Perspective: On Savings
JULY 01, 1986
Men can produce very little with physical labor alone. Only when they begin to use their minds to make tools does their labor become more productive. and the development of tools starts with “rainy-day savings,” that is, by consuming less than is produced and setting aside some food, clothing, and shelter to tide the toolmaker over while he invents and produces.
Improving production is a very slow process. However, the productivity-increasing tools of inventors make it somewhat easier to consume less than is produced. Little by little producers were able to increase their savings. Instead of accumulating only “rainy-day savings,” such as excess supplies of food, clothing, and shelter, they began in time to produce capitalist savings—extra tools and machines to be used later in production. In this way our ancestors created the vast accumulations of capitalist savings on which we all rely: huge power projects, automobile plants, coal and iron mines, oil tankers and pipelines, carefully cultivated farmland, textile mills, and so on. Most of our material welfare is the outcome of the ingenuity and thrift of our ancestors.
—From Bettina Greaves’ Economics
II course at the New York Institute of Credit
“O, what a tangled web we weave, when first we practice to deceive.” In Marmion, Walter Scott wasn’t writing about economics. Nevertheless, deceit in market pricing has certainly led to “a tangled web” of waste and mal-production.
The modern economy is rife with examples of production gone awry when market prices are artificially held down or artificially supported. Wartime price controls led to empty grocery shelves and black markets. Tenants in rent-controlled apartments enjoy housing and a privileged position, while would-be tenants face a severe shortage of apartments.
Price supports, on the other hand, lead to the production of unwanted commodities. For example, the Swiss and Austrian governments pay farmers to grow wheat on the slopes of the Alps for esthetic reasons. The wheat never matures in that cold environment, but presumably tourists enjoy the fields of waving grain. In this country, we support the production of commodities that cannot be sold at the subsidized prices. Recently, when surplus dairy products became an embarrassment, our government began slaughtering 1.6 million dairy cattle. Among the latest disclosures of an artificially subsidized surplus was a wheat glut in Saudi Arabia, where the government has been paying wheat farmers almost five times the world price.
If production were left for entrepreneurs to plan, to serve consumers on the basis of free market prices, supply and demand would always tend to balance. There would then be no serious shortages of rental housing or gluts of wheat or dairy products. Those who try to deceive the pricing system fail to appreciate the valuable knowledge to be gained from freely fluctuating market prices.
Air Traffic Control
Economic Outlook, published by the Chamber of Commerce of the United States, offers an interesting comparison of private versus public management of air traffic control:
“Air traffic control in the U.S. is provided by both the Federal Aviation Administration (FAA) and by private contractors at smaller airports. For the smallest FAA tower authorization, the FAA spends about $1 million to install and about $275,000 a year to operate and maintain a tower. Pri-vate firms provide the same services for about $120,000 per year, including amortization of their original capital investment. When a private operator assumed the responsibility for operating the Farmington, New Mexico, tower, its contract was for $99,000 per year compared to the $287,000 that it had cost the FAA.”
For further insights into private versus public management, see Dale M. Haywood’s article on page 274 and Tibor R. Machan’s article on page 270.
Freeman articles are reaching a growing audience of newspaper readers around the country. John W. Som- mer’s “Disasters Unlimited” (April Freeman) has been reprinted by the Houston Chronicle, The Washington Times, and the Waterbury (Connecticut) American. An adaptation of Dennis Bechara’s “The Continuing Plight of Agriculture” (May Freeman) has appeared in the Waterbury Republican and Pacific Business News.
in Brazil, interviews and stories about FEE are becoming almost a regular feature in the popular news magazine, Visao. Latest to appear is a reprinting of William S. Kern’s “Catholic Social Teaching and the U.S. Economy” (December 1985 Freeman).
As FEE expands its publishing program, we would appreciate it if you would call our attention to any of our articles you may see. We would especially appreciate it if you would send us a clipping.
We are pleased to offer reprints of James L. Payne’s “It’s Not Our Money,” which appeared on page 213 in our June issue. Prices are 50¢ each or 25¢ each on orders for 10 or more.