The author thanks Professor Alan Warde for his comments, and also the BECAS CHILE programme for providing the funding for this project. The author also receives support from the Centre for Social Conflict and Cohesion Studies [CONICYT/FONDAP/15130009 COES].
1In the fictional dramas [telenovelas] of the 1980s, the Chilean lower-class was depicted as sad, poor people who were powerless and patronisingly subordinate to the elite. The dictatorship of the time definitely influenced the way classes were portrayed by the few media channels authorised to broadcast. With the coming of democracy in the 1990s and the accompanying boom in economic growth, these groups were re-drawn to exude empowerment and pride. They were no longer poor. They were self-confident and their self-esteem grew with their ability to go on holiday regularly, visiting places both within Chile and abroad that had previously been reserved for the middle and upper classes— even if they spent the next two or three years paying for the holiday. Houses became more than just a place to call home; they were places to refurbish, decorate and dream. Store cards and payday loans were essential to participation in this home improvement cult. Through this « irruption of the masses » (Tironi, 1999), common people managed to become part of the prolific image of a prosperous country. The « Latin American Jaguar »—a caricature referencing « Asian Tigers » South Korea, Hong Kong, Singapore, and Taiwan— splendidly conveyed the image of Chile leaving poverty behind and entering world trade circuits. Credit was a key factor in this narrative.
2In developed countries, credit has helped the middle class maintain their status since the wage stagnation of the 1970s (Harvey, 2005). One could make the argument that it did the opposite in some developing countries, where credit has been linked to the modernisation of the economy and society, in general. One example of the latter is Chile, where lower-income households’ access to consumer credit and credit cards has been widely driven by department stores and supermarkets. Chile’s lack of a large, established middle class; low levels of savings; and the fact that consumer culture was nonexistent prior to credit expansion must be noted. Until the mid-1970s, the majority of the population relied on public provisioning for health, education, housing, pensions, utilities, and so on. However, a strong welfare state was now out of the picture. Chilean neoliberalism, as a set of government principles, privatised all public companies and utilities, deregulated markets, including the credit market, inviting more aggressive market expansion that targeted middle and lower-income groups.
3The total debt-to-annual income ratio rose from 35.4 per cent in 2000 to 62 per cent in 2014. During the same period, consumer debt grew an average of 14 per cent whereas mortgages increased an average of 12 per cent. Productivity has not grown at the same pace. With average GDP growth of 3.6 per cent, debt rose from 22 per cent to 39 per cent of GDP. While the total debt-to-annual income ratio is ostensibly lower than other OCDE countries, like Sweden (172 %), Norway (213.7 %) and the Netherlands (311.5 %), the situation is hardly the same in terms of individuals’ monthly payments which are only 11 to 18 per cent in those countries. According to the Chilean Central Bank, the ratio of monthly debt payments to monthly disposable income rose from 37.6 per cent in 2003 to 63.5 per cent in 2016. In terms of volume, around 70 per cent of debt is concentrated with banks. While banks grant more than 80 per cent of mortgage loans, they share the consumer debt market with financial retail – supermarkets, department stores, and pharmacies.
4This paper explores the particular discourses on social mobility generated by lower and moderate-income workers who were the target market for credit expansion in Chile. The narratives that emerge from recurrent everyday credit practices, financial inclusion and moral assessment of their debt histories, highlight changes in financing and the perceived structure Chilean society over the last three decades. Therefore, this paper examines how the frequent and extended use of credit by lower-income families and their account of financialisation practices gave rise to a particular discourse on social mobility that is related to how people make sense of their position in social hierarchies, which are constructed in a multidimensional manner (Bottero, 2012 ; Méndez, 2008).
5I attempt to avoid ex ante labelling of some groups as « middle class » based solely on their relative position in the distribution of income. Specifically, I pay attention to the mechanisms underlying the fact that most of my sample identifies as middle class, which is consistent with the high self-identification as middle class (70 per cent) observed across the whole of Chilean society (Méndez, 2008). I examine the influence of credit on this self-identification and how interviewees deal with the notion of credit as an asset which allows them to achieve social goals. To a certain extent, my account includes some groups that enter into the « new middle-class » discussion. However, since the very concept of « new middle classes » has been criticised for being imprecisely used and lacking proper characterisation (Espinoza & Barozet, 2009 ; Espinoza, Barozet & Méndez, 2013), this article offers a characterisation of the financial practices of those I refer to as the « post-industrial working class ».
6The term « post-industrial working class » describes the retail and services working class, namely, salespersons, clerks, cashiers, and transportation workers. These people usually have Monday-to-Sunday jobs with extended shifts (e.g., the shopping mall shift: 10 to 9), contracts for minimum wage plus sales commissions, less autonomy and, in some cases, they are subcontracted employees. They work at larger companies, transnational groups or the multimillionaire domestic family groups which are part of what Schneider (2013) conceptualised as the ‘hierarchical capitalism’ structure in Chile.
7My focus on the credit practices of the post-industrial working class was purposeful. In recent decades, there has been a growing interest in the consumption and economic practices of Latin American « new middle classes ». Economists are also paying attention to the middle class (Ferreira et. al., 2012; Torche & López-Calva, 2013 ; Castellani & Parent, 2011) and in Chile, this interest is backed by market and state authorities who tout the « new middle classes » as synonymous with progress. As a result, political and academic interest in the poor and lower classes has declined (Filgueira, 2007). This article aims to address that gap. Furthermore, research on micro-finance, with few exceptions (see next section), has focused on rural locations in Latin America, whereas this article has an urban focus.
8In the second section, in order to contextualize this article, I provide a brief discussion of the main conceptual frameworks, the financialisation of consumption and everyday life, and the emergence of a ‘new middle class’ in Latin America. In the third section, I describe how I used the qualitative data from in-depth interviews to identify material practices and discourses. The Chilean socioeconomic context and analysis of the retail industry is adressed in the fourth section. Then, I present the narratives, discourses and practices of post-industrial working class households as they relate to the use of credit as an asset and position within the stratification of Chilean society. Next, in the sixth section, I revisit some discussion about the middle class in order to emphasize the relationship between financialisation in lower-income groups and understanding of class and status. In the conclusion, I attempt to summarise the main points of the article.
