Creating Capital by Frederick L. Lipman (novels in english txt) 📕

his minimum expenses, ought he not to work for the six days, putting aside all he could of the excess as savings for the future? It will be generally conceded that this is self-evident. If, viewing the narrow conditions under which the workman ordinarily lives, it should be claimed that during a period of unusual earnings self-gratification would be not only natural but measurably justifiable, the reply could be made that this is merely specious, involving assumption not in accord with the facts. Excuses of this kind we often make for ourselves in the endeavor to justify our indulgence in present pleasure rather than perform the irksome duty of self-restraint. The laborer whose ideals are such that he quits at the end of the fourth day is not the type of man who is going to spend the two holidays in pursuing higher aims in life; he is going to pass them in inaction, quite likely at the grog-shop. The man who fails to take advantage of the security for the future offered him and his family through the opportunity of saving from extraordinary earnings is one who is adding to the abnormal demand for such things as phonographs, jewelry, spirits, and tobacco. And this helps to explain the tremendous market for luxuries during wartime. Doubtless there are many workmen who follow a more rational course, who are reaping and storing the harvest for the comfort and security of themselves and their families during the winter of life. Could any one think that this policy involved an aim that was sordid, tending to draw them down, and away from higher considerations of life? Certainly a course of careful planning in one's affairs would be in so far a better course and on a higher plane than indulgence in idleness or shiftless expenditure of surplus for present luxuries, regardless of future need.

This case of the workmen under conditions of abnormal wages seems exceptional; yet the choice so presented to him is not very different fundamentally from the choice normally presented to all the rest of us.

The young man starting out in life may be as negligent of his opportunities as the workman who quits at the end of the fourth day. Or if he devotes himself properly to his vocation he may consume his earnings in current self-gratification. If, however, he will both concentrate on his work and practice self-restraint with the purpose of creating a saved surplus, all will agree in considering him as so far headed on the road towards success. In the case of the beginner this seems clear enough, but, after all, the same considerations apply to everybody else, whether in business or profession, beginners or experienced, young or old; to all of us is the same choice presented daily, and at our peril we must make it wisely. The physician, for instance, although he cannot afford to pay more attention to money-making than to the welfare of his patients, to his studies, to his professional ideals, must not, on the other hand, leave out of account these business duties and considerations which belong to him as an economic member of society. He must produce and must consume with his family, reasonably, decently and thriftily. He must aim at a surplus to store away for the future. These aims are, as a matter of course, secondary to his professional ideals, but there need be no conflict of duty. The point is that there exists a department of his activity devoted, and to be devoted, by him to his business affairs. In any event, as a man, a husband, a father, a citizen, he cannot escape from the responsibility of these business affairs. They must be conducted in some way. Shall it be well or ill? If he fails herein it may involve failure in any or all these relations—as a man, husband, father, citizen. And obviously these same considerations apply to all other men and women, whatever may be their professions, occupations, or major interests in life. Why do so many allow themselves to be dragged along, living from hand-to-mouth, in fear of the knock of the bill collector at the door? Why do we associate money questions with that which is unhappy, unfortunate, down-at-the-heel, with fear and misery? Barring mere accidents, it is because we are careless, shiftless; because we do not face the problem manfully, practice reasonable self-restraint, consider the subject in its complexity and decide upon, and carry out, a constructive programme. Even if one happens to possess wealth, he is not exempt. Indeed, large wealth involves still greater necessity for care in the conduct of one's pecuniary affairs. The rich man is said to have perplexities and responsibilities which are unknown to those in moderate circumstances. In fine, everyone must face these money questions or be driven by them.

Those who live on fixed incomes, whether from salary or investment, may find it impossible to make any direct attempt to make money; for them the problem is to be confronted and mastered on its other side, the side of spending and saving, that the income may be apportioned as wisely as possible for the purposes of living. But during the last few years a new factor has entered into the money problems of the individual, often adding to his trials, often adding to his self-made excuses, and especially burdensome to the man on fixed income. We refer to the high cost of living. Here it is, however, that the wage earner can do something in self-protection, for the level of prices may be in some measure affected by his policy in handling his earnings.

