Money, Profits and Consumption
 Why is it that we cannot long contrive, as consumers, to acquire and enjoy the goods which, as producers, we can readily turn out? From now on, that question, with which we began our discussion, and which we have shown to be essentially the problem of a money and profit economy, will be the center of our interest. In the whole perplexing realm of economics, no other question perplexes so many people. The wide diversity of answers to that question by statesmen, economists, and social reformers -- ranging from bank credit to the profit motive, from immigration to irreligion, and from unbalanced industries to sun spots -- shows that even those who regard themselves as specialists in the field are nonplussed. Little wonder, then, that the man in the street is bewildered. To him nothing is more incomprehensible than the fact that with millions of people in dire poverty, with millions more in want of the minimum requirements for comfort, health, and security, with scarcely a man, woman, or child who is not eager for more of the good things of life, the industrial world stops short of creating the good things well within its power to create, because of the ever-imminent danger of creating too much. Consumers in constant fear that they cannot get enough, and producers in constant fear that they will produce too much!
Increased per Capita Consumption is the Aim
Let us consider again the anomalies of this situation. Let us observe, first of all, that since nearly all human beings want more of the material satisfactions of life, the end of all economic activity is a constantly rising standard of living for the people generally.
Let us note, in the second place, that the attainment of this end requires, not only a constantly increasing per capita volume of production, but also a constantly increasing per capita volume of consumption. That is, in fact, precisely what men mean on the material side when they speak of a rising standard of living. They do not mean a growth in facilities for production, or in stocks of unsold goods, or in bank credit, or in dollar wages. They mean simply an increasing per capita volume of goods used up by consumers.
All this was perfectly evident to pioneer communities; to them increased consumption clearly meant increased satisfactions, and saving was clearly incidental to that end. They raised corn and made wheelbarrows solely with the idea of having them used up. They not only produced what they consumed, but they consumed what they produced. They had no doubt concerning what they were working for, and no fear of producing more goods in general than they knew how to use to advantage. If, by any chance, they produced more of any particular commodity than they wanted to consume at the time, this was an occasion for rejoicing rather than a cause for concern. It enabled them either to produce more of something else, or to enjoy more leisure. But general overproduction was an impossibility.
Consumption is just as truly the final aim of the vastly more complex money and profit communities of to-day. All our elaborate agencies of production and distribution are, in fact, organized solely for that purpose. Wheat is not raised to fill warehouses; clothes are not made to stock shops; ships are not built to rot in shipyards. Harvesting, transporting, building, trading -- all the multifarious activities of our day -- are directed toward the using up by the ultimate consumer of more commodities and services, more and always more, with the incidental aim ever in view of gaining more leisure without sacrificing material gains. Indeed, if this were not the aim, most saving would be utter folly.
Although some people may be inclined to decry this aim as materialistic, it is not at all inconsistent with higher aims; for though the voluntary overconsumption of those who are rich and foolish is not conducive to the higher life, neither is the underconsumption of the millions who have no choice. Disease, ignorance, malnutrition, child labor, fear of destitution -- the long train of evils that poverty is heir to -- stand in the way of the attainment by vast numbers of people of nearly all that makes life worth living. This tragedy is a closed book to many among the two per cent of the population whose incomes are above ten thousand dollars; for to them the statistics of the strugglers in the lowest income classes have very little meaning. To the fortunate two per cent this world seems to be, after all, a pretty good place to live in, just about as it is; and they see no reason for stirring up people to change it. If, however, they will open their eyes and look about them, they will find income statistics interpreted in terms of human suffering; and they will not doubt that, for most human beings, gains in the consumption of the products of industry are prerequisite to higher gains.
Business Stability is not Enough
With this as the ultimate goal of economic enterprise, business stability -- that is to say, freedom from extreme fluctuations -- is not enough. Those who regard stability as the goal appear to overlook the fact that business can be just as stable in the midst of poverty as in the midst of plenty: just as stable in China as in the United States. It is upon a steadily increasing volume of consumption that standards of living depend -- not upon steadiness of prices, or profits, or wages, or interest rates. Generally speaking, and apart from obvious qualifications, prices, profits, wages, and interest rates, as we tried to make clear in Money, serve the economic interests of society in so far as they do their part toward steadily increasing the volume of production and toward increasing consumption at the same rate.
Still, higher real wages are not enough. The goal is not only larger material incomes, but more leisure in which to enjoy those incomes and all the other good things of life. 'More pay and less work' -- the aim which organized labor has often been censured for pursuing -- should, indeed, be the aim of society; not necessarily less work of all kinds, voluntarily undertaken, but less work imposed on the average worker as a condition of survival. The fault with this aim is that certain groups of workers have pursued it at the expense of other groups, whereas it should be attained for all workers. Unless it is attained, decade after decade, the economic organization of society is at fault.
