats, but the idea of a clean start had taken root.
That same year, merchant and abolitionist Lewis Tappan established the Mercantile Agency in New York. He paid attorneys as credit reporters as they traveled from town to town, conducted their business and interacted with shopkeepers and traders. Competitors quickly sprang up. John Bradstreet invented numerical scores instead of narrative reports. Tappan sold his business to Benjamin Douglass, who later sold it to Robert G. Dun, who adopted the concept of numerical ratings and published a book of ratings for more than 20,000 firms in 1859.
It will not surprise anyone who has tussled with a credit reporting agency that legal and ethical disputes arose early in the credit reporting process. From the start, merchants and later individuals brought suits for libel and slander contending that information was incorrect or worse.
While the threads of bankruptcy and credit reporting enliven the reporting, the book mostly remains just that: straight reporting. In this era of narrative nonfiction, the author has kept things simple and plain. A little bit more excitement, a clever turn of phrase or two, would have served the cause well. After all, economics is the dismal science. There was plenty of room to write with a little more pep without getting overly dramatic.
Perhaps that is the downside to the outside perspective. Towards the end, when discussing the effects of credit reporting on consumers, Olegario flatly calls the three current agencies an oligopoly, for indeed they are. But just two paragraphs later she goes mushy writing that“ the Federal Trade Commission prosecuted a number of credit information providers …” If there are only three that matter, then a number of them would be two? All three?
Similarly, when discussing the irresponsible mortgage lending of the 2000s, she quotes Alan Greenspan’ s comment that“ children, dogs, cats and moose” were able to get loans, but she concludes that the greater good was more credit. For those who lived through the real estate meltdown, this is a shrug to collateral damage. Olegario does not have to turn into Gretchen Morgenson, but in these cases, where millions of people were devastated and billions of dollars lost— or looted— academic distance comes across a bit callous.
In all, this is a useful book, broader than it is deep, but making meaningful connections and bringing fresh perspective.
Gregory DL Morris is an independent business journalist, principal of Enterprise & Industry Historic Research( www. enterpriseandindustry. com) and an active member of the Museum’ s editorial board.
36 FINANCIAL HISTORY | Spring 2017 | www. MoAF. org