Cyclopædia of Political Science, Political Economy, and the Political History of the United States
ACCUMULATION OF WEALTH. It is to the power of accumulation or saving (two terms which in political economy are almost equivalent) that we owe all our capital, all our wealth.
—All the utilities created by man are susceptible of accumulation, whether these utilities are identified with the men themselves, as those which consist in acquired knowledge, in the perfection given our physical, intellectual or moral faculties, or those added to external objects.
—Of the accumulation of utilities of this last class, the most important are those realized in the cultivation of the soil. They consist in the clearing and reclaiming of land; in the increase of its natural fertility by manuring, irrigation or other means; in the substitution of plants useful to man for those with which the ground was primitively covered and not useful to man; in the multiplication and domestication of animals or beasts of burden employed as forces or intended for food; and finally, in the buildings, structures, machines or instruments used in exploitation of any kind. Accumulation of this kind forms the great mass of the material wealth of all nations whose civilization is advanced.
—Next in order of importance come accumulations of wealth under the form of dwelling houses, of factories, shops, machines and tools, roads, railroads, canals, bridges, ships, harbors, etc.; in a word, all the creations of industry destined to facilitate manufacturing or commercial operations, or to satisfy the wants of shelter, of intercourse, communication, etc.
—After these, the most important accumulations in the material order appear under the form of a supply of products destined either for the immediate satisfaction of our wants—such as furniture, utensils, fuel, food, linen, clothing, etc., with which every household is more or less amply provided, or those which have to undergo various changes or modifications, to fit them for consumption.
—Among the utilities which are identified with man, those whose accumulation or extension is most important, consist in the perfection given to the industrial faculties, under which term we comprise: 1st, all positive knowledge capable of rendering man's labors more fruitful; 2nd, the art of applying this knowledge, and the spirit of invention; 3rd, skill in performing all the details in the different kinds of work; 4th, the practice of the habits, individual or collective, most favorable to the development and power of the industrial faculties, and the harmony of economic relations.
—It is plain that the accumulation of utilities, of capital, of wealth, may and really does take place under a multitude of forms. Among these forms we have not included that of money or coin. In reality, accumulations in no way need an increase in the quantity of that particular product; and it is undoubted that a people may double their wealth or increase it tenfold without a single cent being added to their monetary medium. Accumulation of wealth does not take this form except in countries which produce the precious metals.
—Nevertheless it is the almost universal opinion that the greater part of the accumulations of wealth or savings is made under the form of money, and as this false idea is the source of a multitude of economic errors, it seems to us useful to show clearly that although much of the accumulation of wealth appears for a time in the form of money, it consists in reality of something very different. This, a few examples will show. A ditch-digger, by working continuously for six months, has, let us suppose, drained a marsh; the value of his labor is estimated at $400. Of this sum the workman has spent, let us say, $300 for his own personal wants, and there remain to him $100 which he puts into a savings bank. Here is an accumulation equal in value to $100; and all the circumstances remaining the same, this value should be found as an addition to the wealth of the country in one form or another. Is it in the form of money? Evidently not; for the $100, before going into the savings bank, were in possession of the proprietor who received them, let us suppose, from his tenant, who received them from the butcher, who, in turn, received them from the consumer of meat, etc. In short, this money existed in the country before as well as after the operation. The wealth here accumulated, then, does not exist in the form of money, and it can only be found in the improvement given the land by the labor of the ditch-digger, an improvement equal in value to $400, and exceeding by $100 the value of the articles consumed by the workman.
—A builder constructs a house; he expends in its construction, in wages, materials, purchase of land, etc., a sum of $110,000. When he sells the house for $120,000 the excess of $10,000 is his profit, or the price of his services. Of this last sum, $5,000 have been spent in unproductive consumption, and $5,000 are added to the capital which he employs in his business. Does the accumulation here consist in money? By no means; since the money existed before in the hands of the purchaser. It is found in the value of the house which exceeds by $5,000 all that was spent.
—The purchaser of the house receives from his tenants a yearly sum of $6,000. He uses two-thirds of this sum for the personal wants of his family, and he puts the $2,000 of surplus in the bank. Here we have a new accumulation of $2,000, which, although it does not come from new labor, must exist as additional wealth in the country under some form, and, no more than in the preceding cases, under the form of money, since the same money already existed, and has now merely changed hands. In what, then, can the new value acquired to the nation consist? In order to discover this, it is necessary to remark that the service rendered to the tenants by the house is really equal to the value of $6,000, since they have freely consented to pay that sum for its use. They might have applied that service to an industrial purpose and received back its price in that of the products created. But we will suppose that they have consumed it unproductively for their personal wants. Now even in this case the savings of the proprietor add none the less a value of $2,000 to the wealth of the country; and this value must necessarily be found in a form different from that of money. This will be easily understood by noting that without this saving, it would have been necessary to add to the unproductive consumption of the premises other productive consumption still by the proprietor, amounting to the value of $2,000. The saving, therefore, must be found in this case in the form of the different objects which the proprietor has abstained from consuming, the preservation of which has diminished the sum total of consumption in the country and consequently increased its actual wealth to that extent, production remaining the same.
—We might take up in this manner, one after another, all the individual savings accumulated in a year, and it would be seen that all have increased the general wealth in proportion to their importance, either by adding to the utilities which the country already possessed or by preserving a greater part of these, by limiting consumption. It will be seen, at the same time, that these accumulations were made under a multitude of different forms other than money, though most of them appear for a moment under this last form. Thus, that which is accumulated in reality is not money; it is objects fitted to satisfy our needs—utilities of various forms.