A period of high wages is accompanied by and is in some sense an incident of a high level of prices. Now we recognize high wages, considered in itself, as beneficial to the community, for it gives opportunity, at least, for comforts in life and a provision for the future that otherwise would be lacking. But if prices have advanced as much as wages, the apparent improvement to the laborer is merely in nominal wages, while that which alone can benefit him is higher real wages. Now let us see what the workman could do to advance real wages as contrasted with nominal wages.

What will be the effect on prices of the use of surplus earnings during a period of high wages?

If the surplus earnings are expended, they will be used either in meeting the higher prices of customary commodities, or in meeting these advanced prices and also in purchasing additional commodities. The first case will occur only if, and when, the advance in price equals the advance in wages, for only in that event will the new wages just cover the new cost of customary commodities. Then this expenditure of the entire income in customary commodities tends to keep up the price level and any benefit from higher wages disappears.

In the second case, so far as the worker spends his surplus earnings in meeting advanced prices for customary commodities, he tends to maintain prices at the higher level, and so far as he buys additional commodities, he increases the demand for them and tends further to advance the price level.

If, on the other hand, the worker will save from his surplus earnings, he will increase the community's capital, and this will tend, directly or indirectly, to cause the production of further commodities, so increasing the supply of commodities and therefore tending to reduce prices.

In any case, the worker should save as much as possible, as this tends to reduce the price level and so to better his condition. Or, putting it more simply, in time of high wages the worker ought to produce as much as possible and consume as little as possible, both influences tending to increase the stock of commodities for his ultimate gain and for that of the community.

In fact, a high level of prices may be due measurably to some wasting of the world's capital—as in war, for instance—and then the only antidote is to restore the capital, a movement that would doubtless occur anyway in time but which could be greatly accelerated through a general adoption of habits of thrift and saving throughout a community.

This then, though small, is something definite that we can contribute to the material advancement of mankind and, like the duty in this connection to our nation, to our families and ourselves, it consists in creating capital; that is, earning as much as we can and, in any event, even if our earnings are fixed, managing the income thriftily, and carrying forward as large a net result as possible.

We turn now from the mass of mankind, on the whole so singularly neglectful of these responsibilities, to the few in number who constitute the creators of capital, to whom are due so much of the comforts, the conveniences, and the material advantages that go to make civilized life possible. Now these few are found in every rank in life. They may be rich or poor, professional or business men, employer or employee, old or young, male or female. The characteristic is their habit of thrift, of definitely adopting money-making as an aim, of spending less than they earn. It is astonishing what a small percentage of mankind they are. The Income Tax returns in the United States for 1916 showed that out of a population of 104,000,000 people those with taxable incomes aggregated only 336,652, about one in three hundred. But whatever be the rank of the individual practicing this thrift he is headed in the right direction and he tends to reach the point of relative competence, of independence in his pecuniary affairs.

Preëminent in the class of the thrifty we think of the man of affairs; the business enterprise indeed is supposed to be the money-maker, par excellence. Money-making is in fact considered as its raison d'être; it is as a money-maker that the business man is contemned by some and envied by many.

Now money-making and money values occupy a special place in business enterprise, due to the fact that on economic principles such money value becomes the best test—perhaps the only true test—of the workableness and success of business efforts. In the complicated activities of the world's work, where each man, each undertaking, each business unit, respectively, is striving primarily for its own advantage, how is it, among all this pulling and pushing, this competition, that the social income is distributed so nearly in accordance with the individual contribution? Even if we admit that many persons fail to get a fair share, that there is gross inequality here and there, still after all, a student of mankind's activities in production, distribution, and consumption must marvel at the extent to which the rewards approximate the value of contribution. Now this is made possible by money considered as a measure of relative values, by the standard or test of fitness embodied in the thought, Will it pay, and to what extent will it pay? If I have in mind some new invention that will perhaps confer benefits on mankind, the best test of its practicability and utility will be, Will it pay, will people buy it, pay money for it? If an improvement in process is proposed, the question is, Will it pay? If the young man starts out in life with high ideals and a reasonably good opinion of his own abilities, an opinion fostered perhaps by fond parents and admiring friends, the question is, Will these abilities fit in with the world's needs? Will they supply a real demand, will they be serviceable? The best means of ascertaining this, although it may be only a rough estimate and although errors occasionally creep in is, will they pay? Can he sell these services for real money? This criterion is practically omnipresent in the world of affairs. It is based on economic necessity, and although here and there it may be charged with cruelties, with serious blunders, it is, on the whole,