Consumer Credit, Social Inequalities and the State in Postcommunist Central and Eastern Europe

From the end of the 1980s, consumer credit grew quickly all over the developed capitalist world as the expanded access to consumer credit has come to be seen as a way to spur consumption and cushion the pains of growing income inequality as a result of the contraction of the welfare state (Crouch 2009; Prasad 2010; Krippner 2010; Trumbull in press; Kus 2013). The postcommunist region followed this trend in from the late 1990s as the neoliberal logic predominant in their economic policy thinking of that time shaped the course of the economic transformation. As the former socialist welfare states have been retrenching from providing for their citizens from cradle to grave, privatization, commodification and access to credit were ushered in to replace the state’s obligations for free housing, higher education and rationed provision of deficit consumer durables. The expansion of consumer credit in East and Central Europe was achieved primarily through the enormous growth of formalized lending by retail banks but other alternative venues of lending have also sprung up. The paper investigates the effects of consumer credit on inequalities in Central and Eastern Europe and addresses the effects of the financial crisis on this new system of redistribution with special attention to Russia and Hungary.