The Organization Man

  Even when suburbanites have not taken out a loan, the knowledge that loans are so readily available today has a pronounced effect on their budget habits. They have a highly inflated idea of the amount they can borrow. When the young couples are asked how much they could raise in an emergency, the median response is usually $2,000 to $3,000. As a check with bank officers indicated, many of them would be lucky to raise $500. Going by the usual rule of thumb, on a personal, unsecured loan the husband could borrow up to roughly 20 per cent of his annual income. This would mean that couples in the $5,000-to-$7,500 bracket would be able to raise little more than $1,500—provided they had no other debt outstanding. Which would be most unusual.

  Not that the suburbanites are irresponsible. Indeed, what is striking about the young couples’ march along the abyss is the earnestness and precision with which they go about it. They are extremely budget-conscious. They can rattle off most of their monthly payments down to the last penny; even their “impulse buying” is deliberately planned. They are conscientious in meeting obligations, and rarely do they fall delinquent in their accounts.

  They are exponents of what could be called “budgetism.” This does not mean that they actually keep formal budgets. Quite the contrary; the beauty of budgetism is that one doesn’t have to keep a budget at all. It’s done automatically. In the new middle-class rhythm of life obligations are homogenized, for the overriding aim is to have oneself precommitted to regular, unvarying monthly payments on all the major items. Come the first of the month and there is practically nothing left to decide. And so it will be the next month, and the month after—a smooth, almost hypnotic rhythm so compelling that suburbanites will go to great lengths to gear any expenditure to it.

  Two decades ago, one could divide Americans into three sizable groups: those at the lower end of the income scale who thought of money obligations in terms of the week, those who thought in terms of the month, and those who thought in terms of the year. There are still many people at both ends of the scale, but with the widening of the middle class, the month has become the standard module in Americans’ budgetary thinking. Salary checks, withholding deductions, mortgage payments—the major items in middle-class finances are firmly geared to a thirty-day cycle, and any dissonant peaks and valleys are anathema. Just as young couples are now paying winter oil bills in equal monthly fractions through the year, so they seek to spread out all the other heavy seasonal obligations they can anticipate: Christmas presents, real-estate taxes, birthdays, spring cleaning, outfitting the children for school. If vendors will not oblige by accepting equal monthly installments, the purchasers will smooth out the load themselves by floating loans.

  It is, suburbanites cheerfully explain, a matter of psychology. They don’t trust themselves. Occasionally bankers ask them why they don’t build up a constantly replenished savings fund to finance purchases rather than rely on loans. The answer is standard: “We’re sure we’ll pay back the bank,” the young couple explains, “but we couldn’t be sure we’d pay ourselves back.” In self-entrapment is security. They try to budget so tightly that there are no unappropriated funds, for they know these would burn a hole in their pockets. Not merely out of greed for goods, then, do they commit themselves. It is protection they want, too; and though it would be extreme to say that they go into debt to be secure, carefully charted debt does give them a certain peace of mind—and in suburbia this is more coveted than luxury itself.

  They have little sense of capital. The benevolent economy has insulated the organization man from having to manipulate large personal sums; indeed, it has relieved him from even having to think about it. Tax withholding, that great agent of social revolution, has almost removed from his consideration one of the largest single items in his finances, and package mortgages have done the same for real-estate taxes. So with all the other major items. No longer does he have to think about setting aside large sums; the government and the corporation have assumed the prerogative. It is not merely that you don’t have to worry about big sums, a young couple can explain; you don’t even have the choice.

  With budgetism, in short, one is passive, and this passivity helps explain why saving is losing its moral imperative. In the Protestant Ethic morality was identified with savings because of the idea that man, rather than society, was ultimately responsible for his destiny, and that, considering the way things were stacked, he’d better well attend to it. As our society has grown more beneficent, external forces, like the corporation personnel department, have assumed much of the protective job, and it is this defensive alliance, not a slackening of moral fiber, that has robbed saving of its moral imperative.

