CHAPTER VIII: HUMAN COSTS IN THE
SUPPLY OF CAPITAL

§1. So far, in discussing the human 'costs' of production, we have confined our attention to the activities of body and mind directly operative in producing marketable goods or services, grading them from the creative and generally 'costless' work of the artist and inventor to the repetitive and 'costly' work of the routine manual labourer. We now proceed to examine the human costs involved in the processes of providing the capital which cooperates with labour in the various productive operations. The economic 'costs', for which payment is made out of the product to capital, are two, risk-taking and saving. What are the human costs involved in these economic costs?
To clear the ground for this enquiry it will be well to begin by making plain the sense in which risk-taking and saving are 'productive' activities. Neither of them is 'work' in the ordinary organic sense of the application of muscle or nervous energy to the production of wealth. Both would rather be considered as activities of the human will and judgment which increase the efficiency of the directly productive operations. Their productivity may thus be regarded as indirect. But it is none the less real and important on that account. For unless there was postponement of some consumption which might have taken place, and the application of the non-consumptive goods, which this postponement enabled to come into existence, to uses involving risks of loss, 'work' would be very unproductive in comparison with what it is.
Risk-taking, the giving up of a present certain utility or satisfaction for the chance of a larger but less certain satisfaction in the future, is, we know, the essence of business enterprise. Such enterprise by no means always entails a human cost. In industry, as in all human functions, experiments, involving risk, are frequently a source of vital interest and of conscious satisfaction. There are two roots of this satisfaction, the staking of one's judgment and skill in forecasting and determining future events, and the actual joy of hazard. The former is a common trait of intelligent personality, the latter a powerful, though less general motive, involving a 'sporting' interest in life. The spirit of adventure applied to business, enhances the conscious values. Whether it be motived by some physical restlessness or by some element of faith, it must be accounted an organic good, alike as means and end. If all the risk-taking involved in current industry were of this nature, it would not then figure in our bill of human costs, but on the other side of the account. But where the conditions of actual business impose elements of risk that are either in kind or magnitude compulsory, not voluntary, not only does no satisfaction attend the taking of these risks, but considerable loss and suffering may accrue. Risks that are either great in themselves or great in relation to the capacity to bear them are frequently required by the conditions of modern business enterprise. The men who undergo these risks do not deliberately or with express intention stake their faith and foresight on a game of gain or loss, or even enter into the risks with the gambler's zest. They undergo these risks because they cannot help themselves, and the anxiety attendant on these risks is often one of the heaviest psychical and physical costs of the business man.
§2. In analysing risk-taking as a special cost of capital, I must guard against one misunderstanding. Risk-taking, of both sorts, humanly good and humanly bad, is not of course by any means confined to administration of capital. Everyone who, either by choice or by the necessity of his situation, devotes his personal energies to making any product for the market, or to improving some personal capacity with a view to its productive use, incurs risks. In some cases the risks may not indeed entail real human waste, as where the artist or inventor speculates with his creative faculty. Or the professional man, preparing for his career, may willingly and with zest enter a competition in which prizes are few. Men equipped with vigorous intellect and determination will get out of the struggle for professional or commercial success a satisfaction of which the risk of failure is a necessary condition. But for most men a small quantum of hazard suffices. A little risk may stimulate but a larger risk will depress efficiency. A doctor, a lawyer, an engineer is willing to put his natural and acquired ability against those of his fellows in a fair field where the chances of success are reasonably large. But when the risks are so numerous and so incalculable as they are to-day in most professional careers, the anxiety they cause must be accounted a heavy human cost. The same applies to the career of most modern business men. It also constitutes a new and growing cost of labour.
For though it may be true that the actual risks of a working life, personal or economic, are no greater than in former times, the emotional and intellectual realisation of these risks is growing. Education enables and compels the intelligent workman to understand the precarious nature of his livelihood, and his growing sensibility accumulates in 'worry'. This is certainly one of the main sources of 'industrial unrest'.
But though risk-taking thus enters as a human cost into the life of other owners of productive powers, we do right to accord it special attention in relation to the supply of capital. For in the provision of all forms of capital, and in the payment for its use, risk-taking is an element of primary importance, and, though in theory separable from the act of abstinence, postponement, or waiting, which comes into prominence as the direct psychical cost of saving, it is not separable in industrial practice.
