The goal and purpose of all economic activities is the satisfaction of
human wants. The object of production is consumption. We work because
we desire and need various things which we can get only if we produce
them or earn the money to buy them. In this section we take up some 128
of the problems connected with the rational use or consumption of the
wealth which is continually being produced. We have seen something of
the conditions under which it is produced, and the manner in which it
is distributed; we must now study the not less important subject of
its application to human needs and desires. The great question is, how
can we get the largest and most rational return for a given
expenditure? Before trying to answer this question, it will be helpful
to present a summary statement of actual expenditures in different
places:
Expenditures for Different Purposes.
===============+========+==========+=========+=========+=========
Items | United | New York | Great | Prussia | Average
| States | City | Britain | |
| 1903 | | | |
---------------+--------+----------+---------+---------+---------
Food | 43.1 | 43.4 | 51.4 | 55.0 | 48.2
Clothing | 13.0 | 10.6 | 18.1 | 18.0 | 14.9
Rent | 18.1 | 19.4 | 13.5 | 12.0 | 15.8
Fuel and light | 5.7 | 5.1 | 3.5 | 5.0 | 4.8
Miscellaneous | 20.1 | 21.5 | 13.5 | 10.0 | 16.3
+--------+----------+---------+---------+---------
Total | 100.0 | 100.0 | 100.0 | 100.0 | 100.0
---------------+--------+----------+---------+---------+---------
From this table it is seen that practically half of the income of
average working-class families is expended for food, and five-sixths
of it goes for the bare necessaries. It is therefore of the utmost
importance that this be spent wisely. The remaining one-sixth,
included here under the head “miscellaneous,” comprises such items as
education, care of health, comfort, mental and bodily recreation, etc.
It is manifest that this group can be expanded in only one of two
ways: either by enlarging the total income, or by economizing on the
other items by a wiser and better-ordered expenditure. The former
question has already been discussed; here we are concerned only with
the latter. Dr. Frederick Engel, a Prussian statistician, laid down
certain laws with regard to consumption: as the income of a family
increases a smaller percentage is spent for food and a larger 129
percentage for education, health, recreation, etc.; while the
percentage spent for clothing, rent, fuel and light remains
approximately the same. A higher civilization and culture for the mass
of the people can only be secured by expanding the group of culture
expenditures. As long as these remain unsatisfied for the ordinary
family we cannot claim to have attained our economic goal. The author
of a recent study of conditions in New York City, where the cost of
living is high, concludes that a “fair living wage for a workingman’s
family in New York City should be at least $728 a year, or a steady
income of $14 a week.”[44] The actual earnings are certainly below
this figure.
One of the problems which has often proved very puzzling is the
relation between saving and spending. At what point should one stop
spending in order to save? If the satisfaction of our wants is the
object of production, why should we save at all? This is the point
urged by the author of a specious little book called “The Fallacy of
Saving.” The problem can be most easily solved by a more careful
analysis of terms. In the popular view, saving involves the withdrawal
of goods or money from use, while spending means putting them to
immediate use. The spendthrift is proverbially popular. “If the rich
do not spend, the poor die of hunger,” said Montesquieu. Saving may
take the form of hoarding or withdrawing things from use, but nowadays
this is practised only by misers; saving ordinarily takes the form of
investment in some productive enterprise, either directly or through a
bank. In this way a demand is created for goods just as truly as
though the money had been spent for a dinner or a suit of clothes.
Saving is spending, but it is spending for the future rather than the
present; it usually causes the production of permanent material goods
rather than transient or immaterial pleasures. Another cause of the
confusion of ideas on this subject is that we always speak of money 130
and thus lose sight of the acts of production and consumption that lie
back of the money transfer. We see that money is transferred by
spending and think that it increases trade. Consequently, when a
prodigal spends his money foolishly, it is excused on the ground that
it makes employment and puts money in circulation. We forget that it
would have been “put in circulation” just as effectively if he had not
spent it, but had placed it in a bank. If we look back of the money
transfer, we see that usually there has been a foolish or wasteful
expenditure, sometimes an absolute destruction of wealth. A fire which
burns down valuable buildings is an absolute social loss, even though
employment be given to masons and carpenters in putting them up again.
A third confusion of ideas that exists in the popular mind is due to
an over-emphasis of the desirability of work for its own sake. The man
who “makes work” is thought to be doing a desirable thing, even though
this results from the unnecessary destruction of useful things. Now
the real goal of all rational economic endeavor is not production for
its own sake, but consumption; not work, but the gratification of
wants. Every destruction of durable commodities which lessens the
power to gratify wants is a loss to a community and no juggling with
words can make it anything else. If it gives employment to labor, that
means that the labor has been diverted from the production of other
things to which it would have been devoted. Edward Atkinson several
years ago calculated that every year fires destroyed property in the
United States to the amount $150,000,000.[45] That workmen are
employed to reproduce the buildings, etc., can surely not be reckoned
as a social gain. There is great danger in a commercial age like ours
of forgetting that work is not an end in itself, but simply a means to
an end. But it may be argued that unless these men had been given 131
employment of this sort, they would have starved. It is conceivable
that during or after a revolution industry would be so interrupted
that ordinary employments would not be open. But in ordinary times
such a statement is simply an assertion of the fallacious
lump-of-labor theory, that there is just so much work to be done and
no more. New wants are continually pressing for satisfaction, waiting
only for the prior ones to be satisfied before they urge their claims.