  They are acquisitive, yes, but, like the heroes of popular fiction, for the good life, and in the good life it is stability—or at least the illusion of it—that is all important. Money itself is secondary. These sober people have become prey to a state of mind in which the form of payment is almost as important as money itself or, for that matter, the purpose of payment. Up to a point, the regular monthly payment is functionally useful, but young suburbanites have gone far beyond this point; like Pavlov’s dog, they have become so conditioned to outward form that they will respond even when it poorly serves their actual needs. In their budgetism they do not seem to care about money at all. Goods, yes, but about money itself they are apathetic.

  They don’t care very much what they pay for their money. As to interest rates, young suburbanites are inconsistent. They know what they are getting on their savings but they show colossal indifference toward the interest charged on loan money. This is the more remarkable since they borrow so much more than they save, and the interest on loans is usually so much higher that the yield on savings is by contrast almost irrelevant. Yet they don’t care. They much prefer banks to finance companies, for the trip up the flight of stairs to the finance company is a trip away from middle-class respectability, and they do know vaguely that the bank will charge them less than finance companies. But how much less they have no idea. They don’t even ask. All they really want to know, loan officers say, is the size of the monthly payment.

  Even when the suburbanites do imagine they know the interest, they delude themselves. Most young people would be amazed to discover that almost invariably they pay the bank a minimum of 10 or 12 per cent. If they have any notion at all, they believe they are paying about 6 per cent. Very few ever pause to realize that the 6 per cent is on the face amount and, though they are constantly paying off the principal, they continue to pay as if they retained the face amount, and thus, in effect, pay double the interest they think they do.

  They are relatively uninterested in total cost. The monthly charge is the only figure that they feel is relevant, and unless the item is a brand-name appliance they often are quite hazy about the real price. Occasionally a couple will ask the salesman to tell them what the whole thing will come to, itemized, but when he says how glad he is that they raised the question and goes on to other matters most couples seem almost relieved. The truth is, they don’t want to know.

  Their powers of suspicion are rather dormant. A pathetic spectacle is the show of zeal the husband will affect when reading a sales contract; it wouldn’t make the slightest difference what outrageous provisions were inserted, he would still read on, comprehending nothing. Among young people there seems to be a strong faith that the protective legislation of the last twenty years, such as the small-loan acts, has somehow reversed the law of caveat emptor. One would think, for example, that they had lived long enough to be implacably suspicious of any automobile dealer, but they are not. They are so trusting that they almost never multiply to find out how much of a “pack” the dealer is taking them for. When they raise the money somewhere else so they can pay him cash, they throw away the advantage; on the mistaken assumption that the dealer prefers a cash transaction, they will prematurely announce their intention to pay cash and thereby forewarn him to pad the list price by enough to compensate for the finance charges he won’t get.
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  The symbols of reputability easily disarm them. If an automobile dealer or furniture merchant can say that he will arrange the financing through a local bank, they relax their guard completely. The coupon book will have the reassuring good name of the bank on it, and the suburbanites take it for granted that, as the dealer offhandedly promises, they will be paying “bank rates.” Occasionally a purchaser will bother to add up the coupons and come storming into the bank. There must be some mistake, he will say; the interest comes to 12 per cent on the face amount alone. At this point the banker must delicately explain that everything is quite in order but that the dealer, rather than the bank, sets the interest rates. If pressed, the banker must add that the difference between 6 per cent and what the dealer has charged is returned to him as a kickback for throwing the business the bank’s way.

  For a future capitalist, the organization man displays a remarkable inability to manipulate capital. His handling of “debt consolidation” is a case in point. The growing popularity of loans for this purpose conjures up a picture of chastened citizens tightening their belts and cannily reducing total interest charges. The picture is quite misleading. It is true enough, of course, that in taking out one large loan from a bank a person can cut down the interest he has been paying on a variety of purchases from 25 to 30 per cent to a low of 12 or 18 per cent. But this is not the reason most purchasers take out the loan. In actual practice their consolidating is a sort of check-kiting operation by which they can square themselves away for yet another round of commitments. When these are halfway digested, they will be back again. And again.