§3. Let us first examine the economic costs involved in the provision of industrial capital. That process consists in making, or causing to be made, non-consumable goods, which are useful for assisting the future production of consumable goods, instead of making, or causing to be made, directly consumable goods. We need not discuss at length the shallow criticism pressed by some socialists to the effect that since labour makes all goods whether non-consumable or consumable, the only economic and human cost of providing these forms of capital is the productive energy of labour. For the decision and effort of mind or will, which determines that non-consumables shall be made instead of consumables, proceeds not from the labour employed in making them, but from the owners of income who decide to save instead of spending. This decision to save instead of spending is the economic force which causes so much of the productive power of labour to occupy itself in making non-consumables. It is of the first importance that the ordinary business man, to whom 'saving' is apt to mean putting money in a bank, or buying shares, shall realise the concrete significance of his action. What he is really doing is causing to be made and to be maintained some addition to the existing fabric of material instruments for furthering the future production of commodities. This is not, as it may at first appear, a single act of choice, the determination to use a portion of one's income, say £100, in paying men to make steel rails or to put up a factory chimney, instead of paying them to make clothes, furniture, or wine for one's current consumption. The effort of postponement, or the preference of uncertain future for certain present consumables, necessary for supplying capital, if it is an effort, is a continuous one lasting all the time the capital is in use. The critic who asks, why a single 'act of abstinence' which is past and done with should be rewarded by a perpetual payment of annual interest, fails to realise that, so far as saving involves a serviceable action of the saver, it goes on all the time that the saver lies out of the full present enjoyment of his property, i.e., as long as his savings continue to function as productive instruments.
This view, of course, by no means begs the question whether there is of necessity and always some human cost or sacrifice involved in such a process of saving. It is, indeed, clear that a good deal of capital may be supplied without any human costs either in postponement of current satisfaction or in risk-taking. The squirrel stores nuts by an organic instinct of economy against the winter, as the bear stores fat. The thrifty housewife lays up provisions by a calculation hardly less instinctive against the probable requirements of the family in the near future. The balancing of future against present satisfaction, involved in such processes, cannot be considered as involving any human cost, but rather some slight balance of utility. I am certainly in no sense the loser in that I do not lay out all my income the same day that i receive it in purchasing immediate satisfaction. Why I am not the loser is evident. The first 5 per cent of my income I can perhaps spend advantageously at once upon necessaries and comforts which contribute immediately to my welfare. But if I know the sum has got to last me for six months, it will evidently pay me in organic welfare to spread nearly all the rest in a series of expenditures over the whole period, so that I may have these necessaries and comforts all the time. If my income is no more than just sufficient to keep me in full health, i.e., in providing vital 'necessaries', organic welfare demands a quite even expenditure, entailing the proper quantity of postponement. If there is anything over for expenditure on unnecessaries, this will not be quite evenly spread over the six months. For any comforts it affords appear to bring more pleasure if enjoyed now than in three or six months' time.1 And, besides, there is the question of uncertainty of life, upon the one hand, and the risk of being unable to get bold of the future comforts when I may want them. This depreciation of future as compared with present satisfaction and these risks will properly induce me to grade downwards the expenditure on comforts during the period in question. But in this laying out of my income, so as to secure for myself the maximum of satisfaction and utility,2 there is no human cost or sacrifice. On the contrary, any failure to 'save' or 'postpone' might be attended by a heavy cost. Many a savage has died of starvation because he has gorged to repletion instead of storing food to tide him over till he gets possession of a new supply. Thus this simplest economy of saving, the spreading of consumption over a period of time, is evidently costless.
§4. Now, though the saving which consists in keeping stores of consumables for future consumption does not furnish what would be called capital, and so does not come directly within the scope of our particular enquiry into 'costs of capital,' it gives a useful test for the economy of saving under modern capitalism. The modern saver does not, indeed, usually keep in his possession for future consumption a store of consumable goods. It would be inconvenient to store them, many of them are by nature perishable and so incapable of storage. Besides, modern industry affords him a way of making industrial society store them for him, or, more strictly, makes it produce a constant supply of fresh consumables to which he can get access. Nay, it provides still better for his needs, for it enables him, by postponing some present consumption to which he is entitled, not merely to take out of the constant social supply the full equivalent of his postponed consumption at any time he chooses, but to receive an additional small regular claim upon other consumptive or productive goods, called interest.