—It is to be remarked, that these utilities scarcely ever remain in the hands of those to whom they are due; for even when they are exchanged for money, this money is usually given to others by those who have accumulated its values. Now, to place at the disposition of society a utility under one form or another is to render it a service, to furnish it with the means of labor or satisfaction, of which without this it would have been deprived. He who saves renders to society, therefore, a service proportionate to the value of his savings. It is true that he thus acquires the right of demanding equivalent services in return; but so long as he does not actually demand them, so long as he abstains from consuming their value for his personal wants, this value serves others than himself.
—Thus, for example, the owner of land or capital who obtains from these kinds of productive property an annual revenue of $10,000, and who saves half of it every year, renders to society a new yearly service worth $5,000; and although he reserves to himself the power of demanding back at a later time the sum total of these services, increased by the total of the interest, it is none the less evident that while he abstains from demanding it and consuming it, society has the benefit of it in his place. A family which during several generations, during two centuries, for example, should have saved uninterruptedly half of its annual income, would have really admitted society during all this time to an equal partition with itself of the means of production and satisfaction which this income brought; in other terms, it would have added to the sum total of the enjoyments of society, an amount twice as great as the family itself could have obtained from it. The means of creating new wealth or satisfaction of which the family would have deprived itself, would have been acquired by others. The only exclusive benefit which its savings brought the family consisted in the feeling of security resulting from the power which it preserved of demanding from society, in case of need, services equal to those which it had ceded to it.
—These results of saving are incontestible. It follows, therefore, that it does not profit exclusively those who save, and that it is a very positive public benefit. The rich man who spends the whole of his revenue every year, in personal and unproductive consumption, does not exceed his rights; but in this way he only renders to others services exactly equal to those he receives from them; he is, therefore, of less use to others, and consequently less worthy of approbation and esteem in this regard, than the rich man who saves.
—Nevertheless, common opinion is more disposed to approve him who spends all his income for his personal wants, than him who saves a part of it. Strange fact, that the person who preserves for his family and society the greater number of utilities of every kind, and does it by restricting his personal enjoyments, is just the man whom the vulgar mind is inclined to reproach with egoism, while it attributes laudable and generous sentiments to him who denies himself nothing.
—To explain this unjust judgment it is affirmed that he whose personal wants are few does not quicken the circulation of wealth, that he deprives industry and commerce of its outlets and of the encouragement which the consumption of wealth might give them. In this way men come to believe and to profess that every one renders more service to society the more value he consumes unproductively. Thus, men justify the expenses of luxury, pride, profusion, etc. This error was so generally disseminated in France, that in the greater part of the pamphlets, etc., written in 1848 and 1849, with the intention of combating the aberrations of socialism, it was thought necessary to praise the expenses of luxury, and endeavor to prove that it is, above all, on account of this kind of outlay, that the poor classes are interested in respecting wealth; so that, to combat lamentable economic errors, others as great were propagated. This we shall try to prove in a few words.
—Wealth is made up of all objects having value in exchange, no matter what their nature or their form. When a portion of wealth is consumed, that portion exists no longer; after which, if the want which it has satisfied appear again and we have still the means of providing for it, the object consumed must be reproduced, and the necessity of this reproduction gives new food to labor.
—But we may consume a portion of wealth in two ways: in the first place, we can absorb its entire value, in such manner that absolutely nothing may remain of it. This is a case of unproductive consumption, which takes place, for example, in the case of a sumptuous repast, of fireworks, etc. We consume in this way the services of those who have furnished and prepared the food, those of the pyrotechnist, the powder manufacturer, the decorators, the costumers, the musicians, the actors, etc. We have thus furnished, but for once only, labor and pay to all these persons. In the second place, we may consume wealth in such a manner that after the operation a value may remain equal to or even greater than that consumed. This is a case of reproductive (or productive) consumption. Suppose, for example, that the value consumed at the banquet or the fête, instead of being used in this way, had been employed in improving a barren hillside or in making a vineyard of it: by this application of the value consumed, we should have given work and wages to ditchers, to vinedressers, to teamsters, to manufacturers of compost, to producers of plants and of props; and we should thus have furnished remunerated employment to a number of laborers at least as great as the number hired at the banquet; and, while nothing remained after the banquet, from this there would remain a vineyard, the annual product of which, the income from it, would furnish every year, and during an indefinite period, an entirely new article of food, in consideration of a certain amount of labor. This example suffices to show how much it is to the interest of workmen in general, that the rich, instead of spending all their income in unproductive consumption, in outlays for luxury, should devote the greatest part possible of it to reproductive consumption. Even if they do not watch directly over these operations, and if they confine themselves to placing the sum of their savings at interest, they still render a greater service to the working classes than spending their wealth unproductively. Deposited with a banker or a loan agent, their savings go to the farmer, the artisan, the contractor, who utilize them in reproductive consumption.
—Do not men complain every day that we have not enough of capital; that it is lacking in manufactures, in commerce, in great works of public utility, and above all in agriculture; and that, by reason of its insufficiency, the rate of interest is too high? But if such is the case, what should we desire? Should we not desire that savings and investments should be multiplied as much as possible, that capital should increase and its abundance make the use of it less costly, that is to say, lower the rate of interest?
—Now, rich persons are the only ones who can make savings with ease. It should, therefore, be recommended to them, not by the law, for all liberty should be left them in this regard, but by morals, by the esteem attached to such conduct by an enlightened public opinion, by their own self-interest properly understood, which is here completely in accord with that of the laboring classes. Those who give other counsels to the rich, and desire to persuade them that they render more service and have more merit in proportion as they spend more for their wants, their tastes, their fancies, their vanities, their personal satisfaction, obey, in so doing, a prejudice which is much to be regretted. (See
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