Riotous Saving
I
THE standard of living is higher in the United States than in any other country in the world. Is this the result of prohibition? Or tariffs? Or mergers? Or mass production? Or something else? Here is unlimited room for controversy. The one thing we all agree on is pride in our high standard of living.
But what is a high standard of living? In the economic sense, it is nothing but the using up of much wealth. When we say that the standard of living of wage earners in this country has risen 34 per cent since 1914, we mean a gain of one third in the per capita consumption of goods. We mean, mother words, that for every three carpets, cantaloupes, cameras, coats, and all the rest, which were used up by the average person fifteen years ago, the average person now uses up four. We mean that, and nothing else. Likewise, when we say the standard of living of the American farmer is five times as high as that of the Russian peasant, we mean that the American farmer consumes five times as much.
Inventions and discoveries do not necessarily lift us to higher planes of living. Neither do electric refrigerator factories a mile long, or fleets of ships, or gushing oil wells, or fertile fields. Nor do warehouses bulging with wheat, or shop windows filled with the latest creations. These things may or may not result in higher standards of living. All depends on the extent to which the increased wealth gets into the hands of the people who use it.
In short, increased consumption of goods is a higher standard of living.
How, then, can we consume more, year after year? Only by producing more. That, at least, is orthodox economics. According to the latest extension of Einstein’s theories, to be sure, those things which appear to exist do not exist, and time flows backward. Still, it is hard to see how we can eat oranges which have not yet been grown, or wear hats not yet made.
But we cannot keep on producing more oranges or hats or anything else unless we can sell more. And we cannot sell more unless consumers buy more.
In order to see what happens, imagine that all makers of goods have no way of distributing what they make, except through a monster penny-inthe-slot machine. Then the producers cannot long continue to employ workers and turn out goods at any faster rate than the people spend pennies, for there is no use cramming the machine with goods for which there is no outlet. All that sounds absurdly simple. Still, it is in all essentials precisely what happens. That is why nothing except increased spending by consumers can raise standards of living.
If people as a whole spend too little — which is the same thing as saying that they save too much — they defeat the object of saving. That is what the people of the United States have been doing all this year. Right now, large income receivers are trying to save more money than this country as a whole can possibly save to any advantage. For saved money is of no use to the country as a whole until it is invested. But it is useless to invest money in more mills, mines, and machines than the country can use; and the country already has more than it can use without increased consumer spending. Once any nation has piled up larger savings in the form of capital facilities than the nation can operate, there is virtually no way in which it can save anything more that is worth saving. It can merely accumulate more idle capital facilities.
The thrifty individual, to be sure, who saves five dollars instead of buying a pair of shoes, may be better off for his thrift. What are savings for an individual, however, are not necessarily savings for society. Everyone who saves money, at times like the present, when his abstinence helps to curtail production and throw men out of work, saves at the expense of other people. For the individual, a penny saved is a penny earned; but for society, a penny saved is sometimes a penny lost. Both producers and consumers must save; but there are times, such as the present, when they do not save without to some extent frustrating the social object of saving.
The country can use more invested savings — more instruments of production — only if consumers spend more money. But the fact that commodity prices have been falling off for fully a year, while production and car-loadings have been falling off, too, shows that for a full year consumers have not been spending enough money to enable producers to keep their plants running. The monster penny-in-the-slot machine has not been clicking fast enough.
When, under this condition, people save more money, they are wasting the substance of the country in riotous saving.
Even in the prosperous year before the crash of the stock market, we did not buy goods as freely as the increased production of goods warranted. We could n’t buy This. We could n’t buy That. We were saving for a Rainy Day. Of course the Rainy Day arrived: the floods descended and the markets fell.
Then what happened? Did we fetch forth the best galoshes and slay the fatted bank roll? We did not. We went without some more of This and some more of That. We started saving for a Rainier Day. All we have to do now is keep on saving hard enough, and the Rainier Day will arrive. If half the consumers in the United States should spend only half as much this month as they spent last month, next month would bring the worst business depression in all history.