So soon as the old ones are satisfied, additional employment is
provided in meeting the newer desires. The aim of society is to expand
continually the circle of gratified desires. As durable goods and
agents are accumulated by the process of saving, this becomes
increasingly possible in every progressive society. Useless
destruction involves sheer waste and cannot be justified on any
grounds.
On the other hand, saving is socially necessary in every industrially
developed community in order to furnish the requisite capital for the
continued production of wealth. Professor Marshall has estimated that
every year one-fifth of the wealth of a nation is used up in the
processes of manufacture and production; just to keep machines,
factories, railroads, and other instruments of production up to the
point of efficiency and restore loss and depreciation would therefore
require considerable saving. If the nation is to grow wealthier and is
to accumulate additional capital, manifestly still more must be saved.
This is done in all progressive countries. Saving is carried on by
individuals, however, and not by nations, and the motives that lead to
it are personal. The most important is probably the desire to provide
for wife and children or other relatives; next to that is the wish to
lay by sufficient for one’s old age. In our individualistic society,
where each family forms an independent unit and is assumed to be
self-supporting, it is very desirable that habits of thrift and saving
be developed. Both from a social and a personal point of view 132
therefore saving must be approved, though it is undesirable that it
should proceed so far as to prevent spending for the gratification of
essential present needs.
But what shall we say about expenditures for luxuries? Here the
spending is for the gratification of a want, though it may be out of
proportion to the results. What shall be our attitude to it? This
question is not so easy to answer as the other. Three different
schools have given as many answers to the problem of luxury: the first
condemns it utterly; the second approves it wholly; and the third
takes an intermediate position between the two extremes. Luxury is
condemned by the first school from three points of view: as a question
of individual morals, it is regarded as debasing and enervating, thus
preventing the highest development of the human faculties; as a
question of economics it is condemned as wasteful; and as a question
of right and justice it is incompatible with an equitable distribution
of wealth. It is upon this last point that the opponents of luxury lay
the greatest emphasis. As the quantity of existing wealth is
insufficient to satisfy even the primal wants of the large majority of
our fellow-creatures, we should endeavor to increase this available
store as much as we can, and should refrain from drawing upon it in a
reckless manner in order to gratify superfluous wants. Furthermore,
the productive powers that we can use are, as a matter of fact,
limited; and therefore, if the wealthy classes divert a portion of
these forces towards the production of articles of luxury, there will
be so much the less available for the production of those staple
articles that the masses require for their consumption. In the case of
a Robinson Crusoe this would be perfectly clear: if he devoted several
months to the polishing of a diamond for ornament, he would have to go
without a house or other improvements he might have made in that time.
Or, if he forced his man Friday to spend half his time polishing 133
diamonds for him, Friday might be compelled to go without sufficient
clothing or food or housing. The same thing is true of organized
society, only the truth is hidden by the phenomena of exchange. It has
been estimated[46] that the annual consumption of wealth in the United
States is divided somewhat as follows: necessaries, six billion
dollars; luxuries, three and one-half billion (of which $900,000,000
go for liquor and $500,000,000 for tobacco); capitalistic uses, three
and three-quarter billion. It is manifest that if the expenditure for
luxuries was curtailed or abandoned, there would be more to devote to
the other categories.
The opposite school replies to these arguments that luxury is an
indispensable stimulus to progress; that really all economic progress
is first manifested in the form of a need of luxury, and that luxury
therefore is a necessary phase of its development. Since luxury is
wholly relative, every want or need is, on its first appearance in the
world, regarded as superfluous; first, because no one has hitherto
wanted it, and secondly, because its production probably requires a
considerable amount of labor, on account of man’s inexperience and the
inevitable gropings in the dark that attend all beginnings. The
decencies of life today and even the necessities were once regarded as
luxuries--chimneys in houses, shoes, forks and knives, linen for the
body, bath tubs, etc. If all luxury had always been sternly suppressed
when it made its appearance, all the needs that constitute
civilization would have been nipped in the bud, and we should still be
in the condition of our ancestors of the Stone Age. Civilization
depends on the multiplication of wants. Economic progress is a process
of converting superfluities into conveniences, and conveniences into
necessities.
