Wealth and the "Capitalistic System"
INFLATION A THREAT TO THE THRIFTY
By JAMES W. GERARD, Diplomat and Lawyer
Broadcast over WINS, October 4, 1942
Vital Speeches of the Day, Vol. IX, pp. 120-122.
LET us take up today wealth and the "capitalistic system," which the unthinking say must be done away with. What is wealth? We know that it is something we all desire, but what is it?
Wealth is power in exchange. If you possess an article, can you obtain for it some other article owned by another or can you exchange it for the labor of another? Of course, the ability to labor is always in a sense wealth. It will obtain for you some article which you desire to possess or the labor of another. You may exchange your labor as a shoemaker for the labor of a fisherman, but, leaving this aside, wealth, in the sense of a material object, is power in exchange.
If the article or quality which you possess does not meet that definition, it is not wealth. Maybe you have a picture or a piece of shining metal or a bright stone which you have found. If you can exchange it for something possessed by another, if someone is willing to work in your garden, even a few minutes, in exchange for that article, then that article is wealth.
And in talking about all this, I am presuming that we live in a place where the right of private property exists. Thatis one of the most primitive rights or instincts—something inborn in all of us. Wealth is capital.
Wealth, of course, may be acquired in improper ways,—the hold-up man who robs your cash drawer or the corporation director who steals the money of the corporation, each acquires wealth, but acquires it by violating the laws of God and of man.
Wealth results primarily and properly from hard work and self denial, and as that sound philosopher and practical University President, Dr. Nicholas Murray Butler, had written, there is no such thing as the "capitalistic system"—that is an empty and overworked phrase.
I remember a good example of the origin of wealth given, I think, by General Walker, author of a book of political economy. A tribe of primitive savages live by fishing on the shores of the sea. Each one standing on the rocks with hook and line, or spear, or net, obtains about enough to keep himself and his family alive; but one of them wiser than the rest, notices that about half a mile off shore there is a reef about which the fish seem jumping in great numbers. So this wise savage, on days which he has caught more fish than he needs, dries his surplus in the sun until he has enough dried fish to keep him and his family for several weeks. Then he goes into the forest and makes a rough canoe and in that canoe paddles out to the reef, and catches a greater quantity of fish than any of his friends, who work from the shore.
His self denial and enterprise have rewarded him. He is now a capitalist, he can rent out his canoe for a certain part of the catch and in the time he thus wins, he can build a better hut in the forest or otherwise profitably employ his time or he can sit down and enjoy his rest and be denounced as a wicked capitalist by the politicians among the savages who are to lazy to work and rake and scrape, save and dry their fish and build a similar canoe.
At any event he has added to the total amount of fish caught by his community and is thus a public benefactor. Of course, in time, others build canoes and then our budding capitalist may have to go to work again, but always it is hard work, self denial, saving and forethought which are the true basis of wealth.
If our canoe builder decides to live on the proceeds of the rent of his canoe he has become a sedentary capitalist, his property is sedentary capital and of that I shall speak in a few minutes.
Of course, as life in our fishing community becomes more complicated some savages will save some of their dried fish and pay it for instance to someone of their number who on soft moonlight nights will entertain by singing or divert them by dancing in front of the evening fire. The Deanna Durbin of the fishing village does not have to fish or paddle or even cut bait. The gift of a beautiful voice, the equivalent of wealth, brings her enough dried fish to provide handsomely for her needs and even gives her a surplus with which to buy shining stones which some explorer-minded fisherman, working in the time given him by his surplus of dried fish, may have found in the forest.
Dr. Butler is right—there is no capitalistic system as such—but any community which recognizes the right of private property by so doing has established what some call the "capitalistic system."
Sedentary capital, while it must exist if we recognize the right of private property, the right of a man to keep the results of his work and his self denial, is not of as much benefit to a country as capital which is alive, and enterprising always seeking, even at the risk of loss, new outlets for its use, new inventions, processes, mines, oil fields, better homes, improved methods of cultivating the land.
Once when I was talking to Alfonso, the late King of Spain, he said to me, "I want American capital to come to Spain," I said, "But, Sir, you have plenty of capital in Spain," he answered, "Yes, but it won't work; the rich here put their money in Government bonds and sit in front of a cafe, drinking wines and nibbling olives, they are unwilling to risk their money in new enterprises which might benefit the country."
And so those having a surplus must not be discouraged when they seek to risk their capital in far lands and new ventures. If taxes take from them most of their gains without compensating them for their losses, they will become like Alfonso's Spaniards. The English recognized this and what you gain as an addition to your capital is not added to your income and taxed as income, as provided by our income tax law.
