Easy Payments

Economists by nature are the worrying type. Malcolm L. Merriam of the U. S. Bureau of Foreign and Domestic Commerce has the job worrying about one of the most vexatious of economic problems --installment selling. If his department is not the nation's greatest authority on installment selling, it has one of the nation's greatest collections of installment selling statistics. Last week the National Retail Dry Goods Association had a convention in the Hotel Pennsylvania in Manhattan. About 5,000 merchants listened without excitement while speakers told them that Federal taxation was oppressive, that labor unions were monopolistic, that dry goods retailers were the salt of the earth. Then Mr. Merriam gave a speech about installment selling.

About a third of all retail sales--some $13,000,000,000 out of 1937's $40,000,000,000--are made on credit. Two-thirds of these are on charge accounts, the rest, almost to $5,000,000,000, on installments.

The increasing number of sales on the installment plan seems to indicate that consumers like it. Retailers now sell almost everything on installments--not only "hard" goods, the washing machines, jewelry, and automobiles of the 1920s, but also "soft" goods, tires, clothing, perfume, goods which are consumed quickly or which have no second-hand value--so retailers evidently like it. Finance companies handle about two-thirds of all installment sales and they like it. But Mr. Merriam does not like it. The finance companies, who are the most articulate defenders of the installment system, point to their Depression record. Between 1929 and 1932, though the volume of their business declined 60%, their loss from liquidation of accounts was not quite i%. And when the upswing came, they helped to speed it up.

But the fact that finance companies have no trouble in making collections, thinks Mr. Merriam, has nothing to do with the economic justification of installment selling. "Finance companies are liquid, and this is a source of satisfaction to themselves and to their banks,* but it can be little consolation to those who are dependent on a whole pyramid of industries. . . ."

Last week Commercial Investment Trust Corp.. which finances automobiles, announced for 1937 a record profit: $21,501,000.

*In other words, the pressure of installment selling may cause industrial overexpansion and overproduction in pood times, thus prepare for industrial collapse in bad times.

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