This essay was originally published on my website.
Ask yourself these questions:
- Sitting in your home, looking around, what do you see??
- How did you buy those things?
Many of the things you’re surrounded by are probably made of plastic.
Many of those things were probably bought with credit.
Could you have bought them without credit? What if those things were not made out of plastic? Would have you been able to buy them?
- Before & After Plastic
- Before & After Credit
- A World without Credit & Plastic
- Credit & Plastic: Economic Growth
- A Product of Imagination
- Unlimited Everything
Imagine a world without credit and a world without plastic.
Before & After Plastic
To illustrate this example, let’s use three examples of common things made out of plastic.
- Plastic containers for food storage
- Electronic Devices (i.e. computers, phones)
Would you have stored your food as efficiently? Would you be able to afford clothes or electronic devices, considering many clothing and electronic devices are made of plastic?
A world without plastic is a world constrained by materials and their limitations. A world with plastic is a world constrained by...almost nothing.
Before plastic was created, we needed to use materials such as wood, animal fur, plants, or metals to make clothes and tools. Plastic was invented because we were running out of ivory as elephants were going extinct because of our insatiable human demand. Ivory was used for boxes, piano keys, combs, billiard balls, and many other things.
The legend says that a New York billiard supplier ran a newspaper ad offering “a handsome fortune,” ten thousand dollars in gold, to anyone who could invent an alternative to ivory.
An audacious entrepreneur, John Wesley Hyatt, a young printer read the ad and decided he could do it. There was a catch for him, though. He had no formal training in chemistry, but he was an inventor at heart, having patented a knife sharpener in his early 20s.
The entrepreneurial spirit ran through Hyatt and he started experimenting. He began with combinations of solvents and even mixtures of cotton. Little did he know that at his homemade lab, he was building one of the most important innovations in the history of humankind, creating a new era of unlimited materials, no longer would people have to use natural materials that were limited by their quantities and physical limitations.
After over five years of trial and error, his breakthrough finally came in 1869. He ran an experiment that resulted in a material that had “the consistency of a shoe leather” that could be molded into any shape and was very strong. His marketing-savvy brother named the new material “Celluloid.”
In Susan Freinkel's Plastic: A Toxic Love Story, she says “Celluloid appeared at a time when the country was changing from an agrarian economy to an industrial one.” She also says that “celluloid was the first of the new materials that would level the playing field for consumption.” Like plastics that were invented later, celluloid allowed manufacturers to keep costs down while keeping up the rising demand for new products from lower and middle classes.
The plastics industry allowed us to synthesize (create) whatever we wanted or needed. If it seems like we can magically create anything, it’s because we do.
Making and creating new products is fun, but it’s more fun to sell to them. To do that, consumers might need to spend money that they didn't have, and this is what’s called credit.
Before & After Credit
To illustrate this example, let’s use three examples of common things bought with credit.
- Electronic Devices
Would you have been able to afford your house and vehicle? What about that flashy device or your diploma?
A world without credit is a world constrained by money and its limitations. A world with credit is a world constrained by...almost nothing.
When we talk about credit, we talk about trust. The word “credit” came from French, which translates into “belief, trust.” Over the last few centuries our trust increased, so did credit.
Money does not have an intrinsic value and its worth isn’t inherent in the paper. Money is a system of mutual trust. We are willing to use money as a medium of exchange because we trust that other people will trust it too.
Before the modern era, the world was a stagnant place. Everything pretty much stayed the same and economies remained frozen.
In the past, the only way to start a business or enterprise would be to find workers and contractors willing to work today and receive payment a few years later, if and when the business or enterprise makes money.
Only in the modern era did a new system based on trust in the future started working. The way it worked was people agreed to represent goods that do not exist in the present with a special kind of money called ‘credit.’
Credit is the most essential part to the modern economy.
It’s both the biggest and most volatile part. Credit can help both lenders and borrowers get what they want. Lenders usually want to make more money, and borrowers usually want to buy something they can’t afford, like a house or a car, or even a business.
When borrowers promise to repay, and the lenders believe them. Credit is created. How is it created? Any two people can create credit out of thin air. Yes! It’s that simple, here's where it gets tricky. Credit can have multiple names. In How The Economic Machine Works, Ray Dalio says that “As soon as credit is created, it immediately turns into debt. Debt is both an asset to the lender and a liability to the borrower.”
