Part 14

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.

XV. MONEY AND BANKING.

Probably on no subject has there been such confused thinking or have such widely varying views been held as on that of money. There is, however, substantial unanimity of opinion on the important points among economists today, though in practice there still remain many unsolved problems. The modern industrial system has already been characterized as one of capitalistic production, of large-scale enterprises with extended use of machinery. Not less fundamental are the processes of valuation and exchange made possible by the use of money and credit; and also by the machinery for the geographical distribution of goods, our railroads and steamship lines. The modern stage of economic development has been described by Hildebrand as one of “credit economy,” as opposed to those of barter and money economy, which preceded. It is inconceivable that the modern complex system of exchange could be maintained without the extended use of money and credit. Without attempting to define these terms or to trace their historical development, we may proceed at once to state some of the problems to which they have given rise.

The first question that suggests itself is, what determines the value of money? The generally accepted answer may be briefly stated: it is, that the value of money depends, other things remaining the same, upon its quantity. According to the quantity theory an increase in the supply of money will cause a fall in the value of each unit, just as 138 an increase in the supply of wheat or cotton will cause a fall in the value of each bushel or bale. Conversely, a decrease in the quantity of money will cause a rise in the value of money. It is simply an application of the general law of value to money. The phrase “other things remaining the same” is however an important one, for it assumes that the amount of business and the methods by which it is conducted will remain substantially unchanged. Of course if an increase in the amount of money is accompanied by an equivalent expansion of trade, the one may offset the other and the value of money remain unchanged. Now, inasmuch as the prices of all goods and services are measured and expressed in terms of money, it is clear that a fall in the value of money means a rise of general prices; the value of each commodity is now expressed in terms of a larger number of less valuable units or dollars. Prices will be high if the quantity of money in circulation in a country is large; they will be low if the quantity is small. To the question, which is better for a country, high prices or low prices, it may be answered that it is a matter of indifference, provided only that there is enough money to do the work of exchange efficiently and that fluctuations are prevented. Just how much constitutes enough is, however, a matter of contention. In the undeveloped sections of our country, where capital is scarce and banking facilities undeveloped and where most of the people are debtors, there has always been a demand for cheap and abundant money. Capital and money have been confused and the need of one has led to a demand for the other.

It is not a matter of indifference, however, whether prices be rising or falling, that is, whether inflation or contraction of the currency is taking place. A period of falling prices means hardship and injustice to debtors and producers of goods, as farmers, manufacturers, etc. Having contracted obligations and engaged in the 139 production of commodities with the expectation of a given price, they find their goods worth less when ready for the market and themselves confronted with a loss instead of the anticipated profit. Under such circumstances a contraction of the currency and falling prices means lessened production of wealth. Consequently many writers, and even so good an economist as President Walker, have urged that a slow steady inflation of the currency would promote trade and “give a fillip to industry.” The monetary history of the United States is filled with attempts to realize this in practice: colonial and revolutionary bills of credit were first issued; when these were forbidden by the new Constitution resort was had to issues by state banks. When the Federal Government began the issue of greenbacks and restricted the use of state bank notes, the inflationists looked to this source for assistance. After the defeat of the Greenback party, they turned finally to the coinage of silver, which was now falling in price, and the question of bimetallism in the United States was made a practical political issue.

Down to 1870 practically all the nations of Europe and America had the system of bimetallism at ratios of 15½ or 16 to 1. About that date the great increase in the supply of gold and the fall in the value of silver led one country after another to abandon the latter and to adopt the system of gold monometallism. This was vigorously resisted by many persons and several fruitless efforts made to secure a system of international bimetallism. Failing that, the friends of silver in this country endeavored to secure independent action by the United States alone, and were ultimately successful in obtaining the purchase by the Federal Government of practically the entire silver output of the country during the years 1878-1893.

Development of the Manufacturing Industries in the United States, 1800-1905.