Productive Deficiency is not the Trouble
That it is possible to attain this aim with our present resources and without any change in human nature has been proved over and over again. During the World War, it was proved with such prodigal and conspicuous evidence that none were so blind as not to see it. Even with millions of able-bodied men withdrawn from productive effort by the Army and Navy; even with millions of other workers diverted to efforts which, from the standpoint of society at large, were wasted; even with the resultant dislocation of industry; still, the workers who were left produced so much that they not only supplied the goods that were sunk at sea or otherwise destroyed in the conduct of war, not only supplied the Army and Navy and millions of people abroad, but had enough left to enable them to enjoy during the War at least as high a standard of living as before the War. And at the same time, they added far more to our capital facilities in various industries than we have since been able to use.
What a challenge is this to the imagination! Evidently within a single generation we could all but abolish poverty in this country, if we could keep at peace with the world and continue to use our resources, human and material, even as effectively as we have already succeeded in using them. Indeed, if the present income from property were maintained year after year, and distributed equally among the wage-earners, they would not gain so much thereby as they would gain in real wages if the productivity of the War years were maintained even for a generation. The possibilities surpass the goals of some of the socialist reformers.
That the incapacity of industrial society to create more wealth is not the reason why we produce so little is also shown by the heights which production has now and then attained even in time of peace. That a much larger volume of production is readily attainable is also shown by numerous scientific studies. The one conducted by the engineering societies under the direction of Herbert Hoover shows that our present resources would enable us to double the volume of production, provided both labor and capital could be sure of the one factor -- adequate demand -- which they now have reason to fear will never last long.
To double the output of each commodity and each service is, of course, neither possible nor desirable; but to double the output of goods in general, with the proportions largely determined as they would be in a profit economy by the free choices of the people, would be both possible and desirable. Indeed, such gains would be no more than enough to provide all our people with the minimum requirements for comfort, health, security and education. Any lower aim is indefensible. But, it may be said, the greatest need is not more goods but a better quality of goods. These two aims, however, can be reconciled; the people want and are perfectly able to produce better goods and more of them. Any consideration of recent advances in the arts, in the discovery of new resources, in power development, in scientific management, in the reduction of wastes, and in the application of invention to the processes of production, must make it clear that the progress of human knowledga alone, in the absence of anything to nullify its advantages, would make possible, decade after decade, more goods and better goods, and consequently far higher standards of living than have yet been reached.
Every Advance Leads to a Recession
The chief nullifying influence is not, as it is often said to be, a conflict of interests between labor and capital. On the contrary, labor and capital agree on the aim -- a higher standard of living. They agree on the prerequisite -- increased production. They agree that the means are at hand, material and human.
Yet, as soon as there is any considerable progress toward the attainment of the aim, labor and capital alike make further progress impossible. Wage-earners, on their part, know that increased production is the necessary basis of higher real wages, and that the way to increase production is to do their best, avoid waste, welcome every discovery and invention that increases output, and coöperate to the utmost with employers. Yet they know from experience -- the bitter, recurrent experience of enforced idleness and the resultant suffering of hungry, ill-clad, ill-housed families -- that at times the more efficiently they work, the sooner they work themselves out of their jobs. Producers, on their part, are just as well aware that they should constantly increase their output, and most of them are eager to do so. Yet they, too, know from bitter experience, some of them from losing all they have, that whenever they succeed as a body in largely increasing output, they overshoot the mark. The money is not at hand to take away the goods.
Confronted by this situation, labor and capital condemn each other. Workers complain of a conspiracy among producers to limit output, while producers complain that workers are conspiring for the same end. How long will they continue to blame each other? Probably until they discover that neither is especially at fault, since it is really the economic system, and not a fundamental antagonism of the interests of labor and capital, that automatically brings every forward movement to an end. Restrained by such a system, neither labor nor capital can continue to do what their common interest requires them to do. As producers, they cannot bring forth the volume of goods which as consumers they are eager to enjoy.
Why not? Exactly what is the cause of this anomalous situation? A simple answer must be inadequate, a sweeping conclusion indefensible; for, as we observed at the outset, the industrial world of today is far from simple. Its organization is intricate; its forces are many. There is some truth in a score of answers to the question, and at least a grain of truth, no doubt, in a hundred more. Each of these explanations has its place in a complete analysis of the causes of business depressions. Certainly a single cause cannot account for all our ills, nor a single remedy cure them. Furthermore, the necessary statistical basis for a fairly complete answer to the question is not yet at hand. On the basis of the available data, and within the confines of a single volume, the question can be answered only in broad outlines. Refinements, qualifications, exceptions -- all the minor details -- must be left for later studies. Still, we may possibly find the chief cause and the chief remedy if, with the picture of our pioneer before us, we hold fast to the truth that in our complex money and profit economy, as in his simple barter economy, the sole end of production is consumption. There are incidental aims, to be sure, such as improvement of the product, economy of effort, joy in the work and the welfare of the workers; but, with negligible exceptions, whatever the incidental aims may be, the end is always the using up of the product.
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