Principles of Political Economy Part 24

[Footnote 219-3: The Journal des Economistes for March, 1854, very clearly shows, in opposition to the state-sophists who recommended extravagant b.a.l.l.s, etc. as a means of advancing industry, and who even advocated the paying officials higher salaries on this account, and making greater outlays by them compulsory, that such luxury when it comes of itself may be a symptom of national wealth, but that it is a very bad means to produce prosperity artificially.]

SECTION CCXX.

WHEN SAVING IS INJURIOUS.

The act of saving, if the consumption omitted was a productive one, is detrimental to the common good; because now a real want of the national economy remains unsatisfied.[220-1] The effecting of savings by curtailing unproductive consumption may embarra.s.s those who had calculated on its continuance. But its utility or damage to the whole national economy will depend on the application or employment of what is saved. Here two different cases are possible.

A. It is stored up and remains idle. If this happens to a sum of money, the number of instruments of exchange in commerce is diminished. Hence, in consequence, there may be either a general fall in the price of commodities, or some commodities may remain unsold; that is, according to -- 217, a commercial crisis of greater or smaller extent.[220-2] If it be objects of immediate consumption that are stored up and lie idle, articles of food or clothing, for instance, the price of such commodities is wont to be raised by the new and unusual demand for them, precisely as it is lowered afterwards when the stores are suddenly opened and thrown upon the market.[220-3]

B. If the saving effected be used to create fixed capital, there is as much consumption of goods, the same support of employed workmen, the same sale for industrial articles as in the previous unproductive consumption; only, there the stream is usually conducted into other channels. If a rich man now employs in house-building what he formerly paid out to mistresses; masons, carpenters, etc. earn what was formerly claimed by hair-dressers, milliners, etc.: there is less spent for truffles and champagne and more for bread and meat. The last result is a house which adds permanently either to personal enjoyment, or permanently increases the material products of the nation's economy.[220-4] And it is just so when the wealth saved is used as circulating capital. Here, the wealth saved is consumed in a shorter or longer time; and to superficial observers, this saving might seem like destruction; but it is distinguished from the last by this, that it always reproduces its full equivalent and more. However, the whole quant.i.ty of goods brought into the market by such new capital cannot be called its product. Only the use (_Nutzung_) of the new capital can be so called; that is the holding together or the development in some other way of other forces which were already in existence until their achievements are perfected and ready for sale.[220-5] [220-6]

[Footnote 220-1: What evil influences such saving can have may be seen from Prussian frugality in its military system before 1806.]

[Footnote 220-2: The custom of burying treasure is produced by a want of security (compare _Montanari_, Delia Moneta, 1683-87, 97 Cust.), and by an absence of the spirit which leads to production. As _Burke_ says, where property is not sacred, gold and silver fly back into the bosom of the earth whence they came. Hence, in the middle ages, this custom was frequent, and is yet, in most oriental despotic countries.

(_Montesquieu_, E. des L., XXII, 2.) And so in Arabia: _d'Arvieux_, _Rosenmuller's_ translation, 61 seq. _Fontanier_, Voyage dans l'Inde et dans le Golfe persique, 1644, I, 279. A Persian governor on his death bed refused to give any information as to where he had buried his treasure. His father had always murdered the slave who helped him to bury his money or any part of it. (_Klemm_, Kulturgeschichte, VII, 220.) In lower stages of civilization, it is a very usual luxury to have one's treasures buried with the corpse. In relation to David's grave, see _Joseph._, Ant. Jud., VII, 15,3, XIII, 8, 4; XVI, 7, 1.

Hence the orientals believe that _every_ unknown ruin hides a treasure, that every unintelligible inscription is a talisman to discover it by, and that every scientific traveler is a treasure-digger, (_v. Wrede_, R. in Hadhramaut, 113, 182 and _pa.s.sim_.) Similarly in Sicily. (_Rehfues_, Neuester Zustand von S., 1807, I, 99.) In the East Indies every circ.u.mstance that weakens confidence in the power of the government increases the frequency of treasure-burial, as was noticed, for instance, after the Afghan defeat. Treasure-burial by the Spanish peasantry (_Borrego_, translated by Rottenkamp, 81), in Ireland (_Wakefield_, Account of I.