A dollar saved for a Rainy Day may be merely a dollar saved; whereas a dollar spent on a Rainy Day is a dollar earned and spent again, and so on, till the cows come home.
A sign in a suburban bank lures depositors thus: ‘Someone will save the money you spend. Why not save it yourself?’ This is one of those convenient records that can be played either side up. Just now, when trade is dull and jobs are scarce, we like this side: ‘Someone will spend the money you save. Why not spend it yourself?’
The money you save will be used by somebody to finance production; but, for the most part, production has no trouble in getting itself financed. The money you spend for goods finances consumption; and just now consumption is having trouble in getting itself financed. The money you save may possibly be used to produce goods, which may or may not be sold. The money you spend will certainly move the goods already made, and create a demand for more. A demand for goods is potentially a demand for labor. A demand for labor means more wages for consumers. And more wages for consumers — provided consumers’ goods increase at the same rate — mean higher standards of living. Just now more wages mean just that.
It takes months for new emergency construction to get fully under way; months before pay envelopes feel the effects; months from blue prospects to blue prints; more months to run the obstacle race from blue prints to blue overalls; and more months still from blue overalls to blue skies. Meantime, all the Rainy Day Dollars you can prudently spend will do you no harm and will do good to jobless men somewhere. Blessed is that consumer who at this time is weighed by merchants and found wanting — wanting more goods. Satisfied customers may be our best advertisement; but customers with unsatisfied wants, and the will and the money to satisfy these wants, are our best employment agencies. By all means, ‘save for a rainy day.’ But don’t think you are thereby speeding up business. To speed up business, buy an umbrella.
II
In short, how much a country can save to any advantage depends on how much a country spends.
Yet on every hand we hear the complaint that the people are wasting their substance in riotous buying of luxuries. We have just read a caustic account of the extravagance of working girls. It seems that these misguided creatures are not content with necessities: they are buying even such luxuries as fur coats. At least everybody believes that except the furriers.
This reminds us of the time, ten years ago, when the banks cut down the credit allowed to motor-car dealers, on the ground that automobiles were ‘luxuries.’ That was nothing but an opinion of the bankers. Consumers immediately bought more cars than ever before, showing that they did not care a flat tire for the opinion of the bankers. And now consumers actually buy twice as many cars as they bought in that extravagant age. If you don’t believe it, try to find a place to park one.
What the bankers did not understand is that it is useless for anybody to go about deciding, for other people, what are luxuries and what are necessities. Everyone decides that question for himself. If women spend a million dollars more for fur coats and a million dollars less for other things, it is because they want t he fur coats more than they want the other things. To insist that fur coats are ‘luxuries’ is an academic discussion. It has little meaning outside the classroom — if, indeed, it has any meaning there.
No doubt all of us, including working girls, can cultivate higher tastes. We can discover low-priced joys that will warm our hearts more than mink coats. We can learn to spend our money for the more ‘durable satisfactions of life.’ We can make these things necessities. And it will pay us well to do so. But other people cannot do that for us, neither bankers who ride to work in automobiles nor ladies who preach thrift in fur coats.
In any event, finding fault with people for buying ‘luxuries’ is a little ridiculous. No sooner do we arrive at a new definition of ‘luxury’ than mass production and mass distribution make it obsolete. We used to think that any business which dealt with the ‘necessities’ of life — food, clothing, housing, for example — was for that reason on a firm foundation. And any business which dealt with ‘luxuries’ seemed to be trying to get a footing on shifting sands. But in the past twelve months the people of the United States have spent for pleasure motoring at least four billion dollars. For other ‘luxuries’ that did not exist a generation ago — sound and motion pictures, phonographs, radios, airplanes — they have spent, during the past year, no less than three billion dollars. And these seven billions were what they had left over after having spent another seven billions on candy, chewing gum, tobacco, travel, night clubs, vaudeville shows, and other ‘entertaining’ that by no stretch of imagination could be called a ‘necessity,’ even if it could be called entertaining. Altogether, we now spend more for luxuries than our grandfathers spent for the three great staples: food, clothing, and housing. We employ at least one fourth of our workers in making things which were scarcely heard of at the beginning of this century. Many luxuries have become staples, and many staples have become producers’ risks.