9In the Global South, research on financialisation has shared some northern themes, but also focuses on the particularities of the Global South. Müller (2014) has addressed the impact of financial inclusion on poor areas of Brazil, claiming that families have incorporated new knowledge, but private companies have also adapted their commercial practices to foster the financial inclusion of poorer people. Villarreal (2008, 2014) has researched the different regimes of value circulating in rural Mexico, after the beginning of financial inclusion; whilst González (2015) examined the « real households » of the Chilean middle class, arguing that the financialisation of consumption has produced different financial subjects. Wilkis (2014) reported on the credit, consumption and money relationships of the post-2001-crash Argentina underlying a new, post-crisis valuation of creditworthiness. Barros (2008) shed light on the subject of over-indebtedness; Pérez-Roa (2014) researched the socio-political impact of student loans on the debt carried by Chilean higher education students. He highlighted the emergence of a good credit and bad debt—when credit does not deliver the expected outcomes. Ossandón (2014, 2012) investigated the networks behind the new credit markets and the data produced by the socio-technical credit devices.
10The « financialisation of everyday life » (Martin, 2002) and the « financialisation of consumption » have been crucial to understanding of the recent financial crisis, the emergence of financial capitalism, and the general colonisation of everyday life by finances. However, some scholars are thinking in an opposite direction. According to Pellandini-Simányi, Hammer and Vargha (2015) the domestication of finances means the « appropriation » and inclusion of financial devices in existing relationships and ways of doing-and-thinking in the domestic realm. The data from my sample shows that the discourses and practices of heads of household certainly have become « financialised » to some degree. They include features of risk, expectations and asset management, but in a more protective way.
11From both the consumer choice perspective (Bauman, 2001) and the « dupe the consumer » perspective, which sees consumers as impulsive and easily misled (Slater, 1997), especially by the advertisement industry (Horkheimer & Adorno, [1947] 1979 ; Moulian, 1997), a problematic assessment of credit emerges. The choice perspective describes social mechanisms of consumer credit primarily in reference to extreme consumerism, restless wanting and conspicuous consumption. However, since a great deal of consumption is much more mundane and practical, this picture presents an exaggerated and distorted image of consumer society overall. Abandoning the consumerist paradigm, credit can be considered a social asset for families. It can be a helpful tool for mediating and negotiating mobility projects, social aspirations and class meanings. Credit use can also be understood as a « sensible » thing to do (Van Bavel & Sell-Trujillo, 2003 ; Olsen, 2008). When people engage in credit they do act sensibly, using common sense i.e. what the collective usually considers a reasonable course of action. Using credit is doing what is needed to achieve goals in neoliberal settings, like Chilean society. This « economic common sense » works under the assumption of a social and cultural approach to economic practices, contradicting the dominant stance in economics regarding the unique « economic rationality » of isolated individuals.
12The extended discussion about class in Latin America has been dominated by the « discovery » of the new middle class. After decades of focusing on poverty and exclusion, social stratification scholars and economists shifted their attention to this new issue, largely thanks to changes in the social structure over the last three decades. However, there is little discussion of the relationship between these changes in social class and financialisation, especially at the micro level.The concept of the « middle class » is prevalent in political debate. Some political parties set their electoral ambitions on seducing the middle class, equating this hypothetical group to politically moderate positions. In Chile, the right-wing anti-tax discourse appeals to the middle class, even though income tax is paid only by the top 17 % of wage earners.
13Even though they self-identify as middle class, which is common in many societies, and regardless of the term’s formal definition, the Chilean lower classes have developed a clear sense of social mobility towards « middle-classness » in recent decades. Therefore, what seems to be relevant is the post-industrial working class’s perception of social mobility and how that is related to their experience with financialisation and domestication of finances through practical and relational work (Zelizer, 1994, 2012).
14Growing incomes, access to education, consumption, and the rise of non-manual occupations do not necessarily lead to a strong service economy or a middle-class society. The new middle-class society predicted in the 1970s focused on the provision of services rather than production of goods and essentially featured professionals, technicians and managers (Bell, 1976). However, this is far from the class structure found in Chile. Factories are no longer the only place of employment for the working class (Miliband, 1988) and this group is now comprised of both blue and white collar employees as well as women in low-level service occupations. Just as the industrialisation process in Latin America was not the same as in Europe, European deindustrialisation is not necessarily mirrored in Latin America. In Chile, tertiary sector growth was not directly related to development of the most productive economic sectors like it was in advanced economies during the expansion of the post-industrial societies (Esping-Andersen, 1993). Chilean transformation involved a « spurious tertiarisation » (Kessler y Espinoza, 2003), creating service jobs that do not require skilled labour and sub-contracted employment via outsourcing of operations.
15In a similar process, Latin American scholars also began paying attention to and eventually embracing the idea of a growing Latin American middle class, mainly from a developmental economics perspective. Castellani and Parent (2011) with the support of the OECD, define middle class as the middle sectors of income distribution. They describe these groups as formerly poor and vulnerable to falling back into poverty in the event of external shock – illness, unemployment, retirement or economic recession. Torche & López-Calva (2013) and Castellani and Parent (2011) relate a large middle class to political stability, social cohesion, and minimal political polarisation. Thus, the middle-class idea is a favoured target in policy-making and the electoral struggle.
- 1 For instance, D1 appears in the Mora y Araujo’s proposal (2002) for the Argentinean social structur (...)
16Market researchers summarise all these propositions in the concept of a « booming middle class » who have just overcome their « working class » status. While rejected by the established middle class, they are quite similar in terms of consumption access. Using Chilean strata jargon, the D segment started to behave « as if they were middle class » when they began to show positive attitudes surrounding education as a tool for mobility and putting individual effort ahead of state support as an achievement strategy (Sabatini et al., 2010). This is also reflected in their « self-identification » (Espinoza & Barozet, 2009) and growing access to middle-class consumption practices, access to credit and banking. This phenomenon led to the creation of a new market segment (C4 or D1)1. This upper layer of the D segment is assumed to be part of the Chilean middle-class dream, showing greater strides in their quality of life and educational achievements. Analysis shows that the last 20 years of economic growth in Chile have allowed to this group access to consumer society and the retail industry targeted this new D-segment in its commercial and financial business strategy.