Dalio also emphasizes why credit is so important in the economy and how it causes more growth. He says, “When a borrower receives credit, he is able to increase his spending, and remember, spending drives the economy. This is because one person’s spending is another person’s income. Think about it, every dollar you spend, someone else earns and every dollar you earn, someone else’s spend. So when you spend more, someone else earns more.”
Credit allows us to build the present at the expense of the future based on the assumption the future will be better and more abundant than our present resources. We can build and create anything we want. Opportunities are endless if we can build things and create things in the present using future income.
It’s unclear when credit (as we know it today) was first used or invented. Throughout history, there was always some type of borrowing or credit arrangement, but most people didn’t take advantage of credit because they didn’t trust the future would be better than the present. They generally believed that the past had been better than their own times.
In a world without credit, people believed that wealth was limited or even decreasing. The pie was limited. If the pie was limited, for your future to be better you’d need to assume that your kingdom, the entire world, and your life would be better and that it would produce more wealth at the expense of other people.
In Sapiens, Yuval Noah Harari explains, “That's why many cultures concluded that making bundles of money was sinful. As Jesus said, "It is easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of God" (Matthew 19:24). If the pie is static, and I have a big part of it, then I must have taken somebody else's slice.”
That’s one of the big differences in our times. For me to thrive does not mean you could not thrive. The chances for you to thrive are higher if I thrive
A World Without Credit & Plastic
We don’t understand the difficulties and hardships people had before the invention of credit and plastic. We’ve never lived in that world.
Imagine living without credit and plastic.
What would that look like?
I’ll use the examples I used before for both plastic and credit.
Let’s start with plastic. I mentioned plastic containers for food storage, clothing, and electronic devices (i.e. computers, phones). Without plastic, your food would be hard to carry around and store, and it would go bad quicker.
You would also have very limited clothing and the clothes that you'd be able to buy would not be of good quality because you wouldn't be able to afford the good quality clothing because it’s ridiculously expensive and reserved for country leaders and billionaires.
And don’t forget your phone/computer because without plastic they would be more expensive, and you wouldn’t be able to access the opportunities and connectivity that they provide.
A creditless world is even more annoying. I mentioned house/vehicle, education, electronic devices. If you wanted to buy a house or a car, you would need to have the full amount or a very high down-payment, making it impossible to afford it.
What about your college degree? If you didn’t have money to pay, you couldn’t go to college. Period. No student loans, no debt, and no education. Studies have found that college graduates earn nearly as twice as much as their peers without college degrees. What about that fancy electronic device you’re paying monthly? Without credit, you would’ve had to pay it outright. If you didn’t have the full amount. It’s simple, no phone or laptop.
It’s not that people didn’t have credit in the past to buy higher purchases such as home. However, they still had to pay most of it. For instance, the down-payment for a home would be at least fifty percent, making it almost impossible to buy a house for a middle class worker.
Credit & Plastic: Economic Growth
Two of the most essential human inventions that led to our great modern times of economic growth and standard of living could be attributed to credit and plastic.
Before the widespread use of credit and the invention of plastic, economies in Europe did not really grow. From 1300 to about 1550, most of their economies were stagnant.GDP per capita in European economies. 
Then, from 1600 until 1800 we saw an increase in their GDP per capita. We can see that countries like Holland exploded economically as they created the stock exchange (a way to use credit) to fund expeditions to the New World. This growth can also be attributed to the colonization of new lands throughout the world. However, without borrowing money (credit), there was no way people like Columbus could’ve made it to the Americas and other places such as Africa and Asia.
From the 1800s, people realized that credit was a pretty cool thing you could use as long as you had new enterprises and inventions that could make you more money. Credit works even better when you have entrepreneurs, inventors, and scientists in need of funding because they are the ones who can bring more economic growth and overall a better life to all of us.
Plastic had a somewhat modest place in the material world in the early twentieth century, limited to decorative and items such as the comb. Celluloid required lots of labor and could be ignited quickly, causing fires repeatedly in factories. Celluloid needed to be transformed. In Susan Freinkel's Plastic: A Toxic Love Story, she mentions that “It wasn't until the development of more cooperative polymers that plastics truly began to transform the look, feel, and quality of our lives. By the 1940s, we had both the plastics and the machines to mass-produce plastic products.”