What can the old-line manufacturer do about it? He can complain of the extravagance of this age. Often he does complain, bitterly. Or he can stop trying to decide for other people what things are luxuries and what things are necessities, and produce the things they buy. New ‘luxuries’ produced by old industries; new industries produced by old communities — that is the way ahead. Thirty years from now, the people of the United States may be spending thirty billion dollars a year for things which have not yet come to the attention of the Patent Office.
III
But what is to become of the ancient virtue of thrift? The home, the banks, the church, the school, the press — everybody, in fact, except the merchant, extols the virtue of saving money, instead of spending it. And well they may. For most of us must either save money to provide for sickness, unemployment, and old age or else go to the poorhouse. Nothing we have said here, or elsewhere, attempts to tell any individual just how much he can prudently spend. We ought to write that in the sky, with shooting stars for exclamation points. Let us repeat. We are not advising everybody to spend more money. No doubt there are a million persons in this country who, even in these days of business depression, could wisely spend less and save more. You may be one of the million, for all we know.
But how about those who have already saved enough money to provide themselves, for the rest of their lives, with several times the income of the average family? If such persons really want to help their country, the best thing they can do, right now, is to spend more money; right now, when business is 10 per cent below normal, because buyers are scarce; and when, for the same reason, ten billion dollars’ worth of savings in the form of capital facilities is being wasted, and jobs appear to be scarcer than they were even in the major depression of a decade ago. If the well-to-do cannot spend more money prudently on themselves or their employees, they will find, in the next mail, plenty of opportunities to spend it on others.
But this is heresy! This is praise of extravagance! Already, we are told, the working girl ‘ puts all she earns on her back.’ This horrified criticism breaks out every day. Deciding what other women can afford is a pastime for women of leisure. But while these selfappointed reformers are working out to five decimal places what the working girl can afford, the working girl goes ahead and settles that problem for herself. She is ready to put her shoulder to the wheel, but she insists that it shall be a well-tailored shoulder. She will stand for a day’s work that would prostrate her critic, but she refuses to stand for it in shabby shoes. Having no income from bonds with which to buy a wardrobe, she earns it herself. Having no maid to take care of it, she takes care of it herself, after hours. She has won a battle in the war against poverty. She deserves to be decorated — and she sees to it that she is.
Now that we have worked up a case for the defendant, we take pleasure in announcing that there is no defendant. The indictment has been quashed by the findings of the Business Girls’ Budget Contest, conducted by the Exposition of Women’s Arts and Industries, in New York City. The accused are not guilty, as charged; at least, not in New York, and probably not elsewhere. They spend on clothes only 25 per cent of what they earn. And the result! That, in itself, is an ‘exposition of women’s arts and industries.’
The point is this: nowhere in the world do people rise to higher standards of living until they want to rise. It is wholly to the credit of wage-earning girls that they want to dress well, and industry is fully equipped to dress them well.
Yet there are many comfortable persons who call all that we have been saying rank materialism. ‘We are smothered in material comfort,’ says Katharine Gerould, ‘and we do not know enough to look for comfort of a different kind. Only aristocrats can make a spiritual use of leisure. The man who has fought all his life for enough bread to keep him and his family alive will always give undue emphasis to bread. Only in the next generation probably will he turn to the things of the mind: knowledge, taste, delicate experience. The people who know what money is good for are those who have had it long enough to learn.’
This sounds like the famous remark of Patrick McDuff: ‘New shoes are so stiff, I can’t get ’em on until I’ve worn ’em a few times.’ How can anybody wear prosperity gracefully and without squeaks until he has tried it awhile? The Butterscotchman, told that he would have to run in order to get warm, replied, bitterly, that he would have to get warm before he could run. Nobody can learn to spend either money or leisure wisely except by having a little to spend.