17Despite enthusiast indicators and reports, some scholars are more reluctant (Gayo et al., 2016) to embrace the idea of Latin America as a middle-class society, from a subjective or objective perspective. Others suggest that when people are asked about a self-identification regarding class, the response depends on the scale. People tend to avoid extreme classifications such as « lower class » or « upper class »; around 80 % chose a subcategory of middle class (Méndez, 2008). When the scale is more nominal featuring categories like « labour class » [clase trabajadora], people migrate from « lower-middle class » to that category. However, as manual occupations decline in prestige—with the exception of miners—people avoid labeling themselves « working class » or « poor » and some even create a paradoxical category of « poor middle class ».
18This is based on data collected from two sources. The first section consisted of 46 interviews with the head of household/budget planner from lower and middle-income families in two Chilean cities: Santiago, the capital, and Copiapó, a mining town in the north. The data gathered in the interviews provided a detailed account of the material practices, moral assessments, justifications, and social meanings of « normal » credit practices and indebtedness. I focused on how people’s concrete economic experiences shape the framework of understanding and valuation with which they assess their economic rationality and context. (See Lamont & Small, 2008, for an account of how personal narratives have been used to inform studies of poverty and social mobility from a cultural economic perspective.) With this focus, I constructed identity « micro-narratives », an account of the fluid nature of people’s socio-economic practices and the rationality behind each strategy they adopt to deal with credit and debt over a period of time. I also looked at how they interpret socioeconomic structures, usually starting with the beginning of the interviewees’ careers. These are identity narratives because they characterise an individual identity and its evolution, and micro-narratives because they focus only on select periods and issues from each individual’s life. People’s micro-narratives about their economic life also provide information about what is seen as acceptable and how actors negotiate and interpret structural transformations. Part of the outcome of these micro-narratives is the discourse on social mobility and middle-classness.
Table 1. Summary of In-Depth Interviews
Source: Prepared by the author
19Interview data was codified and analysed using the NVivo package, mainly for the practical purposes of classifying and retrieving quotes. For the analysis, I used some distinctions from practice theory (material practices, meanings, and skills-knowledge), which also influenced the organization of my question set. I modified the categories as the analysis was refined. For instance, meanings were diversely classified as moral, individual, social, and family-based. First, I performed a horizontal, case-by-case analysis of every previous code. Then I went vertically, looking deep into each individual debt career to make connections between codes. At this point, I reformulated some existing codes and also made space for new themes of enquiry, such as the strength of moralisation discourses and non-conventional financial practices. As part of the analysis, I produced lengthy summaries (400-500 words) of each interview, in which I described the sociodemographic circumstances of the interviewee, his/her material practices and the most relevant socio-economic topics that emerged from our discussion, i.e., the debt careers of the interviewees. That technique facilitated interpretative annotations on each case in addition to the quotations gathered and classified in the NVivo package. Thanks to these summaries, I could compare and organise cases to produce brief economic stories that included financial, job, and family matters and, ultimately, construct the micro-narratives on debt. This was crucial to analysing the interviewees’ debt careers and consideration given to the present and future impact of debt.
20The neoliberal revolution in Chile, based on the most idealistic of the self-regulated market assumptions, began a couple of years after the 1973 military coup. This neoliberal strategy emphasised upward mobility through access to consumer goods. In 1977, General Pinochet promised a specific number of cars, telephones, and televisions per inhabitant. That promise was honoured, at least for a sector of the population, mainly during the democratic governments that would eventually continue the neoliberal policies. Families tended to see themselves more affluent than previous generations, mainly based on access to better employment, but also on improved access to goods and services, usually referred to as access to consumer society. In Chile, this process has been widely discussed (Tironi, 2003 ; Moulian, 1997; Muñoz, 2007, Garretón, 2012 ; PNUD, 1998, 2002), beginning with the neoliberal reform of the 1970s and consolidation of the model in the 1990s. The discussion encompasses comparison of living standards between the 1992 and 2002 censuses, middle and lower-income families’ growing access to symbolic goods and places, the individualisation process and emergence of new ways of consuming, the decline in political engagement, and the economic transformation. In countries like Chile where trade barriers had literally vanished by the end of the 1970s, prices of durable consumer goods fell, boosting consumption capacity. In the early 1980s, consumption was growing—especially that of the middle classes and those in the middle and upper income brackets—as was access to credit cards, consumer credit and banking services. This surge in consumer goods led to a decrease in the proportion of the family budget spent on basic needs. Advertising expenditure grew 1,500 per cent between 1975 and 1981 (Martínez & Tironi, 1985). After decades of chronic inflation, it stabilised in the 1980s between 12 and 27 per cent. Ranging from 18 to 3 per cent in the 1990s, it has rarely exceeded 5 per cent since 2000. When retail firms led a second credit expansion between 2003 and 2015 average interest rates on consumer credit, including rotating store credit and consumer loans by banks, oscillated from 25 to 45 per cent (SBIF, 2011 ; Central Bank, 2016). Non-bank institutions usually charge double the bank interest rates.
21While economic growth may be at play, the role of credit is even greater. The number of people per household fell, the GDP grew steadily and distribution of income grew more disparate. Poverty decreased from roughly 40 % to 13 %. However, the Gini coefficient of income inequality, became one of the world’s worst, peaking at 0.59 between 1987 and1990. In 2015, it was 0.52 (Norway 0.26; OCDE 0.33 ; Namibia 0.63). This modernisation process meant radical change for Chilean society, making room for opportunities and threats (PNUD, 1998, 2002). These accounts address modernisation in structural terms, noting changes in consumption patterns and the labour market, as well as transformations in the social stratification of society.