======+==========+========================+===========+===========+ | | Wealth. | | | | +---------------+--------+ | | Fiscal| | | | | | Year,|Population| | | Production| Raw wool | ending| June 1. | | Per | of | imported. | June | | Total. |capita. | wool.[B] | | 30-- | | | | | | | | | | | | | | | | | | ------+----------+---------------+--------+-----------+-----------+ | | Dollars. |Dollars.| Pounds. | Pounds. | | | | | | | 1800 | 5,308,483| -- | -- | -- | -- | 1810 | 7,239,881| -- | -- | -- | -- | 1820 | 9,638,453| -- | -- | -- | -- | 1830 |12,866,020| -- | -- | 35,802,114| 669,883| 1840 |17,069,453| -- | -- | 52,516,959| 9,898,740| 1850 |23,191,876| 7,135,780,000| 307.69| -- | 18,695,294| 1851 |23,995,000| -- | -- | -- | 32,607,315| 1852 |24,802,000| -- | -- | -- | 18,343,218| 1853 |25,615,000| -- | -- | -- | 21,616,035| 1854 |26,433,000| -- | -- | -- | 20,228,035| 1855 |27,256,000| -- | -- | -- | 18,599,784| 1856 |28,083,000| -- | -- | -- | 14,778,496| 1857 |28,916,000| -- | -- | -- | 16,505,216| 1858 |29,758,000| -- | -- | -- | -- | 1859 |30,596,000| -- | -- | 60,264,913| -- | 1860 |31,443,321| 16,159,616,000| 513.93| 75,000,000| -- | 1861 |32,064,000| -- | -- | 90,000,000| -- | 1862 |32,704,000| -- | -- |106,000,000| 42,131,061| 1863 |33,365,000| -- | -- |123,000,000| 73,931,944| 1864 |34,046,000| -- | -- |142,000,000| 90,464,002| 1865 |34,748,000| -- | -- |155,000,000| 43,877,408| 1866 |35,469,000| -- | -- |160,000,000| 67,918,253| 1867 |36,211,000| -- | -- |168,000,000| 16,558,046| 1868 |36,973,000| -- | -- |180,000,000| 24,124,803| 1869 |37,756,000| -- | -- |162,000,000| 39,275,926| 1870 |38,558,371| 30,068,518,000| 779.83|160,000,000| 49,230,199| 1871 |39,555,000| -- | -- |150,000,000| 68,058,028| 1872 |40,596,000| -- | -- |158,000,000|122,256,499| 1873 |41,677,000| -- | -- |170,000,000| 85,496,049| 1874 |42,796,000| -- | -- |181,000,000| 42,939,541| 1875 |43,951,000| -- | -- |192,000,000| 54,901,760| 1876 |45,137,000| -- | -- |200,000,000| 44,642,836| 1877 |46,353,000| -- | -- |208,250,000| 42,171,192| 1878 |47,598,000| -- | -- |211,000,000| 48,449,079| 1879 |48,866,000| -- | -- |232,500,000| 39,005,155| 1880 |50,155,783| 43,642,000,000| 850.20|240,000,000|128,131,747| 1881 |51,316,000| -- | -- |272,000,000| 55,964,236| 1882 |52,495,000| -- | -- |290,000,000| 67,861,744| 1883 |53,693,000| -- | -- |300,000,000| 70,575,478| 1884 |54,911,000| -- | -- |308,000,000| 78,350,651| 1885 |56,148,000| -- | -- |302,000,000| 70,596,170| 1886 |57,404,000| -- | -- |285,000,000|129,084,958| 1887 |58,680,000| -- | -- |269,000,000|114,038,030| 1888 |59,974,000| -- | -- |265,000,000|113,558,753| 1889 |61,289,000| -- | -- |276,000,000|126,487,729| 1890 |62,622,250| 65,037,091,000|1,038.57|285,000,000|105,431,285| 1891 |63,844,000| -- | -- |294,000,000|129,303,648| 1892 |65,086,000| -- | -- |303,153,000|148,670,652| 1893 |66,349,000| -- | -- |298,057,384|172,433,838| 1894 |67,632,000| -- | -- |309,748,000| 55,152,585| 1895 |68,934,000| 77,000,000,000|1,117.01|272,474,708|206,033,906| 1896 |70,254,000| -- | -- |259,153,251|230,911,473| 1897 |71,592,000| -- | -- |266,720,684|350,852,026| 1898 |72,947,000| -- | -- |272,191,330|132,795,202| 1899 |74,318,000| -- | -- |288,636,621| 76,736,209| 1900 |76,303,387| 88,517,306,775|1,164.79|302,502,328|155,928,455| 1901 |79,003,000| -- | -- |287,450,000|166,576,966| 1903 |80,372,000| -- | -- |291,783,032|177,137,796| 1904 |81,752,000|107,104,211,917|1,310.11|295,488,438|173,742,834| 1905 |83,143,000| -- | -- |298,915,130|249,135,746| 1906 |84,216,433| -- | -- |298,294,750|201,688,668| 1907 |85,817,239| -- | -- |311,138,321|203,847,545| 1908 |87,189,392| -- | -- | -- |125,980,524| ------+----------+---------------+--------+-----------+-----------+

