Despite the
obvious fact that technology produces marketable goods and services better,
less expensively, and in greater quantity than human labor ever could, some
people continue to insist that human labor is the only “real” factor of
production. Nor is this delusion
confined to socialists. It doesn’t
matter where you go, “productivity” is measured in terms of output per labor
hour.
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| Choose your relatives wisely. |
Plus, if we
assume that the only way to obtain capital is to produce more than you consume
and accumulate the excess in the form of money savings, or inherit,
redistribute, or steal, we have another problem. Not too many of us were smart enough to be
born into an inheritance, and stealing — whether you call it redistribution,
distributive justice, reparations, distributive charity, social justice,
sticking it to the rich, God’s Will, or anything else — is just plain wrong . .
. unless (of course) you are God and can make and break the rules (which, given
the Judeo-Christian-Islamic concept of God means you aren’t God, cf. “The LORD hath sworn, and will
not repent,” i.e., He doesn’t change
his mind and break His own rules).
So, if you aren’t
already rich and thus have the capacity to save without depriving yourself, and
you refuse to play God and just take from others (or get others, such as the
State, to do it for you so that you don’t sully your own hands), how, exactly,
are you supposed to obtain the capital to supplement, even replace what you can
produce by means of your labor?
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| Free yourself from the slavery of savings! |
This was the
problem Louis O. Kelso and Mortimer J. Adler addressed in their second
collaboration, The New Capitalists
(1961). We’ll get into why the title is
so lousy when we look at the illusions of capitalism after we’ve finished the
delusions of socialism, but for now the subtitle of this rather short book is
the important thing: “A Proposal to Free Economic Growth from the Slavery of
Savings.”
Does this mean
we’re agin’ saving? No. Saving is essential if we’re trying to
finance new capital formation, or have something put by for a rainy day, as
prudence would dictate.
What we’re agin’
is the wrong use of savings. Different
kinds of savings are used — or should be used — in different ways. If we use a type of savings meant for one
purpose for another purpose entirely, and don’t allow the use of the right kind
of savings for the job, we are letting savings use us, rather than us using
savings; saving has stopped being our servant, and has become our master.
Misers, who save
as an end in itself, have a mild case of “savings slavery.” Why mild?
Because, assuming that the miser isn’t cheating anyone or stealing, he
or she is only hurting him- or herself and the limited number of people who
would be benefitted by the increase in consumer demand resulting from the miser
spending his or her hoard instead of saving.
The real problem
with savings slavery is when an entire economy suffers from the disease. If everyone saves enough income to finance
new capital, then there won’t be enough consumer demand in the economy to
justify financing the new capital!
This is the
“economic dilemma” that socialism tries to resolve by overriding human rights
in the name of humanity. Here’s how Dr.
Harold G. Moulton described the dilemma:
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| There is an economic dilemma |
Let us next assume that, instead of an increase in the
percentage of national income that is spent, there is an increase in the
percentage that is saved. Let us assume that only 60 percent is spent, while 40
percent is set aside for the purpose of investment. As is indicated in the
third diagram, the resulting decrease in the demand for consumption goods would
lead to the discharge of workers engaged in the production of such goods and
increase the amount of idle plant and equipment. Under these circumstances the
opportunity for profit in expanding plant and equipment would be diminished and
the effective demand for new capital construction would accordingly decline.
Hence we have reduced the "Additions to Capital" area and raised the
question — What becomes of the excess money savings?
It will be observed from these illustrations that when the
flow of funds through consumption channels is increased there arises a demand,
from consumers, for the construction of additional capital goods; but that, at
the same time, funds with which to create the additional capital become less available.
Contrariwise, it will be seen that when the flow of funds through consumption
channels is reduced an increased supply of money for capital expansion is
rendered available; but that the business incentive to use it for such purpose
is diminished. (Harold G. Moulton, The
Formation of Capital. Washington,
DC: The Brookings Institution, 1935, 32-33.)
This puts us in a
bit of a quandary. If even the richest
people save enough to finance new capital formation instead of spending their
income, consumer demand drops to the point where there is no point in investing
the savings.
The case is even
worse for the poor. If someone who is
making exactly enough on which to survive (instead of using consumer credit to
buy now and pay later, mortgaging future wage or welfare income), decides to
start saving 10% of his or her income, there is an immediate drop in the
standard of living with no commensurate benefit: there is no way saving 10%, or
any percent of one’s subsistence income is going to enable anyone to purchase
enough capital to make up for the loss of consumption power caused by saving
current income. Advanced capital
instruments are just a trifle too expensive for most people to be able to
afford even with a lifetime of scrimping and saving that would put Ebenezer
Scrooge to shame.
So, what is to be
done? We’ll answer that question on
Monday, which gives you something to look forward to over the weekend instead
of wasting your time with the Super Bowl.
