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.4Even 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.