  They pay dearly for the convenience. Consider, for example, a possible alternative. A mythical couple we will call the Frugals decide to defer all but necessary purchases for enough months to accumulate an extra $500. They will then have a revolving fund of their own which they can use for cash purchases, and instead of paying out a fixed amount each month in installment loans, they will use these sums to replenish the $500.

  Now let’s take a normal couple. The Joneses, with precisely the same income, don’t put off purchases but instead commit themselves to a combination of installment loans and revolving-credit plans. At the end of ten years the Joneses would have paid out somewhere around $800 in interest. The Frugals, by contrast, would have earned interest—roughly $150. Not counting the extra benefits they would have reaped by being able to buy for cash, they would be, in toto, almost a thousand dollars better off.

  The Frugals, to repeat, are somewhat mythical. Most suburbanites fail to accumulate capital to produce capital, and they fail to manipulate what capital they do have. It rarely occurs to them, for example, to use their savings as collateral in taking out a loan. Were they to do this they could frequently get an actual rate as low as 4¼ to 4½ per cent instead of the usual 10 to 12 per cent—and their savings would still earn them the regular rate of interest.

  Were budgetism carried to its ultimate conclusion, the result would be a plan something like this: A store would assign a couple a credit limit of, say, $150. After buying up to this limit the borrower would pay off in equally scaled monthly payments, with the interest charge on the unpaid balance 1 to per cent a month, depending on the cupidity of the store. There would always be an unpaid balance. Once a couple started using revolving credit they would never stop, for if they continued to buy as fast as they paid off, they would then enjoy absolutely rhythmic regular payments, month in and month out. True, they would be paying between 12 and 18 per cent annually on a perpetually unpaid balance, but they wouldn’t have to think about this.

  In department store revolving credit plans the young couples have found just such a service. And they are enthusiastic. Even the most hardened credit men are flabbergasted; so many people have been staying “bought up” that on some lines the stores are making more profit on the interest charges than on the goods themselves. Department store people don’t quite have a guilty conscience on the subject, but when they start talking about high administrative overhead, the service to the customer, etc., only the humorless can keep a straight face. “It’s fantastic,” a department store executive exclaimed to me, closing the door. “Eighteen per cent a year! Imagine it. We didn’t expect they’d all stay bought up, but if you want to know whether we like the plan, just ask us if we like money.”

  The growth of revolving credit has been an interesting reversal of the usual trickle-down effect. Originally, these plans were designed for the needs of a lower economic group, but they blended so well with the prevailing budget psychology that they have been growing steadily more popular with middle-class stores and middle-class people. To the surprise of stores, even customers well enough off to rate charge accounts now frequently prefer revolving credit.

  Here is the ultimate in regularity. For one thing, revolving credit evens out purchases so that there are no seasonal peaks, such as occur when the children must be outfitted for school, or Christmas presents bought. It is, better yet, a disciplining factor for the wife. The old coupon-book plans that preceded revolving credit had many of the same features, but the coupon book was “hot money,” and, more often than not, the wife spent every bit of it on the trip between the credit department and the store’s exit. The regular monthly limit provided by revolving credit has a different psychological effect, and the wife, to the delight of her husband, can confidently pre-plan her impulse buying to the penny.

  So far, budgetism has operated largely to put people more in debt, but there is nothing inherent in the process that requires it to do that. Budgetism, essentially, is a person’s desire to regularize his finances by having them removed from his own control and disciplined by external forces. This urge could apply to savings as well as debt. To a degree, budgetism has subsumed thrift, most noticeably in pay-roll deduction plans; but on balance, most of the external services offered the consumer are for ease in spending rather than accumulation.