22I argue that in the 1990s and 2000s, major retailers targeted lower and middle income earners for credit expansion and that this « retailisation » of credit was crucial to the consolidation of credit markets as well as normalisation of credit. However, the consumer credit expansion had begun in the late 1970s, with the arrival of the first bank credit card, mostly aimed at the upper-middle classes, in 1978. The government’s decision to deregulate the financial system in the early 1980s gave rise to small institutional lenders, which were frequently consumer credit spin-offs of larger banks. Throughout the 1990s, in the wake of this initial bank-driven credit expansion, new lenders entered the market granting credit to additional social groups. While major department stores offered their own credit cards by the end of the 1980s, the introduction of the Presto credit card in 1996 by Lider supermarkets marked a turning point after which the domestic finance landscape erupted with « everyday » retailers. Thanks to their concentration of capital, major retailers had the economic prowess to enter the unregulated market of retail finance. (Montero & Tarziján, 2010). These new institutional lenders—department stores, supermarkets and other retailers— innovated by focusing on groups not previously granted credit, such as lower-income segments, housewives, retirees, and students. Political authorities2 and the new lenders themselves3 called it the « democratisation of credit »; however it has been argued that retailers entered the credit market to manufacture or « sow » new clients. In other words, they lent small amounts of money hoping to establish a long-term relationship, assuming that some would not repay, but others would be loyal, steady and happy clients (Ossandón, 2014).
23Retail managers admit that their business is more financial than commercial. Given the financialisation of vast areas of the economy4, credit cards became more profitable than retail sales. Retailers have innovated by harnessing their position as a combined retailer and lender (Ossandón, 2014) and offering benefits attached to the use of their credit cards. A variety of products are offered at a lower price when paying with the store credit card, sometimes with compulsory-instalments. However, you get what you pay for and the result is high-cost credit. Moreover, cards allow stores to cultivate another, more profitable kind of relationship with their customers. Beyond the moment of purchase and the hire purchase model, this « card member » relationship enables retailers to offer additional non-financial (e.g. weddings, holidays) and financial (unemployment, life and health insurance as well as car loans) services.
- 5 www.comiteretailfinanciero.cl, visited on 7 March 2016.
- 6 For instance, according to the Financial Consumer Agency, a loan of CLP 1,000,000 to lower-income c (...)
24The social diversification of credit started with department stores offering credit to lower-income consumers. These customers had previously been « unbanked », reflecting a lack of commercial interest in lower-income segments as well as regulations that prevented the industry from servicing service risky clients. In the 2000s, some banks broadened their scope by creating different brands and branches to service these new borrowers under more demanding conditions. Consequently, banks and retail finance offer loans and credit cards to different social groups. Retail finance has designed special financial devices for credit newcomers and more experienced consumers of credit who potentially share the needs of retail finance customers (Aparici & Yáñez, 2004). The requirements for store credit applications are not high. According to in-store high street sales agents « all we need is your ID card to check if you are eligible ». Store cards are also offered by telemarketers who tell potential customers that the card is « already approved and ready to be mailed to you ». Along with easy access, the financial-commercial combination is one of the key advantages of store cards. Department stores become a one-stop shop where borrowers can make purchases, get credit and pay outstanding balances. People go in to do one and end up doing all three. They also find it easier to pop into a department store, where store hours are Monday through Sunday from 9 A.M. to 9 P.M., to get a loan than a bank, which is open Monday through Friday from 9 A.M. to 2 P.M. This shift of retailers into finance has helped diversify credit sources and substantially deepened the market. Aware of their role in financial inclusion5, retailers charge higher fees, maximum interest rates6 and hidden costs in the form of fees for insurance added without customer consent. According to both clients and some of the financial education officials interviewed, firms take advantage of the lower conventional financial knowledge of the targeted needy groups using long, indecipherable contracts written in fine print that ordinary people find hard to read and understand. For instance, Fiorella sells the insurance attached to store cards. Part of her job is to explain the additional charges to customers when they do not acknowledge contracting any insurance or think the store is over-charging them.
People complain because they usually do not understand the payment process. So I teach them that if they buy on credit, even if it says 0 % interest rates, there is always an additional charge. If there were not, the department store would not exist. Sometimes I advise them to purchase in fewer instalments, or that the insurance is not good for them. However, people usually lie and cheat, saying that nobody warned them about the charges in advance.
(Fiorella, 50, department store saleswoman)
25There is a subtle connection between the card and insurance sales. Every time a new or returning customer goes to Fiorella’s desk, she offers life insurance or unemployment insurance. She never says that these policies are compulsory, but as her store is focused on very low-income segments, she reckons that most of the customers assume they are. Statements have only been regulated since 2011, meaning these charges have been taken for granted for decades.
26While financial retail focused on credit newcomers (lower-income families, housewives, students and retirees), store cards flooded all groups of Chilean society. However, as department store salespeople note, the upper-middle class only use their cards to take advantage of a sale. For other purchases, they generally prefer bank-issued credit cards or debit cards. For instance, Alejandra, a department store saleswoman in an upper-class neighbourhood, knows that some credit devices are socially stratified. At the store where she works, customers use bank-issued credit cards or debit cards more often than store cards. Priscila, another department store saleswoman, says that upper-class people only use bank-issued cards and avoid using store cards even if they have them. Those who use store cards, which are available to anyone, tend to be from the lower class. She says that the lowest of all are those that « come in and pay CLP 100,000 in one hundred CLP 1,000 bills ». Apparently, cash is for drug dealers.
27Sofía, 41, works in the furniture section of a department store in an upper-class neighbourhood. She earns minimum wage [EUR 286 at that time] if she sells nothing, but with her sales comission, which is higher when the customer uses the store credit card, she usually earns EUR 500. She is head of her household, which includes her two daughters and her mother, 86. « I see how these people [upper-class customers] live. I don’t know how the customers of Plaza Oeste [lower class] are; they are more like us. I do know that sometimes salespersons there earn more because those people take on 12 or 24 months of debt. People here don’t do that. These people use checks and bank-issued cards, but not the store card. »
28Department store credit cards are not only used for in-store hire purchases. They can also be used at a vast network of associated stores and as a means for cash advances and small in-store personal loans, which are offered by the salespeople and cashiers. In a country where 85 percent of the population does not have a bank account, stores emerged as the main entry point for personal financing (see graph 1). As a consequence, the most relevant source of credit and leverage resources for the post-industrial working class are the major retail financial institutions.
