Creating Capital / Money-making as an aim in business

by Frederick L. Lipman

One of the effects of a world-wide war is an enormously increased demand for labor at high and advancing wages, a condition that we might suppose would be greatly to the advantage of the laborer. But that will depend upon his own attitude and policy. From England, and from American towns here and there, we hear stories of the wage-earner on whom increasing income has had the effect of lessening the effort to work; who stops during the week when the higher wage scale has paid him the amount he is accustomed to regard as a week's earnings. Now, would it not seem natural to expect that any man encountering improved market conditions for his output, whether of commodity or service, would seek to turn the situation to advantage by increasing that output as largely as lay in his power? If, for instance, I can manufacture shoes to sell for $4.00 a pair and a change in market conditions is such that I can obtain $5.00 a pair, I would endeavor to produce more shoes in order to profit by the favorable market; and if thereafter the price should rise to $6.00 and $7.00 and $8.00 a pair, at each increment my efforts would be still further intensified. That, indeed, is the normal economic attitude. Fluctuations in the price level due to changes in the demand for a commodity are expected to affect, and do affect, the market supply. At a higher price, production is stimulated and more units of the commodity are brought to the market, both from new sources and from old sources. Under falling prices, on the other hand, the supply offered in the market would become automatically diminished.

This is an elementary commonplace in economics, yet the laborer to whom we have just referred does not seem to recognize it. He may find that he can earn in, say four days, an amount equal to his former earnings in six days and, therefore, at the end of the fourth day he quits work for the week. Now, obviously under such increasing wage scale, he might do one of three things:

He could quit at the end of the fourth day, having received a week's income.

He could continue working for the six days and use his surplus earnings for comforts, pleasures, and luxuries which previously he had been unable to afford.

He might work for the six days and save as much as possible of his excess earnings.

Now, what is the wise choice for the laborer? Leaving out of account special cases where he has a large family, or sickness at home, or is under some other disability which in his individual case would reduce his earning power or increase his minimum expenses, ought he not to work for the six days, putting aside all he could of the excess as savings for the future? It will be generally conceded that this is self-evident. If, viewing the narrow conditions under which the workman ordinarily lives, it should be claimed that during a period of unusual earnings self-gratification would be not only natural but measurably justifiable, the reply could be made that this is merely specious, involving assumption not in accord with the facts. Excuses of this kind we often make for ourselves in the endeavor to justify our indulgence in present pleasure rather than perform the irksome duty of self-restraint. The laborer whose ideals are such that he quits at the end of the fourth day is not the type of man who is going to spend the two holidays in pursuing higher aims in life; he is going to pass them in inaction, quite likely at the grog-shop. The man who fails to take advantage of the security for the future offered him and his family through the opportunity of saving from extraordinary earnings is one who is adding to the abnormal demand for such things as phonographs, jewelry, spirits, and tobacco. And this helps to explain the tremendous market for luxuries during wartime. Doubtless there are many workmen who follow a more rational course, who are reaping and storing the harvest for the comfort and security of themselves and their families during the winter of life. Could any one think that this policy involved an aim that was sordid, tending to draw them down, and away from higher considerations of life? Certainly a course of careful planning in one's affairs would be in so far a better course and on a higher plane than indulgence in idleness or shiftless expenditure of surplus for present luxuries, regardless of future need.

This case of the workmen under conditions of abnormal wages seems exceptional; yet the choice so presented to him is not very different fundamentally from the choice normally presented to all the rest of us.

The young man starting out in life may be as negligent of his opportunities as the workman who quits at the end of the fourth day. Or if he devotes himself properly to his vocation he may consume his earnings in current self-gratification. If, however, he will both concentrate on his work and practice self-restraint with the purpose of creating a saved surplus, all will agree in considering him as so far headed on the road towards success. In the case of the beginner this seems clear enough, but, after all, the same considerations apply to everybody else, whether in business or profession, beginners or experienced, young or old; to all of us is the same choice presented daily, and at our peril we must make it wisely. The physician, for instance, although he cannot afford to pay more attention to money-making than to the welfare of his patients, to his studies, to his professional ideals, must not, on the other hand, leave out of account these business duties and considerations which belong to him as an economic member of society. He must produce and must consume with his family, reasonably, decently and thriftily. He must aim at a surplus to store away for the future. These aims are, as a matter of course, secondary to his professional ideals, but there need be no conflict of duty. The point is that there exists a department of his activity devoted, and to be devoted, by him to his business affairs. In any event, as a man, a husband, a father, a citizen, he cannot escape from the responsibility of these business affairs. They must be conducted in some way. Shall it be well or ill? If he fails herein it may involve failure in any or all these relations—as a man, husband, father, citizen. And obviously these same considerations apply to all other men and women, whatever may be their professions, occupations, or major interests in life. Why do so many allow themselves to be dragged along, living from hand-to-mouth, in fear of the knock of the bill collector at the door? Why do we associate money questions with that which is unhappy, unfortunate, down-at-the-heel, with fear and misery? Barring mere accidents, it is because we are careless, shiftless; because we do not face the problem manfully, practice reasonable self-restraint, consider the subject in its complexity and decide upon, and carry out, a constructive programme. Even if one happens to possess wealth, he is not exempt. Indeed, large wealth involves still greater necessity for care in the conduct of one's pecuniary affairs. The rich man is said to have perplexities and responsibilities which are unknown to those in moderate circumstances. In fine, everyone must face these money questions or be driven by them.

Those who live on fixed incomes, whether from salary or investment, may find it impossible to make any direct attempt to make money; for them the problem is to be confronted and mastered on its other side, the side of spending and saving, that the income may be apportioned as wisely as possible for the purposes of living. But during the last few years a new factor has entered into the money problems of the individual, often adding to his trials, often adding to his self-made excuses, and especially burdensome to the man on fixed income. We refer to the high cost of living. Here it is, however, that the wage earner can do something in self-protection, for the level of prices may be in some measure affected by his policy in handling his earnings.

A period of high wages is accompanied by and is in some sense an incident of a high level of prices. Now we recognize high wages, considered in itself, as beneficial to the community, for it gives opportunity, at least, for comforts in life and a provision for the future that otherwise would be lacking. But if prices have advanced as much as wages, the apparent improvement to the laborer is merely in nominal wages, while that which alone can benefit him is higher real wages. Now let us see what the workman could do to advance real wages as contrasted with nominal wages.