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Forty years ago I did not fully foresee the extent to which affluence would come to be perceived as a matter of deserved personal reward and thus fully available to the poor, were they only committed to the requisite effort.
The resulting solution is to have them take charge of their own well-being; government aid is a damaging intrusion, the enemy of individual energy and initiative. It must be resisted, which, though unmentioned, also saves money and protects the affluent from taxation. Given such social attitudes, it could be better to be poor in a poor country than poor in an affluent one.
There is no blight on American life so great as the enduring poverty in our great cities and of the still unseen poor in the rural and mountain regions.
Few people at the beginning of the nineteenth century needed an adman to tell them what they wanted.
Numerous factors contribute to the acceptability of ideas. To a very large extent, of course, we associate truth with convenience—with what most closely accords with self-interest and personal well-being or promises best to avoid awkward effort or unwelcome dislocation of life.
Because familiarity is such an important test of acceptability, the acceptable ideas have great stability. They are highly predictable.
There are many reasons why people like to hear articulated that which they approve. It serves the ego: the individual has the satisfaction of knowing that other and more famous people share his conclusions. To hear what he believes is also a source of reassurance. The individual knows that he is supported in his thoughts—that he has not been left behind and alone. Further, to hear what one approves serves the evangelizing instinct. It means that others are also hearing and are thereby in process of being persuaded.
Almost everyone called upon for advice in the early years of the depression was impelled by the conventional wisdom to offer proposals designed to make things worse.
Only posterity is unkind to the man of conventional wisdom, and all posterity does is bury him in a blanket of neglect.
Finally, by the end of the century, the worker’s return—bearing always in mind that by this is meant the income of the masses of the people—was being related to the value of his marginal product; i.e., to what he added to the value of his employer’s product. Were he paid less than the value of his contribution, it would be open to a competitor to offer him more, for in a competitive world there would be other employers whose product he could increase by more than his wage.
During the great depression, the word depression acquired from the event it described an even more unsatisfactory connotation. Therefore, the word recession was substituted to connote an unfearsome fall in business activity.
the orthodox view of the business cycle added a much more general sense of disquiet. This was the insecurity of a householder who is told that, in the normal and regular course of events, he must expect his house to catch fire and his property to be partially or wholly destroyed. The fire cannot be prevented or arrested, for it has its work to do; to call for a fire department is to invite an attempt to drown the flames by drenching them with gasoline.
From the Marxist world, in tones of thunderous conviction, came the warning that the inequality and the insecurity would increase and increase until, in the end, their victims would destroy the whole edifice and, by implication, quite a few of its favored inhabitants.
FEW THINGS have been more productive of controversy over the ages than the suggestion that the rich should, by one device or another, share their wealth with those who are not. With comparatively rare and usually eccentric exceptions, the rich have been opposed. The grounds have been many and varied and have been principally noted for the rigorous exclusion of the most important reason, which is simply the unwillingness to give up the enjoyment of what they have.
In the United States this support has been tempered by the tendency of some of the poor to react sympathetically to the cries of pain of the rich over their taxes and of others to the hope that one day soon they might be rich themselves.
There are other arguments. Excessive equality makes for cultural uniformity and monotony. Rich men are essential if there is to be an adequate subsidy to education and the arts. Equality smacks of communism and hence of atheism and therefore is spiritually suspect.
Present laws are notably favorable to the person who has wealth as opposed to the individual who is only earning it. With a little ingenuity, the man who is already rich can ordinarily take his income in the form of capital gains and limit somewhat his tax liability.
The American well-to-do have long been curiously sensitive to fear of expropriation—a fear which may be related to the tendency for even the mildest reformist measures to be viewed, in the conservative conventional wisdom, as the portents of revolution.
In South America, in the Middle East, to a degree in India, and by travelers therefrom in Nice, Cannes and Deauville, ostentatious display by those of wealth is still practiced. This accords with expectations. In these countries, most people are still, in the main, poor and unable to afford the goods which advertise wealth. Therefore, ostentation continues to have a purpose. In not being accessible to too many people, it has not yet become vulgar.
Consumer taste and demand may shift. The modern large corporation resists this by its advertising. Consumer taste is thereby brought partly under its control.
Myth has also played a part in concealing the effort of the modern corporation to minimize insecurity. There is a surviving conviction, even on the part of the executives of the largest business corporations, that they live dangerously. Almost no large industrial corporation in the United States, which is also large in its industry, has failed or been seriously in danger of insolvency in many years. Where there has been danger, the government has come to the rescue. The security of tenure of corporation executives is remarkably high. So is their remuneration.
There are feather-bedding unions and goldbricking workmen and slothful supernumeraries everywhere. Indeed, it is possible that the ancient art of evading work has been carried in our time to its highest level of sophistication, not to say elegance. One should not suppose that it is an accomplishment of any particular class, occupation or profession. Apart from the universities where its practice has the standing of a scholarly rite, the art of genteel and elaborately concealed idleness may well reach its highest development in the upper executive reaches of the modern corporation.
Whether we need or even wish the goods that are produced, their assured production means assured income for those who produce them. This serves the goal of economic security. Nothing else serves it so well.
Improvements in technology do not come by accident. They are the result of investment in highly organized scientific and engineering knowledge and skills. Yet we do very little of a systematic sort to increase the volume of this investment, except where some objective of military urgency provides the excuse. Rather, we accept whatever investment in technology is currently being made and applaud the outcome.
We attach profound importance to the fact that some industries advance. We attach almost no importance to the fact that others do not.
Vacuum cleaners to ensure clean houses are praiseworthy and essential in our standard of living. Street cleaners to ensure clean streets are an unfortunate expense. Partly as a result, our houses are generally clean and our streets generally filthy.
