Saving is not the accumulation of quarters of game, kernels of wheat, or pieces of money. The storing up of materials and consumers' goods of this kind, which is necessarily confined within very narrow limits, represents saving only for man in isolation. All that we have already said about value, services, and relative wealth shows us that, socially speaking, saving, though of kindred origin, follows a different course and assumes a different character.
Saving is voluntarily postponing until a later date our payment from society, in the form of equivalent services, for services previously rendered it. For example, a man may every day, from the time he is twenty until he is sixty, perform for his fellow men business and professional services equal, let us say, to four, while asking in return services equal only to three. In that case he is in the position of being able, in his old age, when he can no longer work, to receive from society payment for one-fourth of all his labor over the previous forty years.
The fact that his tokens of acknowledgment, which he has received and accumulated through the years, take the form of bills of exchange, promissory notes, bank notes, and specie, is an entirely secondary and nonessential consideration. It has reference only to the means of execution. It can change neither the nature nor the consequences of saving. The illusion created by the fact that money is involved is none the less an illusion, although nearly all of us fall victim to it.
Indeed, it is very difficult for us to resist the error of believing that the saver takes values out of circulation and, consequently, does a certain degree of harm to society.
In this matter we are confronted with one of those seeming contradictions that run counter to logic, one of those barriers that appear to be an insurmountable obstacle to progress, one of those painful discords that lead us to doubt either the omnipotence or the loving-kindness of the Author of all things.
On the one hand, we know that humanity cannot prosper, improve, achieve for itself greater leisure and stability, and consequently intellectual and moral progress, unless it constantly adds great amounts to its existing store of capital. On the rapid increase in capital also depend the demand for labor, the raising of wage rates, and consequently progress toward equality.
But, on the other hand, is not saving the opposite of spending, and if he who spends encourages and stimulates labor, does not he who saves do the contrary? If everybody began to economize as much as possible, employment would fall off correspondingly and would become completely nonexistent if one-hundred-percent saving were possible.
What advice can we therefore give to mankind? And what valid moral precepts can political economy offer, when apparently it can conclude with nothing better than this contradictory and disastrous alternative: If you do not save, new capital will not be formed, and capital will be used up. There will be an increasing supply of workers, but the fund out of which they are to be paid will remain unchanged. The workers will enter into competition with one another; they will offer their services at lower rates; wages will be depressed; and mankind will suffer a decline in these respects. There will be a decline in another respect as well, for if you do not save, you will have no bread for your old age; you will not be able to provide for a more rewarding career for your son, a dowry for your daughter, or any expansion for your business, etc. If you save, you reduce the funds available for wages, you injure a great number of your fellow men, you deal a heavy blow to labor, which is everywhere the source of human satisfactions; consequently, you reduce mankind's standard of living.
These disturbing contradictions disappear when we view them in the light of the explanation that I have given of saving—an explanation based on the theories to which our study of value has led us.
Services are exchanged for services.
Value is the appraisal of two services compared with each other.
Accordingly, saving is permitting some period of time to intervene between the rendering of a service and the receiving of an equivalent service, or, in more general terms, interposing an interval of time between the service rendered and the service received.
Now, in what way does an individual harm society or injure labor when he postpones demanding from society a service to which he is entitled? I shall demand a year from now a value that I could demand now. Thus, I give society an extra year in which to pay. During that time labor can continue to be performed and services to be exchanged just as if I did not exist. I have not disrupted anything. On the contrary: I have added one more satisfaction to those my fellow men enjoy, and for a year they enjoy it gratis.
Gratis is not the word, for I must complete my description of the phenomenon.
The time interval between the two services is itself the subject of bargaining and exchange, for it possesses value. Herein lie the origin and the explanation of interest.
For example, a man performs a service now, but he proposes to receive the equivalent service ten years from now. This represents a value whose immediate enjoyment he forgoes. Now, it is characteristic of value to be able to assume all possible forms. In return for a given value, one may be sure of obtaining any imaginable service, whether productive or unproductive, of equal value. The person who defers for ten years his demand for the payment of an account due him defers not only the enjoyment of a satisfaction but the possibility of turning this value to productive use. For this reason he will find people in the world who are interested in negotiating with him for this deferment. Someone will say to our thrifty friend: "You have the right to receive immediate payment for a certain value, and it suits your convenience not to collect it until ten years from now. Very well, for these ten years transfer your claim to me; let me act in your place and stead. I shall collect the value which is owed you; I shall put it to productive use for ten years, and repay you when the debt falls due. In this way you will be doing me a service, and since a service has a value that is arrived at by comparing it with another service, it remains only for us to appraise the service that I seek from you and to set its value. Once this point has been discussed and settled, I shall be required to return to you, when the debt falls due, not only the value of the service owed you but also the value of the service you are going to do me."
The value of this temporary transfer of values previously saved is called interest.
For the same reason that a third party may desire that, in return for a service, a given value previously saved be transferred to him, so the original debtor may also request the same transfer. In either case this is called asking for credit. Granting credit is allowing time for the repayment of a value; it is surrendering in favor of another person one's own enjoyment of the value; it is rendering a service; it is acquiring the right to an equivalent service in return.
But to revert to the economic effects of saving: Now that we know all the details of this phenomenon, it is very evident that it in no wise harms industry in general or human labor. Even if the person making the saving received cash in exchange for the services he had rendered, and hoarded it, he would be doing society no harm, since he was able to collect these values from it only by contributing equal values to it. I must add that this kind of hoarding is unlikely, exceptional, abnormal, for it is contrary to the self-interest of those who indulge in it. Pieces of money in a man's hand mean: He who possesses us has rendered services to society and has not yet been paid for them. Society has placed us in his hands as a token. We are at one and the same time an acknowledgment, a promise, and a guarantee. On the day he chooses, he may, by producing and surrendering us, receive from society the services to which he is entitled.
Now, this man is not pressed by any urgent need. Does it follow that he will hoard his money? No, since, as we have seen, the time interval between the two services exchanged is itself negotiable. If our thrifty friend proposes to go for ten years without claiming from society the services due him, it is to his interest to name a substitute in order to increase the original value owed him by the value of this special service. Saving, therefore, in no way implies actual hoarding.
Let moralists no longer be dismayed by this consideration.
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