Plastic along with credit started the rise of consumerism and a period of economic growth like never seen before. An economy is the sum of transactions. When you buy or sell something, you create a transaction. In How The Economic Machine Works, Ray Dalio explains that “Each transaction consists of a buyer exchanging money or credit with a seller for goods, services, or financial assets. Credit spends just like money, so adding together the money spent and the amount of credit spent, you could know the total spending.” And the total amount of spending drives the entire economy.
With more plastic products to buy and the ability to buy them, the economic boom of our era began.From Our World in Data
We began using credit more and more from about the 1920s. And plastic materials became more widespread from about the 1940s, giving rise to the sudden and almost linear increase in GDP per capita in the most developed countries of the world.
If you studied U.S. history or like me, you took AP History, you were told that the 1940s economic growth was caused because of WWII. I just don’t buy into that narrative that war built up America’s industrial capacity or that it did important research in science. Most of the important research (besides nuclear) happened later.
If the government didn’t employ soldiers and armament factory workers, their incomes would disappear and spending would decrease, causing the economy to go into a recession or even a depression. This narrative isn’t accurate, in fact, it wasn’t even close.
In a publication by Cecil Bohanon , he examines the post-war effect on the economy and economic growth:
In 1944, government spending at all levels accounted for 55 percent of gross domestic product (GDP). By 1947, government spending had dropped 75 percent in real terms, or from 55 percent of GDP to just over 16 percent of GDP. Over roughly the same period, federal tax revenues fell by only around 11 percent.
Yet this “destimulation” did not result in a collapse of consumption spending or private investment. Real consumption rose by 22 percent between 1944 and 1947, and spending on durable goods more than doubled in real terms.
Gross private investment rose by 223 percent in real terms, with a whopping six-fold real increase in residential housing expenditures.
Dr. Bohanon shows a different narrative and highlights how the private economy had a more impactful effect on the economy. This does not mean the war did not contribute to the economy in terms of GDP. It did, but its effect was only seen in the GDP. For instance, a factory would make bombs and sell it to the government for $10 million. After the war, this same factory would make desks and sell it to customers for $8 million. Americans had the necessity of making bombs just as Americans were better off with products like desks.Source: Economic Recovery: Lessons from the Post-World War II Period by Cehil Bohanon.
Next time you hear someone talking about how war fuels economic growth. Think again and look at the data composed by numbers, not stories or narratives.
I’m fascinated by plastic and credit because of what they represent: human creativity, human potential, and human imagination.
A Product of Imagination
George Bernard Shaw once said that “Imagination is the beginning of creation. You imagine what you desire, you will what you imagine, and at last, you create what you will.”
Both credit and plastic are examples of the extraordinary human imagination. When plastic was invented, no one had seen a similar material, but someone dared to imagine, and the willingness to create it.
Similarly, credit is the ultimate form of imagination building off of something already imaginary like money. Dollar bills have value only in our heads. They have no intrinsic value in the paper, and people are willing to use it because they trust that other people believe money is real but exists only in their imagination.
For instance, it has gotten to a point where entire economies rely on credit to survive and flourish. This trust is the only backing for most of the money in the world.
I like to call this period, “The Era of Unlimited Everything.”
We truly live in the era of abundance, an era of unlimited money, and an era of unlimited material. If you have unlimited money and if you have unlimited material, the sky isn’t even the limit, the galaxies are.
It’s hard to imagine a world without credit and plastic. Our lives are so much better because of them. However, some people have raised objections of whether we should keep going on this route. Myself included, I’ve raised concerns about how governments and institutions have been recklessly using credit to create a “fake economic growth.”
Others have also been concerned about plastic pollution damage. According to Our World in Data , “The world now produces more than 380 million tonnes of plastic every year, which could end up as pollutants, entering our natural environment and oceans.”
Is this truly the world we want to live in? Should we change lanes to other directions?
This is something we can and should decide.
Personally, I don’t want to live in a world without credit nor a world without plastic. I want to live in a world with unlimited money and a world with unlimited materials.
Solution? Let’s use credit responsibly and let’s find a way to recycle plastic.
We could use credit to fund scientists and inventors to create recyclable plastic.