======+==========+=====================================================+ | | Manufactures of cotton. | |Production+--------------------------+--------------------------+ Fiscal| of | Thousands of spindles in | Thousands of bales of | Year,|cotton.[B]| operation on Sept. 1st. | domestic cotton taken | ending| | | by mills. | June | (500-lb. +--------+--------+--------+--------+--------+--------+ 30-- | bales, | In | In | Total | In | In | Total | | gross |Southern|Northern| United |Southern|Northern| United | | weight.) |States. | States.| States.| States.| States.| States | ------+----------+--------+--------+--------+--------+--------+--------+ | Number. | Thou- | Thou- | Thou- | Thou- | Thou- | Thou- | | | sands. | sands. | sands. | sands. | sands. | sands. | 1800 | 73,222| -- | -- | -- | -- | -- | -- | 1810 | 177,824| -- | -- | -- | -- | -- | -- | 1820 | 334,728| -- | -- | -- | -- | -- | | 1830 | 732,218| -- | -- | -- | -- | -- | -- | 1840 | 1,347,640| 181 | 2,104 | 2,285 | 71 | 166 | 237 | 1850 | 2,136,083| 265 | 3,733 | 3,998 | 78 | 497 | 575 | 1851 | 2,799,290| -- | -- | -- | 60 | 404 | 464 | 1852 | 3,130,338| -- | -- | -- | 111 | 588 | 699 | 1853 | 2,766,194| -- | -- | -- | 153 | 650 | 803 | 1854 | 2,708,082| -- | -- | -- | 145 | 592 | 737 | 1855 | 3,220,782| -- | -- | -- | 135 | 571 | 706 | 1856 | 3,873,680| -- | -- | -- | 138 | 633 | 771 | 1857 | 3,012,016| -- | -- | -- | 154 | 666 | 820 | 1858 | 3,758,273| -- | -- | -- | 143 | 452 | 595 | 1859 | 4,309,642| -- | -- | -- | 167 | 760 | 927 | 1860 | 3,841,416| 324 | 4,912 | 5,236 | 94 | 751 | 845 | 1861 | 4,490,586| -- | -- | -- | 153 | 650 | 803 | 1862 | 1,596,653| -- | -- | -- | -- | -- | -- | 1863 | 449,059| -- | -- | -- | -- | -- | -- | 1864 | 229,372| -- | -- | -- | -- | -- | -- | 1865 | 2,093,658| -- | -- | -- | -- | -- | -- | 1866 | 1,948,077| -- | -- | -- | 127 | 541 | 668 | 1867 | 2,345,610| -- | -- | -- | 150 | 573 | 723 | 1868 | 2,198,141| -- | -- | -- | 168 | 800 | 968 | 1869 | 2,409,597| -- | -- | -- | 173 | 822 | 995 | 1870 | 4,024,527| 328 | 6,804 | 7,132 | 69 | 728 | 797 | 1871 | 2,756,564| -- | -- | -- | 91 | 1,072 | 1,163 | 1872 | 3,650,932| -- | -- | -- | 120 | 977 | 1,097 | 1873 | 3,873,750| -- | -- | -- | 138 | 1,063 | 1,201 | 1874 | 3,528,276| -- | -- | -- | 