Graph 1. Banking Products by Income Decile
Source: Survey of Household Finances 2014, Prepared by the author
29Chile is one of the most banking-based developing countries7. One of its main innovations is the Cuenta RUT8 , a debit account with the state-owned bank. The account number is the individual’s identity number [RUT], which everyone in Chile theoretically has. In fact, 9 million people use these accounts. If department stores contributed to the ‘democratisation’ of credit, the Cuenta RUT completed this financial inclusion in 2007 by making plastic money and electronic transactions available to everyone. Although Cuenta RUTs carry a stigma of lower socioeconomic status, they represent the state’s role in financial inclusion. At the end of the twentieth century, the most popular state-issued banking instrument was a savings account with a paper register. Today, the Cuenta RUT card allows everyone to bank and can be used on the Santiago transportation system, like the Oyster Card in London. As of March 2017 in Chile, there were 5,200,000 bank loans; 20 million debit cards; 12,845,000 bank credit cards (4,800,000 active that month); 13 million store credit cards (6 million active that month) (SBIF, 2017). Chile has a population of approximately 17.5 million (2017). In June 2016, the national record of delinquent debtors [Dicom] listed 4,000,000 in people default with a mean debt of CLP 1,318,195 (EUR 1,800). Of those in default, 79 % earn less than CLP 500,000 (EUR 680).
- 9 In Chile, pharmacies are businesses and most of them are in commercial areas. Many of them look lik (...)
30Bank market share in the consumer credit industry decreased from 93 percent in 1998 to less than 50 percent in 2016 (SBIF, 2016), with most of the difference migrating to retail credit, which was simultaneously expanding its market. Retail finance institutions focused on smaller loans, revolving credit, cash advances and hire purchases. Since they are less regulated than banks, they can target riskier segments, namely, lower and moderate-income groups. The high market concentration and oligopolistic characteristics observed in supermarkets, departments stores, pharmacies and home improvement stores in Chile are transferred to the retail credit cards they issue9. Exported to the rest of Latin America, this concentrated model has earned two of Chile’s major retail holding companies (Cencosud and Falabella) a spot among the 30 largest retailers worldwide in 2013.
31At first, banks did not compete with department stores. Later, they created special brands to distinguish higher status customers from credit newcomers. This brand stretching helped banks increase their scope without affecting their brand. It avoided mixing new customers with old customers, as the former could alienate the latter. Bank-issued credit cards are associated with higher income segments than consumer credit. This is because these credit cards are usually part of a banking package that includes a bank account (which are more readily available to higher-income individuals), while consumer credit is granted by the bank’s special brands created to compete with retail banking, which focuses on lower-income households.
32In this section, I describe some of the main credit practices of post-industrial working class households – store cards, borrowing, debt purchasing power, and pay advances. As previously shown, according to national statistics, the landscape of credit practices in Chile includes a broad range of devices and lenders, some of which are in decline, while others are expanding. As a complement to the data in the nationwide database, Table 2 summarizes these practices in terms of their main objectives, terms and use. I also mention informal and obscure practices, whose relevance to the normalisation of credit and implications beyond the credit market are not captured by macro trends on credit usage. Some credit practices are decaying, mutating or simply disappearing. Traditional ways of lending – pawn shop credit, borrowing money from relatives and friends, and personal, short-term credit issued by small businesses – are in decline. A practice that is common now, but beyond the scope of any official statistics, is sharing store cards amongst relatives, friends and even colleagues. More than 90 per cent of my sample had borrowed or lent a card, specifically when their own credit was poor or prior to entering the formal credit system.
33Loans through employment benefit funds, which are very common among lower income workers and retirees who have access through their pension accounts, are growing and are now the third largest source of credit (12 per cent below wholesale retail and banks). According to the workers in my sample, this type of credit is « invisible » and « painless ». As a payroll deduction, it is not impact financial calculations like other credit products. In fact, it was difficult for them to even recall that they were making those payments. To quote individuals from my sample:
R: Do you have any other debt or loans?
I: « No… I mean, I have one loan, BUT they deduct the money from my pay. So I can’t see it. » (Angélica, 30, telemarketer)
« I had loans in recent years, but always through the employee benefit fund. I think they charge less interest, but above all, it is easier; they deduct the payments from your check so paying it isn’t really a problem. You don’t feel it… » (Nancy, 40, collections clerk)
R: So, you are not repaying anything at the moment?
I: « No, nothing. All clear. I have one loan from the employee benefit fund. I had several, but as they are deducted from my pay, I didn’t realise. »
(Nelson, 40, airport security agent)
Table 2. Landscape of Credit Practices in Chile
Types of Credit
|
Term
|
Objectives
|
Use
|
Personal, short-term credit by small businesses
|
Short
|
Essentials
|
Low
|
Revolving Credit
|
Short
|
Fix the Budget
|
High
|
Bank Account Overdraft
|
Short
|
Fix the Budget
|
Low
|
Borrowing Cards
|
Short-medium
|
Clothes, Durable Goods, Emergencies
|
Medium
|
Instalments – Hire Purchase
|
Short-medium
|
Clothes, Durable Goods, Emergencies, Groceries
|
High
|
Cash Withdrawals
|
Short-medium
|
Emergencies, Leisure, Home Improvement, Holidays, Durable Goods
|
Medium
|
Employee Benefit Fund Loans
|
Medium-Long
|
Bridging, Holidays, Home Improvement
|
Medium
|
Consumer Loans
|
Medium-Long
|
Bridging, Holidays, Home Improvement
|
High
|
Educational Loans
|
Long
|
Higher Education Degrees
|
Medium
|
Mortgages
|
Long
|
Properties
|
Medium
|
Source: Prepared by the author, based on qualitative data
34While households engage with credit differently in terms of use, calculations and the reasons underlying their actions, they share the sense that credit is an asset. In a social context, access to credit enables them to harness opportunities, appropriating and mobilising assets. As proposed by the conceptual framework of financialisation, they allow the notion of risk to be incorporated into their everyday activities in pursuit of a decent life. There is calculation, logic, rationale, meaning, skills and self-assessment behind the decision. If there weren’t, problems in this management of credit would lead to a sense of « going backwards », whether missing assets or not taking advantages of the opportunities structure. Financial instruments, such as store credit cards, are not neutral. They play a role in household strategies and problem-solving capacity in the event of change in circumstance or emergency situations. Indebtedness emerges as a particular strategy to improve situations or avoid damage. In terms of social structure, this could be portrayed as social mobility or at least preventing downward mobility, qualifying it as adaptive or defensive strategy.