The attitude taken by practically all economists today is intermediate
between these two extremes. Moderate luxury is justified, but lavish 134
and indiscriminate luxury is disapproved of. This justification of
luxury rests upon purely economic grounds. In so far as personal
consumption is the objective point of production, the prohibition of
luxury would act as an impediment to enterprise. If the desire to
enjoy luxuries stimulates the productive powers of economically
important members of society, it is justifiable as a necessary motive
force. The introduction of luxuries and the consequent raising of the
standard of living seems often the only way to secure progress. If the
mass of the people live on the minimum of cheap food, multiply as long
as cheap food is to be had, and spend little for comforts and
luxuries, then most of the labor of such a community must be spent in
obtaining food for the masses. Such is the condition in India and
China. But if a large part of the community has a higher standard of
living, it will exercise self-restraint in the increase of its
numbers, and the whole level of intelligence and comfort will be
raised, as in France or Switzerland or New England. On the other hand,
it is urged that “failure on the part of any family to secure the
necessaries of life is injurious, not only to it, but to the whole
community. Under-consumption means under-nutrition and loss in
industrial efficiency. If permitted to continue it must inevitably
undermine the standards which make a family self-supporting and
self-sufficient and reduce its members to dependency. The general
interest requires, therefore, acceptance of the maxim: the consumption
of luxuries should be deferred until all are provided with
necessaries…. This suggests that no one is justified in spending
income for a luxury for himself or his family that will afford less
happiness than would the same income spent for someone else.”[47]
But the difficult question at once suggests itself: How can the
surplus incomes of the rich be used so as to provide for the needs 135
of the poor, without undermining their independence or permanently
lowering their earning power? It has been suggested that there should
be a socialization of luxury; that the rich should use their wealth
for the construction of public art galleries, libraries, parks, baths,
etc., which would thus gratify as great a number as possible. The
feeling is growing in the United States and in the world that wealth
is a social trust, and that the ownership of wealth imposes upon a
person certain moral obligations. While every man has a legal right to
spend his surplus income as he pleases, he is morally bound to spend
it in such a way as to increase the welfare of the whole community.
Let us now finally take up the problem of economy in consumption. It
is said that an American family will waste enough food for a French
family to live on. The farmer who leaves his implements out in the
rain or his cattle without proper shelter, is guilty of waste. We all
waste clothing by frequent changes in fashion. Such waste is as much
due to a lack of knowledge and training as to carelessness. The single
example of the consumption of food will illustrate this point. “If we
place the average income of an American family at $500--and it will
not greatly exceed that figure--then nearly $250 of this amount is
expended each year for food. Waste occurs in any or all of the
following ways: (1) needlessly expensive foods containing little real
nutriment are used; (2) there is a failure to select the foods best
suited to the needs of the family; (3) a great deal is thrown away
which ought to be utilized; (4) bad preparation of the food causes it
to lose much of the nutriment which it does contain; (5) badly
constructed ovens diffuse heat, instead of confining it, and cause
enormous loss of fuel. We shall state less than the truth if we
estimate that fully one-fifth of the money expended for food is
absolutely wasted, while the excessive expenditure often fails to 136
provide adequate nutrition.”[48] The remedy for such a waste as this
clearly lies in the teaching of domestic science in our public schools
to the daughters and future wives of the workingmen. As the ordinary
household expenses, as shown above, absorb from 80 to 90 per cent of
the ordinary income, the training of the housewife, under whose
control they fall, is almost as imperative as that of the wage-earner.
The economic evils of intemperance have already been partially stated
in the objections to luxury. There is, however, one additional
objection to the excessive use of intoxicating liquor which is not
true of most indulgences: it diminishes a man’s productive powers. It
is harmful in its effects upon both consumption and production. Other
items of consumption appear, however, not so clearly under the
immediate control of the consumer. The housing accommodations in many
of our large cities have often been unsanitary and unworthy of being
called homes. Legislation has been necessary to compel the erection of
better tenements and prevent the exploitation of helpless people. So
too it has been found necessary to legislate against loan-sharks, in
order to protect people against their own improvidence and ignorance.
In addition to legislation against positive evils, we must of course
look to education as the great remedy of waste in consumption.
There is one other phase of the subject of consumption that may well
be mentioned before leaving this subject. Owing to the constant
pressure of the consuming public for cheap goods, many articles are
produced under conditions dangerous to the health, morality and
well-being of the operatives, as in the case of the “sweated trades.”
To remedy these evils consumers’ leagues have been started in many
places, the members of which pledge themselves not to buy goods or to
trade in stores where the conditions of work are not up to certain
prescribed standards.
They realize that as consumers they owe a duty to other members of 137
society not to exploit them. While this method has proven a fairly
effective method of protest in some cases, it cannot be looked to as a
solution of this evil. But it emphasizes the fact that the interests
of all members of society as producers and consumers are closely
interdependent, and that the progress of society requires the
improvement of the condition of all.