Credit Access and Social Welfare in France and America

Credit Access and Social Welfare in France and America

By Trumbull, G.

Abstract: Theories of regulation in the public interest have emphasized the role of governments either in fixing market failures to promote greater efficiency, or in restricting the efficient functioning of markets in order to pursue public welfare goals. In either case, features of markets serve to justify regulatory intervention. I argue that this causal logic must sometimes be reversed; that, for certain areas of regulation, its function must be understood as making markets legitimate. Based on a comparative historical study of consumer credit markets in the United States and France, I examine the sources of national regulatory divergence. In each case, a series of regulatory interventions by the state transformed a formerly disreputable small lending sector into a legitimate economic activity. But logic of this transformation was very different in the two cases. In the United States, consumer credit was interpreted as a form of welfare policy. In France, consumer credit was seen as a threat that generated inflation and reduced consumer purchasing power. This paper traces the emergence of these different legitimating narratives.