We achieved the impossible, “The Era of Unlimited Everything.” Now, let’s come together proactively to create a bright and promising future that I would like my kids and grandkids to live in.
 I took this graph from Roger Fouquet and Stephen Broadberry – Seven Centuries of European Economic Growth and Decline. You can access it online here https://www.aeaweb.org/articles?id=10.1257/jep.29.4.227
 This paper is amazing and highly insightful. I’d highly encourage you read it.
 Plastic Pollution is a bigger problem than I thought. Check out this entry to learn more about this issue https://ourworldindata.org/plastic-pollution
Thanks so much to Adam, Praveen, Scott, Hal, Nick, George, Dipan, Charlie, Lev, Sher, Reddy2Go, and Jason for reading drafts of this essay and providing your insightful thoughts.
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In my opinion, the true wonder material is oil. Of course, plastic is made out of oil, thus what you explain about plastic applies.
Without oil, there would be no industrial agriculture, no mass transport of goods and people. Without oil powered machine, building houses, or mining materials for your electronic devices would be orders of magnitude more expensive. People could not buy products made far from their home region. The standard of living in rich countries would not be very different from poor countries.
Bad news : oil is not unlimited (unlike credit). It will be very hard to replace it once exhausted.
Bit of a tangent, but while we might plausibly run out of cheap oil in the near future, the supply of expensive, unconventional oil is vast. By vast I mean 'several trillion barrels of known reserves', against an annual consumption of 30bn.
Question is just how much of those reserves are accessible at each price point. This is really hard to answer well, so instead here's an anecdote that'll stick in your head: recent prices ($50-$100/bbl) are sufficient that the US is now the largest producer of oil in the world, and a net exporter to boot.
For what it's worth, this whole unconventional oil thing has appeared from nowhere the last ten years, and it's been a shock to a lot of people.
This is very true, Andy. Venezuela is the country that has the largest reserves but it's very expensive to get it out. Technology will be the answer there.
Perhaps going a level further down we can talk about the wonder of polymers. Plastics. Oils. DNA. WIthout polymers we have no life I suspect.
I would really like to write something like that in the future, especially from a meta level. Polymers is super interesting as well.
I'll give it some thought and probably write something about it. If you'd like to receive that essay, I'd love to have you join our Weekly Memos where I send similar essay. Join us here --> juandavidcampolargo.com/newsletter
Hi! Oil is also a great topic to explore. And you're right the true wonder material is oil. I'm very familiar with oil as I grew up in Venezuela so I have some experience on what oil what can do. Sometimes it becomes a "curse" but for the most part and if you use it well, oil is a true wonder.
I'll give it some thought and probably write something about it. If you'd like to receive that post, I'd love to have join our Weekly Memo where I send similar essay. Join us here --> juandavidcampolargo.com/newsletter
Unconventional oil largely consists of oil shales, which I can remember being taught about in the eighties. It becomes more commercially feasible to extract as the price of oil goes up.
I'd like to object to credit being described as unlimited money. Credit doesn't exactly always the amount of money you have. The main thing it does is it lets you send money back in time.
For productive capital, this might be close enough to unlimited money. If you have an investment with a 10x expected value and can prove it sufficiently to banks or investors, you can borrow as much money as you need to do it and by the time you need to send 1/10th of it back in time to close the loop you'll still have more money available than you would have in the timeline where credit wasn't invented. Examples of this are situations like "borrow money -> buy tractor -> grow a bigger/better crop -> sell bigger crop -> pay back money used to buy tractor".
That doesn't apply to consumer credit though. If you bring $1000 from the future back in time to buy a couch, you haven't actually increased the amount of money available to all versions of you, you've just transferred it from future-you to present-you (and in-practice, reduced the amount of money available since a few hundred dollars are guaranteed to fall out of your time machine on the way).
To be clear, unlimited capital is a huge deal, but you specifically mention consumer credit and give several examples of consumer goods. I think the two categories should be treated very differently.
Hi @Korin43. While I understand your point, I was using it as an analogy. You're totally right as my description was not 100% accurate.
Consumer credit is totally different. I agree with you. Thanks for explaining the your point and the difference.
Sounds US-centric. There are countries where students attend colleges without taking student loans.
Fair point. It doesn't apply to most countries. Thanks for pointing that out.