This extra payment was regarded by the classical economists as a cost or price paid for an effort of abstinence. More recent economists have usually chosen to substitute for abstinence 'waiting' or some equally colourless term. But abstinence is better, for it does suggest a painful effort involving some human cost, some play of motives naturally adverse to saving which requires to be overcome by a positive economic payment. Thus, not merely the economic, but the moral or human necessity of interest is best asserted.
This abstinence or postponement of possible present consumption of commodities is admittedly the condition or even the cause of the supply of the productive instruments which increase the production of future wealth and incidentally furnish the fund out of which the interest is paid. For our present purpose, then, it makes no difference whether we look at the primitive saving which stored consumables for future use, or the modern saving which causes productive instruments to be created, applied and maintained. The question whether there are human costs of saving, and what they are, is in the last resort the same in both cases.
Out of any individual, or social, income a certain amount or proportion of saving evidently may be 'costless' in the human sense. That is to say, the person or society that saves it sustains no organic loss or injury by doing so, though he may sometimes think or feel he does. If he does so think or feel, society must set a counter-weight against this false imaginary loss, in the shape of interest. But, as we have already noted, there is a good deal of saving which represents the calculated outlay over a period of time, which the owner of an income will make in his own interest. In such cases there is no human cost, and if an economic cost (interest) is defrayed, it has no human correlative. From the standpoint of human distribution of wealth it involves a waste.
The organic utility to individuals of hoarding, in order, by distributing consumption over a longer period of time, to get from it a larger aggregate of goods, will thus furnish a considerable quantity of instrumental capital to modern industry. For, only by putting the postponed consumption into the form of instrumental capital, can the savers establish the lien they want upon the future output of consumables. If all the required capital could be got by this simple play of motives, the savers balancing more useful future units of consumption against less useful present units, with due allowance for risks connected with postponement, the supply of capital would be humanly 'costless.' Though some element of risk, inherent in the proceeding, would, taken by itself, carry a cost, the superior utility attaching to the postponed units of consumption, as compared with that which the same number of units would afford when added to the consumption already provided, would offset that cost, so that the arrangement, as a whole, would be costless.
§5. Though the method of our analysis has obliged us to approach this problem of saving as part of our enquiry into processes of production, because it is the means by which a productive factor, viz. capital, is supplied, it appertains directly to the process of consumption, or outlay of income on consumables. As the current expenditure of any member of industrial society will be distributed among a number of different purchases, contributing by natural, conventional, or purely personal connections, towards a standard of consumption endowed with maximum utility (or what the consumer takes for such), so will it be with the distribution of expenditure over points of time. Let us elevate into a clear conscious policy of calculation what is in large measure a blind instinctive conduct, and the organic relation between the two 'economies' is apparent. It involves an intricate balancing of larger future utilities, weighted by risks, against smaller present utilities not so weighted. To take the simplest instance. If, out of an income of £600 coming in this year, I decide to consume £500 in the current expenditure of the year and to put aside £100 for consumption in five years' time (when I purpose to work only half-time and earn only half my present income), I shall have estimated that the luxuries which i could buy this year by the sixth hundred pounds expenditure are slightly less agreeable or 'useful' to me than the comforts purchasable by the fourth hundred pounds as visualised five years off, with an allowance for the chance that i may then be dead, or that I may have come into a legacy which renders this postponement of consumption unnecessary. In a word, this economic ego must be conceived as operating by a plan of outlay which, in regard to the disposal of the current income, has a longitude and latitude of survey and valuation. Just as the different ingredients of present consumption make a complex organic whole with delicately proportioned parts, the size and form of each dictated by the unified conception of the current standard of comfort, so the disposition of the income over a series of points of time in which present values of each several consumable and of the whole standard are compared with future values, involves the similar application of a plan for the realisation of my economic ideal. Though a fully rational conception and calculus, either for the composition of current expenditure or for prospective outlays, is very rare, some half-conscious, half-instinctive calculus of the sort must be accredited to everybody.3 So far as it is rightly conducted by their reasoning or just instinct, it means that, out of all or most of the members of an industrial society, some humanly costless saving could be got, some contribution towards the socially desirable fund of capital.
