No, we spelled that right. Combine “slavery” and “savings” and you get “savery.” What Louis Kelso and Mortimer Adler called “the slavery of [past] savings” is at the root of a great many problems that could easily be solved if people weren’t stuck in the assumption that the only way to save to finance new capital formation is to cut consumption in the past.
|Worst way to save. (Belloc sneers.)|
That is, in fact, one way to save — and the very best way to save for the purpose of consumption goods and services. If you’re talking productive goods and services, however, cutting consumption to accumulate savings to invest is pretty much the absolute worst way to save.
Perhaps Dr. Harold G. Moulton said it best, in his 1935 monograph, The Formation of Capital. As he succinctly explained what he called the economic dilemma, “The dilemma may be summarily stated as follows: In order to accumulate money savings, we must decrease our expenditures for consumption; but in order to expand capital goods profitably, we must increase our expenditures for consumption.”
|Belloc: Born to sneer.|
Thus, there is a Catch-22 when trying to use past savings to finance new capital formation. To justify new capital, there must be an increase in consumption . . . but to finance that same capital, there must be a decrease in consumption!
. . . if we go by the usual assumptions, that is. Of course, going by the “usual assumptions” means that the people who most need to own the capital that is displacing them from their jobs are the very ones who are unable to afford to purchase the new capital because they can’t afford to cut consumption!
Consequently, what we’re seeing now throughout the world is the rapid growth of what Hilaire Belloc called “the Servile State.” As Belloc say it, the Servile State is one in which capitalism assumes aspects of socialism, and socialism takes on characteristics of capitalism.
Belloc was wrong, however, in that the chief characteristic of the Servile State would be a condition of people being compelled to work, whether or not they want to, thereby “enslaving” (imposing a condition of servility on the great mass of people) to a private employer. As technology advances, labor is displaced from the production process, . . .
|Keynes: "My job is to tell the State its job is to create jobs." (Belloc sneers.)|
. . . and the State becomes concerned with trying to “create” enough jobs artificially for people who want them. It doesn’t have the time or the resources to bother with people who don’t want to work.
Of course, this makes people dependent on the State for a “job,” which is the only way academics and the politicians they advise think that people can gain income.
It's no wonder Belloc got into the habit of ridiculing socialist nonsense . . . almost as much as he mocked capitalist drivel. As he said in 1928 or thereabouts,
|George Bernard Shaw selfie.|
“I do not know what Mr. Chesterton is going to say. I do not know what Mr. Shaw is going to say. If I did I would not say it for them. I vaguely gather from what I have heard that they are going to try to discover a principle: whether men should be free to possess private means, as is Mr. Shaw, as is Mr. Chesterton; or should be, like myself, an embarrassed person, a publishers’ hack. I could tell them; but my mouth is shut. I am not allowed to say what I think. At any rate, they are going to debate this sort of thing. I know not what more to say They are about to debate. You are about to listen. I am about to sneer.” — Hilaire Belloc to the audience, about to moderate a discussion between a distributist and a socialist.
Fortunately there’s a way out of this dilemma. That is, don’t use existing (“past”) savings — past reductions in consumption — to finance new capital formation. Instead, use future savings — future increases in production — to finance new capital formation!
The key to this is that anybody who can come up with a financially feasible plan and some means of securing collateral (below) can tap into future savings, because future savings are limited only by what you can do. Past savings, however, are strictly limited in amount and, furthermore, can only be tapped by the people who already own them or can afford to compensate owners of existing savings for risking what they own — and that can get expensive, as everyone who has ever seen “Shark Tank” knows.
|Capitalist Past Savings Pig . . . malion?|
There is the problem of collateral, though. Collateral is existing wealth that a lender can seize if you fail to repay your loan. In other words, collateral is a type of insurance. You know what else is a type of insurance?
That’s right, insurance. If you don’t have collateral to secure a loan, Kelso and Adler pointed out that you could take out an insurance policy that would pay off in the event you failed to repay your loan.
So the answer to being displaced by technology is just what Louis Kelso said in an interview in Life magazine over half a century ago: “If the Machine Wants Our Jobs, Let’s Buy It.”