We do not manufacture wants for goods we do not produce.
economic theory has managed to transfer the sense of urgency in meeting consumer need that once was felt in a world where more production meant more food for the hungry, more clothing for the cold and more houses for the homeless to a world where increased output satisfies the craving for more elegant automobiles, more exotic food, more erotic clothing, more elaborate entertainment—indeed, for the entire modern range of sensuous, edifying and lethal desires.
Nothing originally proved more troublesome in the explanation of prices, i.e., exchange values, than the indigestible fact that some of the most useful things had the least value in exchange and some of the least useful had the most. As Adam Smith observed: “Nothing is more useful than water; but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use: but a very great quantity of other goods may frequently be had in exchange for it.“
The urgency of desire is a function of the quantity of goods which the individual has available to satisfy that desire. The larger the stock, the less the satisfactions from an increment. And the less, also, the willingness to pay. Since diamonds for most people are in comparatively meager supply, the satisfaction from an additional one is great, and the potential willingness to pay is likewise high. The case of water is just the reverse.
THE NOTION that wants do not become less urgent the more amply the individual is supplied is broadly repugnant to common sense. It is something to be believed only by those who wish to believe.
Who can say for sure that the deprivation which afflicts him with hunger is more painful than the deprivation which afflicts him with envy of his neighbor’s new car? In the time that has passed since he was poor, his soul may have become subject to a new and deeper searing.
If the individual’s wants are to be urgent, they must be original with himself. They cannot be urgent if they must be contrived for him. And above all, they must not be contrived by the process of production by which they are satisfied. For this means that the whole case for the urgency of production, based on the urgency of wants, falls to the ground. One cannot defend production as satisfying wants if that production creates the wants.
Were it so that a man on arising each morning was assailed by demons which instilled in him a passion sometimes for silk shirts, sometimes for kitchenware, sometimes for chamber pots, and sometimes for orange squash, there would be every reason to applaud the effort to find the goods, however odd, that quenched this flame.
a new breakfast cereal or detergent so much wanted if so much must be spent to compel in the consumer the sense of want?
in unraveling the complex, we should always be careful not to overlook the obvious.
When a vested interest is enjoyed not by a minority but a majority, it is a human right.
In the more censorious social levels of American society, there has long been a fashionable aversion to gadgetry. (The word gadget is itself a pejorative term for durable goods.) In such circles, shiny rumpus rooms, imaginative barbecue pits, expansive television screens and magnificent automobiles no longer win acclaim. They may even invite mild social obloquy. A degree of shabbiness in personal attire is now sought, and all but universally among the young.
But the first task of the public relations man, on taking over a business client, is to “re-engineer” his image to include something besides the production of goods. His subject must be a statesman, a patron of education, or a civic force. Increasingly, some artistic or intellectual facet of his personality must be found or invented. A businessman who reads Business Week is lost to fame. One who reads Proust is marked for greatness.
In fact, the position of the intellectual is now far more secure than that of the businessman. It would hardly occur to a successful poet or scientist to hire a public relations man, just as it would scarcely seem wise for a successful corporation president to do without one.
Perhaps most suggestive of all, American intellectuals long ago created what amounts to a second-class citizenship for the intellectual efforts of the business executive. They listen to his speeches, review his books and receive his ideas with respectful attention. But they do not judge them to be good or bad in themselves. They are good (or on occasion bad) for a businessman. It is well understood that this is a much lower standard.
One danger in the way wants are now created lies in the related process of debt creation. Consumer demand thus comes to depend more and more on the ability and willingness of consumers to incur debt. An increase in consumer debt is all but implicit in the process by which wants are now synthesized.
People have changed their view of debt. Thus there has been an inexplicable but very real retreat from the Puritan canon that required an individual to save first and enjoy later.
The process of persuading people to incur debt, and the arrangements for them to do so, are as much a part of modern production as the making of the goods and the nurturing of the wants.
However, few things are more satisfactorily established in economics than that debt creation, whether by producers or consumers, is a major source of uncertainty in economic behavior. It has long been recognized that times of high income and employment and a generally sanguine outlook are encouraging to both borrowers and lenders. The spending that results from these transactions adds to the general total of purchasing power when, in effect, it is least needed. Under less sanguine circumstances, loans are advanced more cautiously. Instead of spending from new loans, there is repayment of old
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(Since these words were written some forty years go, there has, indeed, been a huge increase in consumer debt (and also in citizen bankruptcy).
The encouragement to indebtedness which the society accords to the man who wants to buy an automobile or even take a trip is matched by the stern mistrust with which it views the local government that might want to borrow for a school.
For the beef-cattle producer, by contrast, income elasticity is rather higher. He is the beneficiary of the well-known and statistically quite demonstrable tendency of people who have an increase in pay to celebrate with red meat.
In the early days of World War II, a grateful and very anxious citizenry rewarded its soldiers, sailors and airmen with a substantial increase in pay. In the teeming city of Honolulu, in prompt response to this advance in wage income, the prostitutes raised the prices of their services. This was at a time when, if anything, increased volume was causing a reduction in their average unit costs. However, in this instance, the high military authorities, deeply angered by what they deemed improper, immoral and indecent profiteering, ordered a return to the previous scale.
It is not unknown for men of sound faith to call for a high and rising volume of business investment and incentives, including tax revision, to encourage it, while at the same time they strongly endorse a policy of monetary restraint designed to prevent inflation. These remarkably contradictory positions can be reconciled only if there is faith that, by essentially occult means, monetary policy will stabilize prices without affecting the volume of producer borrowing, investment and spending.