§6. As, then, we have seen that a certain proportion of the various current activities, which are directly productive in the shape of skilled and unskilled labour of brain and hand, are either humanly costless or carry some positive fund of human utility, so is it also with the processes of saving and risk-taking, which go to the supply and maintenance of capital. It is not difficult to conceive a society in which all the saving needed for the normal development of industry might be costless. In a primitive society, based chiefly on agriculture and simple handicrafts, one might find the bulk of the working population earning a secure and sufficient livelihood, but with no margin of savings for instrumental capital. The comparatively small amount of such capital as was needed might be furnished mainly or entirely from the surplus incomes of a landowning or a governing class, extracted as rent or taxes. Of course, if, as would commonly occur, such rents or taxes were extorted from the peasantry by starving them or by imposing a burden of excessive toil, the human costs of such saving would be very heavy. But where a class of feudal lords drew moderate rents and fines from their tenants, or where a governing caste, such as the Incas in ancient Peru, applied to useful public works a large share of what would be called the 'economic rent' of the country, taken in taxation, such saving need entail no human cost. Nor is such costless provision of capital necessarily confined to a society living under simple industrial conditions in which comparatively little saving can be utilised. Even in an advanced industrial society the large incessant increments of capital might be provided costlessly. For if the national dividend were not only very large but so well or equably distributed, as income, that all classes had more than enough to satisfy their current organic needs, such a society would, by a virtually automatic economy, secrete stores of capital to meet the future needs of a growing population or a rising standard of consumption, as every animal organism naturally lays up stores of fat, muscle and physical energy, for future use.
A well-ordered socialistic state, were such possible, would certainly apply the industrial forces at its disposal, so as to secure an adequate supply of costless capital. After making proper provision out of current industry for the physical and moral health of the whole population, and for normal progress in personal efficiency of work and life, it would apply the surplus of industrial energy to improving the capital fabric of industry so as to provide for the production of increasing wealth, leisure, and other opportunities in the future. The calculation, as to what proportion of current industrial energy should be thus applied to preparing future economic goods to ripen for utility at various distances of time, would of course be a delicate operation. But so far as it were correctly carried out, it would be socially costless. For on the hypothesis that adequate provision for current needs of individual stability and progress had been a first charge on the industrial dividend, the postponement of any additional consumption involved in social saving could not rightly be regarded as involving any net human cost. For, if, instead of the surplus being saved, it had been paid out to individual members of society for current consumption, it would ex hypothesi be unproductive of organic welfare, being applied in an injurious and wasteful attempt to force the pace of advances in the current standard of living. Applying the organic metaphor, one would say that it was a natural function of an organised society to secrete capital in due quantity for its future life.
§7. But how far can it be held that an industrial society like ours is so organised as 'naturally' to secrete the 'right' quantity of capital, to provide it in a costless way, and to distribute it economically among its various uses? A full answer to these questions must be deferred until our analysis of the consumption side of the national dividend enables us to assess the human utility of the productive work to which capital is applied. At present we must assume the utility of the £300,000,000 of savings applied out of the aggregate national income to the enlargement of industry, and confine ourselves to enquiring what proportion of this amount is likely to be 'costless' and how to estimate the 'human costs' attached to the other part. It is, of course, quite evident that such answer as can be given is of a general and speculative nature, with no pretence at quantitative exactitude.