35There is a group in my sample that employs an « opportunist strategy ». Like enterprising strategists, « opportunists » do not fear credit. They talk like investors; however, the « opportunist strategy » differs from a conventional concept of investment or investor-subjects (Langley, 2008) as focus shifts away from profit to capitalising on an opportunity in a broader social sense. Conventional and domestic financial know-how is required to make the most of these opportunities, which can sometimes become debt disasters. However, this management of finances results in a clear sense of empowerment as practitioners aim to raise living standards in the short-term with celebrations, holidays and durable goods. The moral justification is that this improvement would not be possible unless someone takes a chance. Aware of the costs of credit, the borrowers perceive their credit operations to be under control. Francisco, a mining services subcontractor, shares part of his manifesto: « As a rule of thumb, if someone is giving you a higher credit limit, you take it »
I realised that I was offered an additional credit limit at the same time my company forced me to take a leave of absence due to a flood in the city so I thought « I have to take my family on the best holiday in years’. I had no second thoughts; I planned a trip all over the country to visit the capital and family further South ».
(Francisco, 40, mining services contractor)
36Francisco’s choice was not a reflexive, irrational action. He calculated all the instalments, deferred payments and repayments. He assessed the risk of finding his company out of business when he returned from holiday. From his perspective, doing nothing carried the largest opportunity cost.
37When we abandon the consumerist paradigm, credit can be a social asset for families. It can be helpful for mediating and negotiating mobility projects, social aspirations and class definitions. Using it can be seen as the « sensible » thing to do (Van Bavel & Sell-Trujillo, 2003 ; Olsen, 2008). According to credit narratives, households lie on a continuum from empowerment to exploitation. Experiences range from managing credit ‘assets’ in order to harness opportunities to defaulting and the impending social drama. Credit appears sensible in situations where family ties and emotional economy are at stake. When gifts, aspirations and family projects are made possible by credit practices, that may impact family dynamics and become part of the values passed on from generation to generation. Justifications influence how credit is strategically managed as an asset, but such management is also a matter of social opportunism and a response to unfavorable socioecnomic circumstances. Moreover, they all agree that credit is a necessary, ordinary tool for organizing their economic lives. Different moments in their debt career have helped normalize credit, especially the way they processed defaults or debt disasters. After all, credit is money, an asset, and that is how lower-income families tend to approach it.
38Rogelio, a salesperson at an industrial plastics company has always seen a credit line as an opportunity to « be something better ». At the beginning of his career, he considered himself a fool if he did not use the credit available to him. Having always worked in bespoke sales, he felt the need to « look better » in order to improve his business prospects. He decided, as he put it, to « invest in [him]self for the sake of the job ». He said that lately he had gotten used to living beyond his means just because « the market allowed it ». This moral justification rests on investment in aesthetic capital to be a better worker and the obligation to not throw away an asset.
R: Where did this idea of living like you earn 400 when you actually earn just 200 come from?
I: The market offered it to me, and I took it. The goal was to have a better l’if.
(Rogelio, 31, industrial sales agent)
39Credit expansion plays an important role in any discrepencies that may exist between subjective and objective class positions. Moral justifications for the way households combine credit practices for ordinary and extraordinary consumption are based on their social aspirations, parental roles, and economic constraints. The way social mobility narratives are presented aligns with and potentially even feeds the dominant, self-complacent discourse regarding the growth of the middle class. With the addition of student loans for first-generation college students (mobility projects) who usually study at low-quality universities, the « middle-class package » is complete. Beyond theoretical and empirical assumptions, there is a deconstruction and reconstruction of the middle-class concept. Thus, when exploring the social implications and context of credit practices and indebtedness in lower and middle-income groups in Chilean society, attention must be paid to the families’ priorities when they adapt and adopt the financial devices for their domestic economies.
40Alejandra, a 61-year-old department store saleswoman, considers herself organised and fairly financially conservative. Even so, up to 20 % of her family income is earmarked for debt repayment, including an outstanding balance on the store card issued by her employer. She mainly works in furniture sales, with at least 70 % of her wage coming from sales commisions, which are higher for purchases made on the store credit card. Alejandra is one of the workers who both takes on and offers credit. She claims that debt is a necessity and blames that fact on the inequality of distribution, shedding light on her class position through hierarchical analysis of Chilean society. She shares an opinion commonly observed among the middle class: The wealthy do not need any help. Poor people receive subsidies from the government and the State has abandoned the middle class, like her. She recalls the time a social worker visited her home to assess the possibility of a scholarship for her son. The social worker asked if she had purchased all the furniture and appliances herself, implying she had enough money to afford college fees. She had, but on credit, of course, « like all middle-class people do ». Both the market and social services reinforce the idea that acquisition of material goods, especially on credit, is synonymous with social mobility.
41Fabiola, 38, holds a low-level corporate position. She has established a hierarchy for type and use of credit. She has credit cards for large appliances and unexpected health expenses – nothing conspicuous. She relates how credit card usage is part of the middle-class identity. People like her use credit cards to earn points in customer loyalty programs and take advantage of special sales. In other words, they use credit cards as management tools and because life is expensive and they don’t always have cash at the moment. Her justifications are particularly based on what she perceives as a high cost of living in Chile and unexpected health issues. Therefore, credit is just part of our societal structure. At the same time, the majority feels credit use is about false class consciousness, i.e., people trying to be something they are not.
