Chapter XXIV. Prudent Consumption.
Prudent uses of wealth.—It has already been suggested that a proper use of wealth looks always beyond the present. We accumulate, not only to spend, but to spend in such a way as will give larger abilities in the future. The name prudential consumption has been given to all that use of wealth which has for its end the maintenance of individual powers at highest efficiency for the longest life and provision for a more efficient posterity with more efficient instruments of production.
It is prudential use of wealth to gather into the farm, not only such machinery in the shape of buildings, fences and roadways as will make the future labor more effective, but all possible fertility that will make the future owners of the farm a larger welfare in possession. All wealth put into the form of productive capital is prudentially consumed. All so-called permanent improvements which look to the better satisfaction of future wants fulfil the condition of prudent foresight. All public improvements are really such, when this far-seeing provision for future wants and abilities of society is made. Such methods are the genuine economic saving in which the community should be encouraged. A saving which merely stores against a future personal want contributes less to general welfare, and [pg 313] does not stimulate the natural growth of wants in the individual, which is the chief source of increasing power. The one who saves that he may have better tools with which to do more for his future satisfaction, not only adds to his physical abilities to meet his daily wants, but adds the strongest stimulant to energy in his work. The supply of ordinary wants being provided for, new wants arise.
In the spirit of prudential consumption such wants are encouraged as give greater and greater abilities. Thus the ideal of life is constantly raised, and the struggle is not for existence but for higher enjoyment and more genuine welfare. The wealth which comes in this accumulation of capital for larger accomplishment aids true philanthropy. The whole world gets more of welfare with every addition made by farmers to their working capital. In the same way all increase of capital in machinery, tools, warehouses, ships and other means of transport contribute to a philanthropy that makes society richer.
Such saving is entirely opposed to the miserly spirit which hides wealth because of mere love of possession or fear of future want. It is the true way of both spending and having, since it expends earnings for that which continues to aid in bringing larger returns to meet increasing want. That social system is most prudent for the world which accumulates productive capital without reducing any part of society to poverty. Prudence, however, requires that this capital saving be adjusted to the abilities of the community in which it is to be used. The building of an enormous factory, where [pg 314] skill has yet to be developed and where a market is wanting, would be the height of imprudence. Such waste is sometimes seen under the false stimulant of a bounty or a restrictive tariff. Just so, great public improvements upon rivers, harbors and highways are a part of economy and prudent investment of wealth only when a community is able to use them to advantage. The test of prudence in capital saving is in its nice adjustment to the abilities of the users.
Prudent adjustment of capital.—A still further adjustment is required by prudence between the capital put into fixed forms and the circulating capital needed for best use of the more lasting machinery. A farmer is said to be stock poor when he overloads his farm or crowds his farm buildings with growing stock. Having all his capital in stock, he is unable to handle it to advantage, and must readjust his capital in live stock to his capital in the farm and machinery by selling some of his stock and adding to the value of his farm. On the other hand, many a farmer is land poor, where the bulk of his capital is invested in land, while he cannot command circulating capital in stock and wages sufficient to make the land useful. He needs, in the spirit of prudence, to sell some of his land for the sake of current funds to invest in live stock and in labor. The same principle applies to all investments of capital. A railroad may so exhaust the funds of the community in building it that it cannot be fairly manned for work. Sometimes a whole nation invests so largely in permanent forms of capital as to bring distress and poverty from want of means to use the great machine.
Prudence also requires a further adjustment between the amount of labor directly producing wealth and that employed in what may be called the arts of consumption, contributing directly to personal comfort and enjoyment. The neatness of a farmer's yard, outbuildings, fences and machinery is a part of his welfare. It also indicates a certain thrift, which enhances the value of the farm. But it is a proper sign of such thrift when it grows naturally out of the productive energy employed upon the crops and the stock. The wealth used in maintaining this neatness is not wasted, but it will not reproduce itself. It must be supplied from other sources in direct production. All services in the household, in contributing to bodily comfort of the family, make an essential part of human welfare, but prudence requires such an adjustment of these services to the total wealth-producing energy that they may be maintained without reducing the total power. All public expenditures in the care of streets and parks are an essential to welfare so long as the sources of wealth production are kept the more active from such advantages. The test of prudence in all such adjustment is the increase of power in wealth-production, along with increasing welfare.
Provision for future wants.—True prudence is largely foresight, and so is the enterprise of speculative energy which provides any product for a future market. No more careful adjustment is necessary than that which secures such a product of farm or factory as the world will need when it reaches its actual market. The greatest wisdom is needed in studying the conditions of a [pg 316] community with reference to its future wants, and the supply actually accumulating for meeting those wants.
Farmers need, as truly as any producers, to know the wants of the world for which they are producing food. The crops they plant in the spring will actually be consumed in large measure during the following year. Prudence suggests that they plant such crops as will be most in demand. If they judge by the market today, they are in danger of two errors: first, of overestimating the future demand, which may be satisfied before the new crop comes; second, of diverting from ordinary staple crops too large a portion of the crop-raising force. Common experience has taught that a high price of hops or onions or broom corn has almost certainly wrought a reduction of the price for succeeding crops below the normal cost. Still larger foresight is needed with reference to the raising of live stock, which requires more than a single season's investment of capital. To stock a farm with hogs, sheep, cattle or horses, requires from one to five years of accumulated capital. The record of farm stock shows successive waves of such production in direct opposition to prudence. (Chart No. [4], p. [83].)