I, 593), in the interior of Russia (_Storch_, Handbuch, I, 142), and among the Laplanders. The custom was very much strengthened among the latter when, in 1813, they lost 80 per cent. by the bankruptcy of the state through its paper money. (_Brooke_, Winter in Lapland, 1829, 119; compare _Blom_, Statistik von Norwegen, II, 205.) As during the Thirty Years' War, so also in 1848, it is said that large amounts of money were burned by the Silesian and Austrian peasantry. Much of it is lost forever, but, on the whole, much treasure is wont to be found where much is buried; governments there make it a regal right to search for it.]

[Footnote 220-3: If the h.o.a.rding takes place in a time of superfluity, and the rest.i.tution of the stores in a time of want, there is of course no detrimental disturbance, but on the contrary the consequence is a beneficent equilibrium of prices. This is the fundamental idea in the storage of wheat.]

[Footnote 220-4: In the construction of national buildings, etc., we have the following course of things: compulsory contributions made by taxpayers, or an invitation to the national creditors to desist somewhat from their usual amount of consumption, and to employ what is saved in the building of ca.n.a.ls, roads etc. In France, for instance, after 1835, 100,000,000 francs per annum. (_M. Chevalier_, Cours, I, 109.) The higher and middle cla.s.ses of England saved, not without much trouble, however, between 1844 and 1858, 134,500,000 in behalf of railway construction.

_Tooke-Newmarch_.]

[Footnote 220-5: Such savings have sometimes been prescribed by the state. In ancient Athens many prohibitions of consumption in order to allow the productive capital to first attain a certain height. Thus it was forbidden to slaughter sheep until they had lambed, or before they were shorn. (_Athen._, IX, 375, I. 9.) Similarly the old prohibition of the exportation of figs. (Ibid., III, 74.) Compare Pet.i.t. Leges. Atticae, V, 3. _Boeckh_, Staatshaushaltung, I, 62 seq.]

[Footnote 220-6: The process of the transformation of savings from a money-income, in a money-economy (_Geldwirthschaft_), into other products, more closely a.n.a.lyzed in _v. Mangoldt_, V. W. L., 152 ff.]

SECTION CCXXI.

LIMITS TO THE SAVING OF CAPITAL.

It may be seen from the foregoing, that the mere saving of capital, if the nation is to be really enriched thereby, has its limits. Every consumer likes to extend his consumption-supply and his capital in use (_Gebrauchskapitalien_); but not beyond a certain point.[221-1] Besides, as trade becomes more flourishing, smaller stores answer the same purpose. And no intelligent man can desire his productive capital increased except up to the limit that he expects a larger market for his enlarged production. What merchant or manufacturer is there who would rejoice or consider himself enriched, if the number of his customers and their desire to purchase remaining the same, he saw his stores of unsaleable articles increase every year by several thousands?

This is another difference between national resources or world resources and private resources. The resources of a private person, which are only a link in the whole chain of trade, and which are, therefore, estimated at the value in exchange of their component parts should, indeed, always be increased by savings made. (-- 8.) For even the most excessive increase of supply in general, which largely lowers the price of a whole cla.s.s of commodities, will never reduce the price of individual quant.i.ties of that commodity below zero, and scarcely to zero. It is quite otherwise in the case of national or world resources which must be estimated according to the value in use of their component parts. Every utility supposes a want. Where, therefore, the want of a commodity has not increased, and notwithstanding there is a continuing increase in the supply, the only result must be a corresponding decrease in the utility of each individual part.[221-2]

If a people were to save all that remained to them over and above their most urgent necessities, they would soon be obliged to seek a wider market in foreign countries, or loan their capital there; but they would make no advance whatever in higher culture nor add anything to the gladness of life.[221-3] On the other hand, if they would not save at all, they would be able to extend their enjoyments only at the expense of their capital and of their future. Yet these two extremes find their correctives in themselves. In the former case, a glut of the market would soon produce an increased consumption and a diminished production; in the latter the reverse. The ideal of progress demands that the increased outlay with increased production should be made only for worthy objects, and chiefly by the rich, while the middle and lower cla.s.ses should continue to make savings and thus contribute to wipe out differences of fortune.[221-4]

[Footnote 221-1: Up to this point, indeed, wants increase with the means of their satisfaction. The man who has two shirts always strives to get a dozen, while the person who has none at all, very frequently does not care for even one.

And so the person who has silver spoons generally desires also to possess silver candle-sticks and silver plates. On Lucullus' 5,000 chlamydes, see _Horat._, Epist., I, 6, 40 ff.]

