Austerity

“ The strategies, policies and measures adopted in the national recovery effort have sought to maximize the effects of this economic recovery in the industrial world on the national economy, at the same time that austerity measures sought to contain the country’s balance of payments deficit. ”

“ The coming months and years will determine whether we can have development under the rigors of financial discipline and austerity, whether we can bring about not just temporary relief and stability but sustained and authentic economic recovery and growth. ”

“ We cannot expect to bring about the degree of economic improvement which we have set for our country without diverting a higher proportion of the national income to cap­ital investment. Such a course inescapably entails our fore­going of less essential consumption and wasteful investment. This implies a policy of voluntary austerity on the part of our people since we are a democratic nation. Sacrifice and a policy of austerity will have to be adopted temporarily on many fronts. ”

“ These loans, being drawn from capital (in lieu of taxes, which would generally have been paid from income, and made up in part or altogether by increased economy) must, according to the principles we have laid down, tend to impoverish the country: yet the years in which expenditure of this sort has been on the greatest scale, have often been years of great apparent prosperity: the wealth and resources of the country, instead of diminishing, have given every sign of rapid increase during the process, and of greatly expanded dimensions after its close. ”

“ Unproductive expenditure of what was destined to be expended productively, they always characterise as a squandering of resources, and call it profusion and prodigality. The productive expenditure of that which might, without encroaching upon capital, be expended unproductively, is called saving, economy, frugality. Want, misery, and starvation, are described as the lot of a nation which annually employs less and less of its labour and resources in production; growing comfort and opulence as the result of an annual increase in the quantity of wealth so employed. ”

“ Let the once-opulent trader, let the starving mechanic, bear witness to this truth, that our commerce has been declining with hasty steps for these last ten years:—Let the numerous half famished poor which we meet at every turn in our streets; let the needy gentry, whose honest independent ancestors have handed down to them a moderate income, and who find that income yearly sinking from bare sufficiency to poverty, bear witness, that the high price of all the necessaries of life, with the oppressive burden of our taxes, are very weighty evils. ”

“ Now, if in a period of prosperity the rate of consumption should rise pari passu with the rate of production, there is no inherent reason why the prosperity might not continue indefinitely. But in modern societies, a considerable portion of the wealth produced belongs to a small class. In active times their incomes rise more rapidly than their consumption and the surplus income is perforce saved. There results for the community as a whole a slight deficiency of spending and a corresponding excess of saving. ”

“ But let them work ever so efficiently, the increasing population could not, as we have so often shown, increase the produce proportionally: the surplus, after all were fed, would bear a less and less proportion to the whole produce, and to the population: and the increase of people going on in a constant ratio, while the increase of produce went on in a diminishing ratio, the surplus would in time be wholly absorbed; taxation for the support of the poor would engross the whole income of the country ”

“ Price give an instance where any civilized nation, unless at war, or suffering from some great calamity, has impaired its capital by over-consumption? Can he name a period when, at the end of any year, with the exceptions mentioned, England has possessed less wealth than at the beginning of that year? ”

“ But these savings of the past were accumulated, after all, by comparatively few of the workers; not by the many, who lived from hand to mouth, happy-go-lucky, spending and enjoying in time of abundance, suffering in time of poverty and stress, making no provision even for their own future, still less recognizing any duty to their country or to posterity to produce economically and regulate their expenditure wisely so as to carry forward a surplus. ”

“ Thus, where the value of land is low, there may be a small production of wealth, and yet a high rate of wages and interest, as we see in new countries. And, where the value of land is high, there may be a very large production of wealth, and yet a low rate of wages and interest, as we see in old countries. And, where productive power increases, as it is increasing in all progressive countries, wages and interest will be affected, not by the increase, but by the manner in which rent is affected. ”

“ But all rates of interest or modes of profit on capital, which render possible the rapid accumulation of fortunes, are simply forms of taxation, by individuals, on labor, purchase, or transport; and are highly detrimental to the national interests, being, indeed, no means of national gain, but only the abstraction of small gains from many to form the large gain of one. ”

“ Those who toil for daily wages are beginning to understand that capital, though sometimes vaunting its importance and clamoring for the protection and favor of the Government, is dull and sluggish till, touched by the magical hand of labor, it springs into activity, furnishing an occasion for Federal taxation and gaining the value which enables it to bear its burden. And the laboring man is thoughtfully inquiring whether in these circumstances, and considering the tribute he constantly pays into the public Treasury as he supplies his daily wants, he receives his fair share of advantages. ”

“ Thus, the unsatisfied desire for wealth, the competition of labor and capital for employment, would insure the extension of the margin of production, we will say to 18, and thus rent would be increased by the difference between 18 and 20, while wages and interest, in quantity, would be no more than before, and, in proportion to the whole produce, would be less. There would be a greater production of wealth, but land owners would get the whole benefit, subject to temporary deductions, which will be hereafter stated. ”

“ Do the ratepayers ever think that the seven millions of annual poor rate would in one single year place every recipient of Poor Law relief, old and young, man, woman and child, on the shores of America?—would pay all expenses, and leave them one or two pounds their pockets to begin the world with? ”

“ Chapter XIV The persistence of poverty amidst advancing wealth Look over the world today. In countries the most widely differing - under conditions the most diverse as to government, as to industries, as to tariffs, as to currency - you will find distress among the working-classes; but everywhere that you thus find distress and destitution in the midst of wealth you will find that the land is monopolized; that, for its use by labour, large revenues are extorted from the earnings of labour. ”

