FALLACIES

Press, Volume LXVI, Issue 20086, 15 November 1930, Page 14

FALLACIES

XIII.—THAT INSTALMENT BUY INCREASES PURCHASING PO

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Qne of the most remarkable trading < developments of th» last decade has been the great growth of instalment buying or time-payments, and its extension to fields -which it had never before invaded. In some forma it is almost as „old as trade itself. Land and buildings, for example, have always been bought on the instalment plan, and so, too, has much machinery and productive capital. It is only in this way, indeed, that many people of small means could acquire property or establish businesses; and in this form, under proper safeguards, instalment buying has always been economically beneficial. Formerly restricted mainly to the sphere of durable capital and fixed assets, or very nearly so, the system has .now spread to the purchase of a wide range of consumable and luxury articles. This has grown to the point where its wisdom has been questioned. It is defended on the ground that it is good for trade, and therefore for the commuiiity, because it increases purchasing power.' 4 • In the very short run it appears to do so, though in fact .it does not. People can now get many things on time-payments that they could never afford if they had to pay cash, such as radio sets, automobiles, gramophones, household furniture and utensils, and even clothing. It does not follow because a girl of obviously restricted means is seen on the street attired in an expensive looking fur coat that she is a brazen hussy. Instalment buying has taught us charity, and we now assume, quite rightly in most cases, that she is a perfectly respectable young woman who has been initiated into the magic of time-pay-ments. It would appear at first sight that the system has opened up a - new avenue of additional trading, but has it? On examination we see that it has done nothing of the it has merely diverted the purchasing power from one direction to another, from commodities that cannot be purchased by instalments to those that can. At the most it anticipates now in one hit accruing purchasing ' power in the future, because the purchase now is

made at the cost of a long payments on the same future. The necessity to string of instalment payment* in jfffi'i future is obviously a deduefe»/jtt2lfi the future purchasing power of who adopt the system. They art thing in a lump now, it by diminished purchasing the future. Its net effect fore be to increase pttrehasb»'j»™B*l over a long period. This fiaojXl shown by American ?' SSgLM dull and depressed bnymy' there at the present time it fnwMCT measure attributable to tha-jgjguyH so large a! section of the peopfeiSPß their present purchasing by instalment buying in the The instalment system' is sible only at the expense of It increases buying power nwraßfpll a corresponding deduction., The net effect is to lower chasing power - for cause .the enormous cost the i system of instalment the necessary charges, for risks involved, are an head in trade that lessens thJjSjßf M chasing power of the snmers. Vjaw. 8 Even in the presenD the muff'l largely a diversion. Insfa&ragßs ments 1 are made at the eimfiK savings, .of the grocer, the tnjiiSuj? landlord, and. the doctor. viders of necessary serviefl&J99s wait wliile the suppliers - through time-payment are this manner the risks normal business for ments are necessarily, t«Sw^BHBbM Purchasing power/ dep«Mra||B|H earning power of the since the method of biqn£|9HH|B vant, or very nearly so, consideration, it - canßofr>spßßjßßH| affect - the volume o£ can only divert the cost, waste, and 'social ..process. It has the consequence of diverting from necessaries diminishing the true fort_prevailing in Ibe.fOfM&MflHjH incidentally loading tional middleman's ehiM>£ l , l^3j|HjH