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