42These women see themselves and their families as middle class, but what is more relevant is how they construct their middle-classness, i.e., their narratives of social mobility. While all of them think they are better positioned than their parents, they do not attribute the difference to educational achievement, even though they have completed more years of schooling. They do not attribute their mobility to better income, which could be the case as income per capita is up across all deciles.
43What appears most relevant in post-industrial working class narratives is their relationship with credit. This was made clear in their references to accessing goods and services that they did not have in their parents homes. « In the old days, if we did not have the money to buy something, our parents told us to forget it and move on. Now we have credit so we can have and do things ». Otherwise, how would it be possible to have a new washing machine, buy proper clothes for the children or go on holiday? The way they face unforeseen circumstances, like serious health issues, helps construct their social mobility narrative. The majority say they would use a credit card to afford private healthcare if something ever happened. Some only have a credit card « just in case ». They do not hold insurance policies like conventional financial wisdom dictates, but prefer to use their credit card as a contingency plan instead. They feel conflicted about how they achieved social mobility. Debt is related to class. The state only helps the poorest. Left to their own devices, the middle class is forced into debt. The rich are so rich that they are distant, unreachable and invisible. The same thing is true for the poor. « Middle-classness » describes people struggling every day to have a decent life. It describes those who do not receive state support and must go into debt to get what they want. That is their definition of social mobility.
If you don’t have a decent job, debt is the only way to keep going. That’s all. We are up to our eyeballs in debt and that’s why we progress and have things… We live comfortably, but we don’t have money at all.
(Rodrigo, 41, low-skilled entrepreneur)
44The social connotations surrounding the « borrower » or « financial consumer » are surely more prestigious than those associated with the « poor » or « subsidy recipient ». These connotations align with the neoliberal citizenry who look for private solutions, stigmatise those who rely on the State and remark on their own work ethic and regulations.
If we talk about the different levels, it’s completely lopsided. The working class—the people, the middle class, who receive less state assistance—is most in debt. Sometimes the poor just can’t and the rich do not need debt. They have money. What about the middle class? Debt. Moreover, status [for some middle class groups] is based on appearance. How many people have a car but can barely afford it? I’d rather not have one.
(Alejandra, 61, department store saleswoman)
45The belief that social position is subject to deterioration causes family stress (Martucelli & Araujo, 2011). In advanced societies, this stress is not unique to minority groups who have been excluded from capitalist society. Rather, it is over-arching across the majority of social groups. In that sense, this post-industrial working class mantra of a decent life is a defensive way of experiencing « middle-classness »: While their standard of living certainly better than their parents, maintaining it is a daily ordeal. Without the State, any ability to save or stable employment, the way they manage their finances—credit, budgets and purchases—is key to keeping things going. Credit could potentially be contributing to the spread and negotiation of middle-class rhetoric, meaning there is no such thing as the middle class anymore. « Lower-middle class » means lower, but not poor; « poor middle class » means not-so-middle class. Entering the middle class means « I am not poor anymore ». Politicians make appeals to the working people of this country, « the middle class ».
46Credit expansion has had a broad impact on socio-economic relationships in Chilean society. The access to goods and services made possible by credit may decrease levels of discontent that would arise if people relied solely on their income. Statistics show that the everyday budget and shopping lives of Chilean households have become financialised; however, at the micro level, stories indicate that lower-income families combine non-market resources, moral economies, and non-market rationale to domesticate credit in the pursuit of social goals and adapt to structural circumstances. Credit usage offers insight into how everyday lives became financialised and how a subjective sense of social mobility, where credit proves vital, is present in family economics like budgeting and purchasing.
47This paper examined how the frequent and extended use of credit in lower-income families and their interpretation of financialisation practices has led to a particular discourse on social mobility. Through a process of pragmatic adaptation to credit expansion, wide-spread, regular use of credit became highly normalised and morally justified in Chilean households. One of the social consequences of this widespread lending is that the Chilean post-industrial working-class shows a sense of « middle-classness » even when some living conditions hardly disguise poverty. The distinguishing feature of this common narrative of social mobility is the use of credit as an asset to improve social position.
48« Middle class » is often synonymous with non-manual labour and income just above the poverty threshold or according to the World Bank, groups with income of USD 2 to USD 10 a day. Given the instability of employment, low income, and lack social security, often the only characteristic is this description that holds true in Chile is employment in non-manual labour. The heterogeneity of tertiarisation makes this especially the case in Latin America. I argue that income is not an accurate proxy of consumption power, given the role credit plays in leveraging resources under ordinary and extraordinary contexts. Rather, debt purchasing power has become particularly relevant, especially following the « democratisation » of credit that mainly targeted lower-income families. So if the measure for ‘middle-classness’ is household wellbeing, income is not necessarily the key element. The relationship with poverty is two-fold. People view changes in their standard of living as a type of social mobility. Their everyday practical concerns shift from a deprivation-based poverty experience to a highly vulnerable state where debt is one of the essential ingredients. It is the new face of poverty, equipped with all the living standards of the middle class thanks to credit, but lifetime opportunities remain low.
49People tend to think in very complex ways. In the long run, they think more about consumption and living standards, which seem to be the sum total of their aspirations, rather than occupations, which can also provide a sense of improvement. However, reflection on their daily activities sheds light on additional financial elements. On one hand, they have access to credit that was unavailable to their parents. On the other, the experience of being in debt, defaulting and becoming and creditworthy again as well as the lessons learnt in their debt careers help construct a narrative of social mobility that connects the conditions of social change and management of household economies. First, they know they probably have more than their parents or than they themselves did previously. Second, they know consumption rules are different because, in the past, a lack of cash or credit simply restricted access. Today, they use credit for important household purchases as well as everyday consumption like groceries, clothing, and so on. They moralise this in terms of social mobility since it is the (only) way they can have a « decent life » and the things their own parents could not afford for them. They avoid conspicuous superfluous purchases on credit, but use credit to manage finances (Trigg, 2001; Duesenberry, 1967). Third, they process social position in terms of the social transformation experienced in recent decades. They attribute change to the labour market’s shift from manual to non-manual jobs, privatisation, state retrenchment, and growing income inequality.