In considering savings with an eye to discovering the human costs. It will be well to classify these savings under three heads. First will come what may be termed the automatic saving of the surplus income of the rich, that which, remaining over, after all wants, inclusive of luxuries, are satiated, accumulates for investment. The proportion of new capital proceeding from this source will vary with the amount and regularity of such income, its distribution among the rich, and their attitude of mind towards the expenditure of their incomes. The automatic or spontaneous character of this saving is due to the fact that no close relation exists between progress in industry and the evolution of a personal standard of consumption. Sudden rapid advances of income are not usually accompanied by a corresponding pressure of new personal wants tending immediately to absorb in increasing expenditure each increase of income. Though no limit can be set upon the expenses of a luxurious standard of consumption and the vagaries of personal extravagance, expensive habits take time for their establishment, and in a progressive industrial society where skilful, or lucky, business men are making fortunes rapidly, their acquisitive power will be apt to run far ahead of their consumptive practice. Moreover, the absorption in the practice of making money evidently retards the full acquisition of habits of lavish expenditure, giving full scope to the development neither of tastes nor of opportunities. This will be particularly true of incomes growing not by regular increments but by sudden rushes. Extreme instances abound in the recent history of America. Where the quick skilful seizure of new sudden opportunities, conjoined with a general development of national resources at an abnormally rapid pace, enables a Jay Gould or a John D. Rockefeller to amass millions within a few years, a wide natural divergence is created between income and expenditure. Enormous masses of unspent income thus roll up into capital which again continually grows by the accumulation of the unspent interest it earns. Though the number of persons in this position of financial magnitude is very few, a considerable class of successful business men in America and in every advanced European country comes into the same category as regards capacity of saving. While their personal and family expenditure may be continually rising, it will tend to keep in safe adjustment to what may be termed a conservative estimate of their income. The occasional great trading coups, the enormous profits of a commercial or financial boom, will not even tend to be assimilated in expenditure.
Wherever the economic circumstances of a country are such as to throw a large proportion of the growing wealth into the hands of a class of busy rising men, by a series of great windfalls or more or less incalculable increments, the new capital flowing from these superfluous incomes will be large. Moreover, so far as it is automatic, it will have little if any regard to rate of interest, and thus to 'social demand', so far as interest can be considered a just index of social demand.4
Even when the element of fluctuating or fortuitous increase of income is not present, a fairly rapid advance of income, particularly where it is 'earned' and therefore carries no presumption of indefinite continuance, will ordinarily leave a considerable margin of automatic saving. This will be larger where the standard of living is already established on a high level. For though certain curious psychological traits seem to show an extraordinary concentration of personal interest in the extravagances which give personal distinction in 'society', the low pressure of organic utility, or the emergence of positive disutility inherent in many of these forms of luxury, must be considered to exercise some check. Putting the matter simply, one would say that real primary human needs are more readily assimilated in a standard of consumption than purely conventional or positively injurious modes of expenditure. So, making every allowance for the depravity of tastes and the zest for competitive extravagance, it will remain true that the classes with large incomes will tend to contribute to capital a large amount of surplus income by a process of automatic accumulation.
For such saving there is neither an economic nor a human cost involved: the interest it receives is in the economic sense as much a 'surplus' as the rent of land. Not merely is there no human cost, there is a positive human utility in such saving, for it is an instinctive rejection of the injurious effort to incorporate this surplus in a current expenditure already adequate to satisfy all felt wants, good or bad.
It is likely that a large and a growing proportion of the total volume of saving in England and in the Western world is of this order. For though it may not be generally true that the rich are growing richer and the poor poorer, it is probably true that both a larger quantity and a larger proportion of the national income are in the hands of rich and well-to-do business men whose means have been advanCing faster than their expenditure.