In this period of high wages there is opportunity for the industrious to practice self denial and lay the foundation of a fortune.
Soon I am going to tell of the leaders of American business who started with nothing, such as the case of a poor Irish boy who landed in this country with fifty cents in his pocket and spent his first night in America sleeping on the tail of a cart in Brooklyn and yet by industry and study he had founded a great industry before he was forty-five.
Of course, if the lazy politicians and crack pots and theorists in our fishing village are in the majority and have become envious of the success of the hard workers they can get out their stone axes and decide to abolish the right of private property, in which case the whole community will gradually decay because there is no longer the great incentive to invention and hard work and self denial—that of acquiring wealth. The community may survive but it will be a drab, regimented life, with constant disputes as to whether each one is doing his share of work and ruled by the politicians of the majority who will vote themselves and their friends as salaries the lion's share of any surplus of dried fish.
If you have any property, a house, or a savings bank account, or a farm, I am sure that some refugee from Europe, some theorist here who hates to work will be glad to put an end to the so-called capitalistic system and share your farm or your money or other property with you.
As one grows older there comes the realization that envy is one of the most powerful of passions and there is a tendency in each one of us to envy those richer and to see with joy their property taken from them. Many of the unthinking chortled with joy when a Congressman in Congress cried out, soak the rich—soak the rich—well, the rich have been soaked but finally all hands have felt the heavy soaking hands of the tax gatherer.
Out in the lands of the Dakotas four great colossal heads are being cut from the living rock—Washington, Jefferson, Lincoln and Theodore Roosevelt. Three of them were rich. Washington was the rich man in the American Colonies which he freed, Theodore Roosevelt's riches enabled him to devote his life to public service, and if you ever make a pilgrimage to Monticello, the home of Thomas Jefferson, the great Democrat, you will see how beautifully, how sumptuously, even he lived.
The poorest among the four was Abraham Lincoln, although he made a good income as a lawyer. You will admit, I am sure, that he was a man of strong, solid, common sense. He had this to say about the right of private property:
"Property is the fruit of labor; property is desirable; it is a positive good in the world. That some should be rich, shows that others may become rich, and hence is just encouragement to industry and enterprise.
"Let not him who is houseless pull down the house of another, but let him work diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built."
The great problem begins to take shape—are the savings of the prudent to be destroyed? Shall the so-called capitalistic system which means the right of private property remain?
At the moment the threat of inflation is a threat to the savings of the thrifty, to those who have taken out insurance or social security, to those who buy war bonds.
A ceiling or maximum price must be placed on all commodities and on farm or food products and on wages as well.
Five million of our men are scattered over the face of the globe, from the ice clad shores of Greenland to the green hell of tropical jungles, guarding us as they fight on shark infested southern seas or convoying supplies for Russia, they dare submarines in the waters of the far north. They risk their lives on deserts and the seven seas to protect us from the worst gang of assassins and plunderers who ever set out to ensalve the world.
Before they left they thought that they had secured the future of their wives, of their little children by taking out insurance, by making deposits in savings banks, by buying government bonds. And what is happening behind their backs here at home?
Ceilings or maximum prices have been placed on most articles. If you have tin or zinc or copper or a hundred other articles you cannot sell at a price greater than that fixed by law.
There must be definite fixed ceilings placed on both farm products or food and on wages. The ceilings must go on both:—if you put a ceiling on wages and not on food products then as the cost of his food rises the workman will have a just cause of complaint and if you put a ceiling on food and not on wages then increasing wages will finally increase the price of everything the farmer buys, shoes, clothes, farm machinery, etc., and the farmer will have a just cause for complaint. The ceiling must go on both.
Our legislators are elected, some from wholly farming districts, some from industrial districts by the votes of working men. These interests clash and the chances are that compromises will be made, producing a rise in prices, and inflation which will mean that soldiers returning broken in health from the war will find, whether he be farmer or industrial worker, that the money he left in the savings banks, the interest on his war bonds, the endowment insurance which he slaved to pile up will not buy as much food, as many shoes for his children, as much clothes for him and his wife as it would have bought before he left for the front of war.
And this applies to your social security as well. Part of your savings, of your insurance, if inflation goes on, will have turned to monkey money.
I am with the President. Only a third party such as he is can decide between the claims of the farmer and the city worker and each, whether he knows it or not, will be injured by inflated prices.
The vast majority of our people are with our President in his fight against inflation. Just as he sensed the danger of Nazism to the world he has sensed the awful danger of inflation to our country. I am sure that he will not fail us.