50Prices are blurred by credit to the extent that the heads of household in my sample have gone from checking the actual price of goods to looking at how the instalments on a hire purchase fit their monthly budget. They consider this before noticing skyrocketing interest rates or significant disparities between the credit price and the cash price. Furthermore, the symbolic value of things also changes, usually decreasing. The majority think that easy access to credit makes it possible to have things, like a flat screen television or a refrigerator-freezer, more quickly than previous generations for whom these things symbolised years of effort. Now it is just « buy now, pay later ». After the credit expansion, people realised that almost anyone can have devices, like mobile phones, that used to be status symbols when they first arrived in Chile in the 1990s. Even possession of credit cards lost social prestige; they became « plebeian » once everyone could have one (Wilkis, 2014). Older interviewees recall the 1980s, before the « retailisation of credit », when a wallet full of cards was a status symbol. Now, for the people in my sample, cards are an everyday essential. The only status they provide is the idea of not being supported by the state, a sense of self-support that is an ongoing discourse of « middle-classness ».
51What is behind this widespread indebtedness and the combination of devices involved in these credit practices? According to economists, the way people experience and evaluate their financial position impacts the way they see themselves on the social ladder (Lora & Fajardo, 2011). However, people connect financial circumstances differently. First, lacking enough money to pay for food, education or health is not necessarily an indication of being poor as long as people have access to credit. People may experience some distress due to indebtedness, but they ultimately argue that being in debt is part of being middle class. Since the poor receive help from the state and the rich have money, they tend to normalise the use of credit as a means for achieving social aspirations and providing a decent life for their family. In household finance, people who know how to adapt financial devices to family needs gain access and are considered good breadwinners. It is not about freedom from financial concerns, rather it is about knowing how to deal with them and, for some families, how to make the most of them.
52This paper addressed the relationship between access and use of credit, social positioning and social status in Chilean households. I refer to the discussion about the « new middle class » in Latin America and to the financialisation and domestication of everyday economic practices, by looking at the processes of financial inclusion and its impact on social mobility and social stratification discourse. The retail industry’s role in expanding credit to the « unbanked » was highlighted throughout the article. I argued that the narratives of social mobility generated by the groups I call the post-industrial working class focus fundamentally on their ability to manage credit as an asset as they aim to provide decent life for their family and improve their social position. Their middle-class rhetoric emerges despite and thanks to credit. Sustaining their improved standards of living requires widespread regular use of credit that is morally justified by the goal of providing a « decent life » and other mobility projects, like education. By the same token, recurrent use of credit puts them constantly on the verge of a « debt disaster », which is seen as part of their debt careers.
53The relationship between financialisation and social class lies in the gap between subjective and objective class position, which this article aims to illustrate. Credit expansion plays an important role in this gap as households combine credit practices to cover ordinary and extraordinary consumption, finding moral justification in social aspirations, parental responsibilities, and economic constraints. The way the social mobility narratives are presented aligns with and potentially even feeds the dominant, self-complacent discourse regarding the growth of the middle class. With the addition of student loans for first-generation college students—mobility projects—who usually study at low-quality universities, the « middle-class package » is complete. The higher education system has been promoted as a vehicle for individual social mobility and a university degree has been portrayed as an investment that pays off in the long run. However, Chile’s higher education system is highly segregated and that segregation transfers to the labour market. Universities in Chile (and the degrees they grant) are highly differentiated in terms of selectivity, prestige, fees, and ownership. This segregation is also a reflection of the inequality of access to good-quality primary and secondary education. Children from upper-income families have access to private, good-quality secondary education, then also to the better (public) universities (Brunner, 2006). In 2004, the OECD (2004:277) stated that the Chilean educational system is « consciously structured by social class », thereby reproducing the severe inequality found in the country. The majority of private universities accept less qualified students (40 per cent drop out in the first year) who also have less social capital. These students usually take on debt to pay fees and since they are not receiving top-quality education (according to education authorities like the Educational Quality Assurance Agency), their transition into the labour market will probably be difficult. The « good credit » turns into a « bad debt » (Pérez-Roa, 2014). The dream ends when the higher education they took on major debt to attain does not provide the expected pay off, leaving the families’ social mobility expectations unmet. Even worse, when students drop out, the outstanding debt remains.
54Beyond theoretical and empirical assumptions, there is a process of deconstructing and reconstructing the concept of « middle class » that occurs in a context of classless thinking. This process is highly related to credit expansion and household debt practices. Thus, when one is exploring social implications and circumstances of the credit practices and indebtedness of lower and middle-income groups in Chilean society, attention must be paid to family priorities as they adapt and adopt the financial devices for their domestic economies.
55Tertiarisation in Chile reflects the structural heterogeneity of Latin American societies, with self-employment differentiated by high and low skill. For instance, low-skilled entrepreneurs benefit from government programs and subsidies aimed at helping them build a career in the informal sector. The ecology of the third sector includes a small layer of professionals and technicians and a massive group of workers in industries characterised by lower productivity, lower qualification, and precarity. The latter is more heavily populated by women where occupations include sales and lower financial services (healthcare, banking, insurances, and administrative tasks). The main features shared by the Chilean post-industrial working class are low incomes, low power and low autonomy at work, and a lack of alternative assets to produce income. The occupations (e.g., department store and supermarket salespeople and low-skilled entrepreneurs) that comprise the sample used as a basis for the qualitative research that informed this article are part of the « spurious tertiarisation ». The living standards of such groups has undergone some structural improvement, but as my sample reports, this is due mainly to the « democratisation of credit » and the financialisation of consumption. The result is a persistent « middle-class rhetoric » through which the members of my sample construct their narratives of social mobility. I argued that the social mobility narratives rely on how these groups manage credit as a valuable asset that requires sensible use and is an integral part of their consumption and budgeting practices. These formerly poor groups and the economic, political and social implications of their financial practices have been outside the scope of much academic analysis. My article attempts to contribute to understanding this group, particularly their household economic practices.