“ Within the vitals of the economic system upon which it subsists the plutocracy has found a source of never-ending torment in the form of a constantly increasing surplus.
2. The Knotty Problem of Surplus
The present system of industry is so organized that the worker is always paid less in wages than he creates in product. A part of this difference between product and wages goes to the upkeep and expansion of the industry in which the worker is employed. Another part in the form of interest, dividends, rents, royalties and profits, goes to the owners of the land and productive machinery. ”

“ The other phenomenon from which the notion of a general excess of wealth and superfluity of accumulation seems to derive countenance, is one of a more permanent nature, namely, the fall of profits and interest which naturally takes place with the progress of population and production. The cause of this decline of profit is the increased cost of maintaining labour, which results from an increase of population and of the demand for food, outstripping the advance of agricultural improvement. ”

“ As the public revenue is all derived from those who labour, and as it can come from no other persons, if the prosperity and happiness of the subject were a mere matter of indifference, which it cannot be supposed to be; still it would be an object for government to preserve his resources undiminished. It was our lot, in another chapter, to mention the enormous increase of the poor's rate, which was in part attributed to the general increase of wealth ”

“ THE REMEDIES FOR LOW WAGES FURTHER CONSIDERED.
§ 1.⁠By what means, then, is poverty to be contended against? How is the evil of low wages to be remedied? If the expedients usually recommended for the purpose are not adapted to it, can no others be thought of? Is the problem incapable of solution? Can political economy do nothing, but only object to everything, and demonstrate that nothing can be done? ”

“ Because for a long period before the crash our production had been outrunning our consumption. The workers were producing more than they could buy with the wages they received. Our predicament is primarily due to the inequitable distribution of the earnings of industry as between capital and labor. ”

“ The labourer may obtain greater comforts; wages in kind real wages may rise. Or the progress of population may force down cultivation to inferior soils, and more costly processes; thus raising the cost of production, the value, and the price, of the chief articles of the labourer's consumption. On either of these suppositions, the rate of profit will fall. ”

“ Up to the extent of the savings of the nation, expenditure on railways can do no economical or financial harm; and these invaluable developers of wealth may on such a basis be rationally acquired for the public good. Any outlay made out of savings, be what it may, is innocent of mischief; it may do no good, but it does not impoverish. But what are savings? The surplus of wealth made over wealth consumed. If it is turned into capital and applied to increased production, the nation becomes richer; if it is expended on any luxury or any folly, the nation is where it is. ”

“ The influence of an accumulating surplus upon the credit system of the country, producing dangerous extensions and ruinous contractions, fluctuations in the price of property, rash speculation, idleness, extravagance, and a deterioration of morals, have taught us the important lesson that any transient mischief which may attend the reduction of our revenue to the wants of our Government is to be borne in preference to an over-flowing treasury. ”

“ Those whose degree of providence is below the usual standard, become impoverished, their capital perishes, and makes room for the savings of those whose effective desire of accumulation exceeds the average. These become the natural purchasers of the lands, manufactories, and other instruments of production owned by their less provident countrymen. ”

“ The other great source, from whence this calamity arises, is certainly our vast increase of riches; the causes and consequences of which, I will now briefly consider. That our riches are in fact amazingly increased within a few years, no one, who is in the least acquainted with this country, can entertain a doubt: whoever will cast his eyes on our public works, our roads, our bridges, our pavements, and our hospitals, the prodigious extension of our capital, and in some proportion that of every considerable town in Great Britain ”

“ A steady and constant Revenue drawn from sources that represent the prosperity of the nation,—a Revenue that grows with the growth of national wealth, and is so adjusted to the expenditures, [Pg 445] that a constant and considerable surplus is annually left in the Treasury above all the necessary current demands, a surplus that keeps the Treasury strong, that holds it above the fear of sudden panic, that makes it impregnable against all private combinations, that makes it a terror to all stock-jobbing and gold-gambling,—this is financial health. ”

“ If it shall be found that for one year the net earnings have been less than 31⁄2 per cent., and for two years less than 41⁄2 per cent., unless it shall be proven that this deficit has been fostered by neglect of due economy, or by extravagant expenditure as aforesaid, the rates shall be raised. ”

“ That, fellow-citizens, is the feast to which the advocates of inflation invite you so blandly. That is the revival of business, that is the wonderful development of prosperity which they promise you in such glowing colors. That is the drift of the policy which is to set our factories whirling, to make our farmers rich, to give our laborers abundance of work and unprecedented wages, to put bread into the mouths of the needy. ”

“ There are farmers who complain of the low prices of agricultural products; laboring men complaining of a lack of remunerative employment; men in all sorts of pursuits complaining of a general business stagnation and of a scarcity of money. In some parts of the country, especially the South and West, there are many people complaining of a want of capital and a too high rate of interest. ”

“ I grant, then, that the remission of the assessed taxes might be productive of great individual benefit; I allow that it would be beneficial to individuals, that they should have so much more income at their own free disposal; and I am ready further to allow, that the expenditure of this income would, in particular instances, create a great extra demand for labour and commodities. But this is not the whole question.—Would the demand for commodities and labour, looking to the community at large, be increased? ”