§8. So much for the automatic saving of the rich. We have next to take into account the admittedly large contribution of the classes who in respect of income are 'middle'. This comprises the great majority of families engaged in the directive work of manufacture and commerce, and almost the whole of the upper grades of the professional and official classes in such a country as ours, as well as a considerable number of persons of moderate 'independent' means. A certain amount of conscious 'thrift' is traditional in these classes. It is by no means automatic, but involves for the most part some conscious sacrifice of current satisfaction in favour of a greater estimated future satisfaction to the saver or his family. The motives which influence such saving, alike in its amount and its application as capital, are complex and various. But the sacrifice ascribed to such saving cannot be assumed to involve any economic cost, in the sense that it requires the payment of economic interest to evoke it. Still less can it be assumed to involve a human cost. A good deal of this middle-class saving, though less automatic than the savings of the rich, is a calculated postponement of some expenditure which might purchase present comforts or luxuries, in order to make provision for the purchase of necessaries or conveniences at some future time. In a word, it is of the nature of the 'stocking' saving, which the better-to-do peasants have always practised before the opportunities of profitable and fairly safe investment were open to them. Though utilised to earn interest, the saving would be made just the same if no objective interest were attainable, provided it were tolerably secure against pillage or destruction. Risk counts for more than interest in such saving, and the bulk of the so-called interest which such savings demand, as a condition of loan or investment, is not true interest but insurance. But in practice inseparable from such saving is that undertaken with the direct object of earning interest upon the capital. A great deal of middle-class saving, and some saving of the rich class would not take place without the hope of receiving interest. If no interest were attainable, though some saving might take place, in order to provide against the possibility of a total collapse of current earning power and a consequent deprivation of the necessaries of life, there would be little disposition to give up any present free expenditure on comforts in order to provide for future comforts which might not be wanted, or which, in consequence of loss of savings, might not be procurable. A positive bonus in the shape of interest seems necessary to evoke this latter saving. The operation of this bonus as an inducement is, however, very complex. It might appear at first sight obvious that, the larger the bonus in the shape of rate of interest, the greater the aggregate of saving it would evoke. So far as non-automatic saving is motived by a general desire to be better off in the future, in order to attain a standard of consumption and of social consideration which denote success and satisfy personal ambition, or in order to bequeath a large estate to one's family, higher interest will tend to evoke a corresponding increase of saving in those whose current incomes enable them to save considerable sums without encroaching upon their established standard of comfort. Young or middle-aged men, of an aspiring nature and with rising incomes, will undoubtedly save more if they see a handsome return on their investments. But, as most men will realise more clearly and feel more keenly these future economic and social gains if the full fruits of such savings will be reaped by themselves, not by their heirs, ageing men will be likely to respond less freely to this motive. Present comfort, security, and power, will mean more to them than a future liberality of living which they can only hope to enjoy for a few years, if at all. The amount, therefore, of the acceleration of saving achieved by a rise of interest will depend a good deal upon the relative importance this general desire to be better off possesses as an inducement to save. That relative importance again will depend a good deal upon whether the economic and social conditions of the community place considerable numbers of younger business or professional men in a position of rising incomes and of considerable saving power, or, on the contrary, confine such surpluses chiefly to older men.
If, instead of taking as our motive a general desire to be better off, we take a desire to save in order to make some limited specific provision, as for example to buy an annuity of £100, the effect of a higher rate of interest upon volume of saving is likely to be different. Though it may serve to quicken in some degree the pace at which the sum required will be amassed, it will reduce the absolute amount of saving. For when interest is higher, the capital sum required to yield an annuity of £100 a year will be less than before. Against this, however, must be set the fact that, when a definite sum is needed in order to pay off some debt, or to furnish a sufficiency for retirement, a high rate of interest may be required in order to make this saving possible or certain. If a man cannot save enough to attain such definite object, he will not save at all, for an insufficient amount will be held futile; whereas, if a rise of interest gives him a good prospect of saving the required amount, he will put forth the effort.
§9. But making due allowance for counteracting motives, it is tolerably certain that a rise of interest, showing any signs of continuance, will stimulate an increase of 'motived' saving, though by no means a proportionate increase. Thus it will appear that, so far as this large section of middle-class saving is concerned, some definite measurable economic costs, in the sense of deprivation of current consumption, are involved, requiring compensation in the shape of interest. But the question which concerns us is whether there are human costs corresponding to and involved in these economic costs. In answering this question, it is not enough to point to the admitted fact that this saving involves the failure to satisfy some current desire for increased consumption. It has to be considered whether the sacrifice of current 'satisfaction' is really a sacrifice of welfare, either from the standpoint of the saver, or of the society of which he is a member. For we have not taken the view that the personal transient desires and valuations of consumers are a final criterion, either of personal or social welfare. If then the saving evoked by paying interest merely means that certain fairly well-to-do folks abstain from comforts or luxuries, which, though agreeable and innocent, carry no organic benefit, there is no human cost, or even if there is some slight cost, it may be offset by the individual or social benefit resulting from the postponement of consumption. A large proportion of motived middle-class saving undoubtedly falls within this category. But by no means all. A good deal of lower middle-class saving eats into certain factors of humanly serviceable expenditure, particularly expenditure in education of the young. Frequently it injures the free life of the home by the constant pressure of niggling economies, which, though not perhaps injurious in the particular privations they impose, leave no margin for the small pleasures and amenities which have a vital value. Even though we assume that such saving brings, in the ownership of property and the interest it yields, a full vital compensation to the individual who saves, it by no means follows that it is socially justified, when a true criterion of social welfare is applied. Take for instance the saving which is diverted from expenditure on education, precluding the children from getting a university or professional training and turning them on the world to earn a living, less effectively equipped than they might have been. Society may be a heavy loser by its policy of evoking such thrift by means of interest, for it obtains a certain amount of material capital in place of the more valuable intellectual or moral capital which the money, expended upon education, might have yielded. Even regarded from the standpoint of future economic productivity, the stimulation of this sort of saving is likely to be injurious.