128 | 1,192 | 1,320 | 1875 | 4,302,818| -- | -- | -- | 130 | 1,071 | 1,201 | 1876 | 4,118,390| -- | -- | -- | 134 | 1,220 | 1,354 | 1877 | 4,494,224| -- | -- | -- | 127 | 1,302 | 1,429 | 1878 | 4,745,078| -- | -- | -- | 151 | 1,345 | 1,496 | 1879 | 5,466,387| -- | -- | -- | 186 | 1,375 | 1,561 | 1880 | 6,356,998| 561 | 10,092 | 10,653 | 189 | 1,382 | 1,570 | 1881 | 5,136,447| -- | -- | -- | 225 | 1,713 | 1,938 | 1882 | 6,833,442| -- | -- | -- | 287 | 1,677 | 1,964 | 1883 | 5,521,963| 860 | 11,800 | 12,660 | 313 | 1,759 | 2,072 | 1884 | 5,477,448| 1,050 | 12,250 | 13,300 | 340 | 1,537 | 1,877 | 1885 | 6,369,341| 1,125 | 12,250 | 13,375 | 316 | 1,437 | 1,753 | 1886 | 6,314,561| 1,150 | 12,250 | 13,400 | 381 | 1,781 | 2,162 | 1887 | 6,884,667| 1,200 | 12,300 | 13,500 | 401 | 1,687 | 2,088 | 1888 | 6,923,775| 1,250 | 12,300 | 13,550 | 456 | 1,805 | 2,261 | 1889 | 7,472,511| 1,360 | 12,700 | 14,060 | 480 | 1,790 | 2,270 | 1890 | 8,562,089| 1,570 | 12,814 | 14,384 | 539 | 1,979 | 2,518 | 1891 | 8,940,867| 1,740 | 12,900 | 14,640 | 613 | 2,027 | 2,640 | 1892 | 6,658,313| 1,950 | 13,250 | 15,200 | 684 | 2,172 | 2,856 | 1893 | 7,433,056| 2,100 | 13,450 | 15,550 | 723 | 1,652 | 2,375 | 1894 |10,025,534| 2,200 | 13,500 | 15,700 | 711 | 1,580 | 2,291 | 1895 | 7,146,772| 2,400 | 13,700 | 16,100 | 852 | 2,019 | 2,871 | 1896 | 8,515,640| 2,850 | 13,800 | 16,650 | 900 | 1,605 | 2,505 | 1897 |10,985,040| 3,250 | 13,900 | 17,150 | 999 | 1,793 | 2,792 | 1898 |11,435,368| 3,550 | 13,900 | 17,450 | 1,254 | 2,211 | 3,465 | 1899 | 9,459,935| 3,950 | 14,150 | 18,100 | 1,415 | 2,217 | 3,632 | 1900 |10,266,527| 4,368 | 15,104 | 19,472 | 1,523 | 2,350 | 3,873 | 1901 | 9,675,771| 5,500 | 11,700 | 20,200 | 1,583 | 1,964 | 3,547 | 1902 |10,827,168| 6,400 | 15,000 | 21,400 | 2,017 | 2,066 | 4,083 | 1903 |10,045,615| 6,900 | 15,100 | 22,000 | 1,958 | 1,966 | 3,924 | 1904 |13,679,954| 7,650 | 15,200 | 22,850 | 1,889 | 2,046 | 3,935 | 1905 |10,804,556| 7,631 | 16,056 | 23,687 | 2,140 | 2,139 | 4,279 | 1906 |13,595,498| 8,995 | 16,255 | 25,250 | 2,373 | 2,536 | 4,909 | 1907 |11,375,461| 9,528 | 16,847 | 26,275 | 2,411 | 2,574 | 4,985 | 1908 |13,587,306| 10,201 | 17,304 | 27,505 | 2,187 | 2,352 | 4,539 | ------+----------+--------+--------+--------+--------+--------+--------+