‘The next generation’ is too far away. All of us ought to be ‘smothered in material comfort’ right here and now. Never fear, comfortable critics, we shall recover our breaths, presently, just as you did. We too shall acquire an appreciation for knowledge, taste, and delicate experience. Jesus, above all others, inspired men to look for comfort of another kind. Yet He once paused in His teaching, not to make sure that His listeners were ‘aristocrats ’ with a cultural background that would enable them to turn to things of the spirit; He paused to make sure that they were amply supplied with the ‘material comfort’ of loaves and fishes.
Pruning our wants is not necessarily an economic virtue. Indeed, so far as it brings unemployment to others, the practice is not even spiritually sound. We used to suppose that there was just so much wealth in the world, and so the fewer good things we grasped for ourselves, the more were left for others. But it does not work out that way. The more we get of the goods which really add to our health, usefulness, and pleasure, the better off we are. There is not so wide a chasm as the Puritans thought there was between ‘goods’ and ‘good.’ On the contrary, a dearth of this world’s goods — poverty — is the cause of much of this world’s disease, ill temper, and crime.
Is there danger that we shall become ‘ thing-minded ’ ? André Siegfried thinks so. In America Comes of Age, he expresses the fear that as individuals we may become spiritually submerged and smothered by the avalanche of goods which we produce. ‘America,’ he says, ‘has emphasized the prestige of production. Rightly or wrongly, we fear that the individual, considered not as a producer or as a consumer, but as a human being, may appear in the long run to be the loser.’
It may be possible, merely as a mental exercise, to consider the individual, not as a producer or as a consumer, but as a human being. When this is tried in real life, however, the ‘individual’ is out of luck. To be a human being, it is necessary to be a consumer. The spirit may be willing to concentrate on individuality, but the flesh will not put up with it. Americans have never found their idealism blighted by the assurance of three square meals a day — those who have been fortunate enough to have that assurance. Idealism persists, if at all, not on undernourishment, but in spite of it. The best centres for developing individuality are well-nurtured, well-housed, and well-clothed human beings. The result of mass production in America has been greatly to increase the proportion of such human beings. Its goal must be to make any other kind unknown.
For centuries, men have praised the virtues of the poor. The poor do have virtues, many of them: tolerance, charity, sympathy, often an amazing generosity to those even poorer than themselves. But these are the virtues of the poor. They are not the virtues of poverty. Poverty has no virtues. It has not even the virtue, so long ascribed to it, of developing the ‘spirituality’ of its victims. Well-meaning souls, bent on making the best of a condition that has no best, have assured us that poverty, under its ugly disguise, is a heavenly disciplinarian. Released from poverty, it is said, the great masses of the poor would relapse into gross materialism.
This doctrine seems to be preached most eloquently by persons who are comfortably well off. We conclude that they themselves have developed spirituality without the beneficial influence of poverty. But if they can escape materialism, why not all of us? We too may be able to resist the deadening effect of comfort. At any rate, we should like to try it; especially as Henry Ford has just declared that poverty is not an evangel at all. It fosters, he says, not spirituality but materialism. The unfortunate man whose mind is continually bent to the problem of his next meal or his next night’s shelter is a materialist perforce. How shall this unfortunate man be rescued?
By prayer and fasting?
‘No,’ says Mr. Ford. ‘This man cannot get his mind off the grindstone of material needs. But emancipate him by economic security and the appurtenances of social decency and comfort, and instead of making him more of a materialist, you liberate him from the menace of materialism.’
Mr. Ford is a practical man. When he says, ‘Emancipate this man by economic security,’ he is not talking of Utopia. He is talking of something that can be done, ‘now, at this time.’ To do it, we must steadily increase production. To do that, we must steadily increase sales. To do that, we must steadily spend more money.
No doubt we shall also save more. For if, in the future, we save more money when prices rise and spend more money when prices fall, we shall, in the long run, spend more and also save more. It is no accident that wage earners in the United States have the largest per capita savings in the world and also the largest per capita expenditures.
Spending in proportion to producing, we do not lay waste our substance in Riotous Saving.