§10. Far graver importance attaches to this consideration when we approach the savings of the working-classes. The contribution made from this source to the flow of fresh capital, the £300,000,000 per annum, is evidently attended by heavy human costs. Very little of it can be regarded as the considered reasonable outlay over a long period of time of income not needed for current organically useful consumption. Most of it involves a stinting of the prime necessaries or conveniences of life, or of some rise in present expenditure which would promote the health or efficiency of the family. Almost the only saving made by ordinary wage-earners not attended by this human sacrifice is that applied by young workers, who having only themselves to keep, can afford to set aside some portion of their pay in full employment so as to furnish a future home, and to insure against a few special emergencies involving loss of earning power or expenses connected with death or sickness. Even such personally serviceable insurances the married worker can seldom properly afford. Though the narrower view of the economy of a self-sufficing family may appear to justify savings made out of a wage the entire present expenditure of which can be applied to purposes of organically useful consumption, the wider social standpoint does not endorse this policy. For a workman to pinch on housing, clothing, the education of his children, or upon wholesome recreation, in order to avoid worse pinching in some unforeseen but probable emergency, may be sound individual economy. But, unless society is unable from other resources at its disposal to provide against these emergencies of working-class life, it is an unsound social economy, involving a heavy net cost of social welfare. The issue is a very vital one. It may be stated in this concrete form. Most of the savings effected in this country out of a family income of 30/ or less per week, and much of the savings made out of a larger income when the worker's family is young, involve a sort of abstinence which is fraught with heavy net costs in the social economy. No part of the economically necessary fund of annual capital ought to be drawn from this sort of saving. It is literally a coining of human life into instrumental capital, and the degradation of the term 'thrift' in its application to such saving is a damning commentary upon the false standard of social valuation which endorses and approves the sacrifice. The great risks of loss which actually attend such saving, and the heavy expenses of the machinery of its collection and administration, aggravate the waste. If we ascribe £50,000,0005 out of the £300,000,000 to this class of savings, a proper social book-keeping would put the human costs of this working-class abstinence as a large offset to the net utility of the other £250,000,000. The forethought, endurance, and other real or supposed benefits to the character of the workers imputed to this 'thrift' can no more be regarded as a compensation for such social injury, than can the discipline and fortitude of soldiers be regarded as a testimony to the net human economy of war.

NOTES:

1. Observe that this appearance is illusory. The maximum of organic utility would probably involve an even expenditure of all the elements of income without allowance for my preference of present over future.
2. It may be urged that, even in respect of necessaries, there will be some discount for future as compared with present consumption. But in any class of civilised men, whose income is paid at long intervals, this discount will be very small and may be ignored.
3. For a discussion of the nature and limitations of this calculus see Chapter XXI.
4. 'So ingrained is the habit of accumulation among the prosperous classes of modern society, that it seems to proceed irrespective of the rate of interest.' Taussig, Principles of Economics, Vol. II, p. 27.
5. This is most likely a gravely excessive estimate. Probably £30,000,000 or 1/10 of the national saving would be nearer the mark. Moreover, a large proportion of working-class savings is not destined to purposes of permanent investment but to provision for some early probable emergency, e.g., burial or unemployment which will cancel the saving. There exist no approximately reliable estimates of the amount of capital belonging to the working-classes. The usually accepted figure includes under the head of Post Office Savings Bank and Building Societies a large but unknown quantity of middle-class savings.