[Footnote 221-2: That consumption and saving are not two opposites which exclude each other is one of _Adam Smith's_ most beautiful discoveries. See Wealth of Nat., II, ch. 3.

But compare _Pinto_, Du Credit et de la Circulation, 1771, 335. Before his time most writers who were convinced of the necessity of consumption were apologists of extravagance.

Thus _v. Schroder_, F. Schatz- und Rentkammer, 23 seq. 47, 172. Louis XIV.'s saying: "A King gives alms when he makes great outlays." According to _Montesquieu_, Esprit des Louis VII., 4, the poor die of hunger when the rich curtail their expenses. This view, which must have found great favor among the imitators of Louis XIV. and Louis XV. was entertained to some extent by the Physiocrates; for instance, _Quesnay_, Maximes generales, 21 seq. Compare _Turgot_, uvres, ed, _Dare_, 424 ff. On the other hand, _Adam Smith_, loc. cit.

says that the spendthrift is a public enemy, and the person who saves a public benefactor. _Lauderdale_, Inquiry, 219, reacts so forcibly against the one-sidedness which this involves that he believes no circ.u.mstance possible "which could so far change the nature of things as to turn parsimony into a means of increasing wealth." In his polemic against Pitts' sinking fund as inopportune and excessive, he a.s.sumes that all sums saved in that way are completely withdrawn from the national demand. See per contra _Hufeland_ n. Grundlegung I, 32, 238. _Sismondi_, N. P. II, ch. 6, with his distinction between _production_ and _revenu_, is more moderate; the former is converted into the latter only in as much as it is "realized," that is, finds a consumer who desires it, and pays for it. Now only can the producer rely on anything; can he restore his productive capital, estimate his profit, and use it in consumption, and lastly begin the whole business over again.... A stationary country must remain stationary in everything. It cannot increase its capital and widen its market while its aggregate want remains unaltered. (IV, ch. 1.)]

[Footnote 221-3: Thus _John Stuart Mill_ thinks that the American people derive from all their progress and all their favorable circ.u.mstances only this advantage: "that the life of the whole of one s.e.x is devoted to dollar-hunting, and of the other to breeding dollar-hunters." (IV, ch. 6, 2.) In the popular edition of 1865, after the experience of the American civil war, he materially modified this judgment.]

[Footnote 221-4: _Storch_, Nationaleinkommen, 125 ff. That there is at least not too much to be feared from the making of too great savings is shown by _Hermann_, St. Untersuch., 371 seq. On the other hand, there is less wealth destroyed by spendthrifts than is generally supposed, for spendthrifts are most frequently cheated by men who make savings themselves. (_J. S. Mill_, Principles, I, ch. 5, 5.)]

SECTION CCXXII.

SPENDTHRIFT NATIONS.

As there are extravagant and frugal individuals, so also are there extravagant and frugal nations. Thus, for instance, we must ascribe great national frugality to the Swiss. In many well-to-do families in that country, it is a principle acted upon to require the daughters to look to the results of their white sewing, instead of giving them pin-money; to gather up the crumbs after coffee parties in the presence of the guests, and to make soup of them afterwards, etc. Sons are generally neither supported nor helped to any great extent by their parents in their lifetime, and are required to found their own homes.

They, therefore, grow rich from inheritance only late in years, when they are accustomed to a retired and modest mode of life, and have little desire, from mere convenience sake, to change it for another. And so Temple informs us that it never occurs to the Dutch that their outlay should equal their income; and when this is the case they consider that they have spent the year in vain. Such a mode of life would cost a man his reputation there as much as vicious excess does in other countries.

The greatest order and the most accurate calculation of all outlay in advance is found in union with this; so that Temple a.s.sures us he never heard of a public or private building which was not finished at the time stipulated for in advance.[222-1]

On the other hand, the Englishman lives rather luxuriantly. He is so used to enjoying comparative abundance, that when English travelers see the peasantry of the continent living in great frugality, they generally attribute it to poverty and not to their disposition to make savings. If England has grown rich, it is because of the colossal magnitude of its production, which is still more luxuriant and abundant than its consumption.[222-2] This contrast may be the effect in part of nationality and climate;[222-3] but it is certainly the effect in part also of a difference in the stage of civilization which these countries have respectively reached. The elder Cato had a maxim that a widow might, indeed, allow her fortune to diminish, but that it was a man's duty to leave more behind him than he had inherited.[222-4] And how prodigally did not the lords of the universe live in later times!