  Bankers, for the most part, have not yet recognized how inclusive is the urge for the organized life. They have heavily exploited the obsession for monthly regularity in their loan business, but they have not done the same for savings. Except for the Christmas Clubs, which bankers rather dislike, few banks have merchandised compulsory, fixed plans by which people can trap themselves into accumulation. Either people save or they don’t save, bankers argue, and special plans would have very little effect.

  If this were true, however, the Christmas Clubs would be highly unpopular. As many bankers privately remark, the Christmas Clubs are in some ways rather silly; the term is too short for the bank to net any profit from the funds, and the customer, who has to come in once a week, gets nothing extra in interest for his trouble. And Christmas, it has turned out, doesn’t have much to do with the plans; when they withdraw their money in December, the depositors apply it to real estate and federal taxes more often than presents, and roughly a third of the depositors transfer the sums to regular savings accounts or convert them into bonds.

  Illogical? What people have really been begging for in the Christmas Clubs is an external discipline, and the one feature that banks most dislike—the short time period—is what many depositors also dislike. They want entrapment—constant entrapment—and those banks which have abstracted the moral think the urge can be requited quite easily. Instead of merchandising the idea of saving, they would merchandise the apparatus of it. The external stimulus, they reason, already exists. Thanks to the young couples’ familiarity with loans, they have a conditioned response to coupon books, and to exploit this, the banks simply set up loans in reverse (one such plan is called Sav-a-Loan). Instead of having payments optional, they supply coupon books with specified payments and specified dates. It is only a change in form, but where such plans have been pushed they have been successful.

  Whatever expression it may take, the rhythm of budgetism is going to become more compelling. Organization man’s suburbia provides only a foretaste. Our whole population is moving toward the more regularized life, and as the gu
aranteed annual wage becomes a reality, the conditions for middle-class budgetism will become yet more universal. And then, finally, there are the children of suburbia —a generation of organization people for whom the Depression is not a father’s tale but a grandfather’s. Nobody, as suburbanites sometimes remark, is going back.

  * Ad in The New York Times, January 10, 1954: “Gimbel’s takes note of a new trend in American living. The ‘Booming Middle Class’ is taking over—and no longer are we living up to the Joneses (Chauncey Montague Jones et familia)—we’re living down to the Joneses (Charlie Jones and the wife and kids). It’s bye-bye, upstairs chambermaid—ta, ta, liveried chauffeur—good riddance to the lorgnette, limousine, and solid-gold lavatory. The new Good Life is casual, de-frilled, comfortable, fun—and isn’t it marvelous. Gimbel’s is all for the bright, young, can’t-be-fooled Charlie Joneses.”

  * The combination of dealer passivity and the growing influence of the group network has a lot to do with the pricing troubles now worrying manufacturers and retailers. Many manufacturers talk about the cut-price problem as if it were due largely to the machinations of discount houses and will be solved by “stabilizing” the market and “protecting the ethical retailer.” It is not quite so simple. What has been happening is that the consumer has been taking over part of the selling burden historically allotted to the retailer. Just as the consumer has shared in the markup on groceries by sharing in the physical burden of distribution, so now with the “big ticket” items; he has worked for part of the markup by sharing the selling burden, and he wants his cut. Because discount houses give it to him, they are often cited as the villains of the piece. But they are not the cause, only the manifestation, and though they are filling the vacuum, it was produced for them. Manufacturers still give retailers a markup big enough to justify the missionary work retailers once did. With few exceptions, however, retailers no longer do this kind of work; they service demand, but they have discarded their former techniques, such as the use of outside sales forces, to create the demand. The burden of introducing new products, as a result, now falls upon a combination of advertising and the word of mouth of the consumer group. The real selling job, in short, is done before the customer comes into the store. Guided by the group, the customer already has determined almost everything about the purchase—including the fact that he will make it—except the price and a few minor options. So he shops for price; he is earning the price cut, and whether manufacturers like it or not, he is going to get it. For years merchandising people have loved to say that the consumer is their boss. Now some of them would like to eat their words. He really is.