[Footnote 222-1: _Temple_, Observations on the U. Provinces, Works, I, 136, 138 seq., 179. _Roscher_, Geschichte der engl. Volkswirthschaftsl., 129. Thus, for instance, the Richesse de Hollande, I, 305, describes a rich town near Amsterdam in which a man with an income of 120,000 florins a year expended probably only 1,000 florins per annum on himself.]

[Footnote 222-2: As early a writer as _D. Defoe_, Giving Alms no Charity! 1704, says: the English get estates; the Dutch save them. An Englishman at that time with weekly wages of 20 shillings just made ends meet; while a Dutchman with the same grew rich, and left his children behind him in very prosperous circ.u.mstances, etc. _L. Faucher_ draws a similar contrast between his fellow countrymen and the English. _Goethe's_ ingenuous observations (Werke, Bd., 23, 246, ed. of 1840) in his Italian journey, show that the Italians, too, know how to save. _Molti pochi fanno un a.s.sai!_ And so in Bohemia, the Czechs have a good reputation for frugality, sobriety, etc. as workmen. They are more frugal than the Germans, although all the larger businesses belong to Germans, because when the Czech has saved something, he prefers to return to his village to putting his savings in jeopardy by speculation.]

[Footnote 222-3: Drunkenness a common vice of northern people: thus in antiquity the Thracians (_Athen._, X, 42; _Xenoph._, Exp. Cyri, VII, 3, 32), the Macedonians, for instance, Philips (_Demosth._, Olynth., II, 23) and Alexander's (_Plutarch_, Alex., 70; De Adulat, 13). To drink like a Scythian, meant, among the Greeks, to drink like a beast. (_Athen._, X, 427; _Herod._, VI, 84.) On North German drunkenness in the 16th century, see _Seb. Munster_, Cosmogr., 326, 730. _Kantzow_, Pomerania, II, 128.]

[Footnote 222-4: _Plutarch_, Cato, I, 21.]

SECTION CCXXIII.

THE MOST DETRIMENTAL KIND OF EXTRAVAGANCE.

The kind of extravagance which it is most natural we should desire to see put an end to, is that which procures enjoyment to no one. I need call attention only to the excessive durability and solidity of certain buildings. It is more economical to build a house that will last 60 years for $10,000, than one which will last 400 years for $20,000; for in 60 years the interest saved on the $10,000 would be enough to build three such houses.[223-1] This is, of course, not applicable to houses built as works of art, or only to produce an imposing effect. The object the ancient Egyptians had in view in building their obelisks and pyramids continues to be realized even in our day.

I might also call attention to the premature casting away of things used. Our national economy has saved incredible sums since rags have been manufactured into paper. In Paris 4,000 persons make a living from what they pick up in the streets.[223-2]

[Footnote 223-1: Compare _Minard_, Notions elementaires d'Economie politique appliquee aux Travaux publics, 1850, 71 ff. He calls to mind the many strong castles of the age of chivalry, the Roman aqueducts, theaters, etc., which are still in a good state of preservation, but which can be used by no one; so many bridges too narrow for our purposes, and so many roads too steep. The sluices at Dunkirk, made 12.60 metres in width by Vauban, were made 16 meters wider in 1822, and still are too narrow for Atlantic steamships. In England, private individuals have well learned to take all this into account. Compare _J. B. Say_, Cours pratique, translated by Morstadt, I, 454 ff.]

[Footnote 223-2: _Fregier_, Die gefahrlichen Kla.s.sen, translated 1840, I, 2, 38. In Yorkshire it is said that woolen rags to the amount of 52,000,000 a year are manufactured into useful articles. (_Tooke_, Wool-Production, 196.) Compare The Use of Refuse: Quart.

Rev., April, 1868. On the ancient Greek ragpickers the so-called spe????????, see _St. John_, The h.e.l.lenes, III, 91; on the Roman _Centonariis_: _Cato_, R. R., 135; _Columella_, R. R., I, 8, 9; _Marquardt_, II, 476, V, 2, 187.]

CHAPTER II.

LUXURY.

SECTION CCXXIV.

LUXURY IN GENERAL.

The idea conveyed by the word luxury is an essentially relative one.

Every individual calls all consumption with which he can dispense himself, and every cla.s.s that which seems not indispensable to themselves, luxury. The same is true of every age and nation. Just as young people ridicule every old fashion as pedantry, every new fashion is censured by old people as luxury.[224-1]