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_Barbara Weinstock Lectures on The Morals of Trade_

HIGHER EDUCATION AND BUSINESS STANDARDS.
By WILLARD EUGENE HOTCHKISS.

CREATING CAPITAL: MONEY-MAKING AS AN AIM IN BUSINESS.
By FREDERICK L. LIPMAN.

IS CIVILIZATION A DISEASE?
By STANTON COIT.

SOCIAL JUSTICE WITHOUT SOCIALISM.
By JOHN BATES CLARK.

THE CONFLICT BETWEEN PRIVATE MONOPOLY AND GOOD CITIZENSHIP.
By JOHN GRAHAM BROOKS.

COMMERCIALISM AND JOURNALISM.
By HAMILTON HOLT.

THE BUSINESS CAREER IN ITS PUBLIC RELATIONS.
By ALBERT SHAW.




CREATING CAPITAL

MONEY-MAKING AS AN AIM IN BUSINESS



By

FREDERICK L. LIPMAN



BOSTON AND NEW YORK
HOUGHTON MIFFLIN COMPANY
_The Riverside Press Cambridge_
1918

COPYRIGHT, 1918, BY THE REGENTS OF THE
UNIVERSITY OF CALIFORNIA

ALL RIGHTS RESERVED

_Published March 1918_


_The Riverside Press_
CAMBRIDGE. MASSACHUSETTS
U. S. A




BARBARA WEINSTOCK
LECTURES ON THE MORALS OF TRADE


This series will contain essays by representative scholars and men of
affairs dealing with the various phases of the moral law in its
bearing on business life under the new economic order, first delivered
at the University of California on the Weinstock foundation.




CREATING CAPITAL

MONEY-MAKING AS AN AIM IN BUSINESS


The object of this paper is to discuss money-making; to examine its
prevalence as an aim among people generally and the moral standards
which obtain among those who consciously seek to make money.

The desire to make money is common to most men. Stronger or weaker, in
some degree it is present in the mind of nearly every one. Now, how
far does this desire grow to be an aim or object in our lives, and to
what extent is such an aim a worthy one?

The typical money-maker as commonly pictured in our imagination is a
narrow, grasping, selfish individual who has chosen to follow lower
rather than higher ideals and who often is tempted, and always may be
tempted, to employ illegitimate means for the attainment of his ends.
The aims he has adopted are made to stand in opposition to the
practice of certain virtues. Thus we contrast profits and patriotism;
enriching one's self and philanthropy; getting all the law allows and
justice; taking advantage of the other fellow and honesty; becoming
engrossed in acquisition and love of family. Now, such contrasts
obviously prove nothing more than that money-making is and would be a
vicious aim if pursued regardless of these virtues, and it could well
be replied that consideration of patriotism, philanthropy, love of
family, etc., must in themselves impel one to earn and to save. "The
love of money is the root of all evil" implies an exclusive devotion
to acquisition that may well be criticized. But aside from this there
is no doubt that amid the confused ideas held on the subject, aiming
to make money is commonly regarded as in some sort of antagonism to
the social virtues.

That there are other sides to the picture is recognized, however, even
by the loose thought of the day. The man who earns his living, for
instance, it views as one who in so far is performing a fundamental
duty. Indeed, the world scorns him who cannot or will not support
himself and his family. But this is only to say that one must work
to-day to meet the expenditures of to-day. Is this the limit? Is it a
virtue for him to work in order to spend, but a vice for him to work
in order to save? What are the considerations to be observed by a man
in deciding whether or not he should adopt money-making--that is, the
acquisition of a surplus beyond his current needs--as one of his
definite aims in life?

One consideration relates to our country. The United States is now
understood to be spending about $25,000,000 per day in carrying on the
war. In the last analysis this amount must be paid out of the past
savings and the savings from current earnings of the people of the
United States. The wealth of the nation consists mainly of the sum of
the wealth of its citizens. We are therefore told to seek increased
earnings and to economize in our expenditures in order to enhance the
national wealth. The duty here is perfectly clear, but even if we did
not have war conditions to teach us as a patriotic responsibility the
necessity of earning and saving a surplus, the obligation would still
be there. We owe a similar debt to our state and to our city or
district. And nearer still comes the duty to one's family and to one's
own future, the duty of providing for the rainy day, for old age. And
it will be observed that money-making in this sense is directed to the
acquisition of _net_ income, it relates to that portion of one's
earnings which is saved from current expenditure and becomes capital.
Then we must also consider the duty to society. As we look out upon the
surrounding evidences of civilization--buildings and railroads and
highly cultivated fields, the machinery of production and distribution,
the shops full of useful commodities--and then cast our thought
backward to a time not very many years ago when all this country was a
natural wilderness, we may begin to realize the magnitude of the
wealth, the capital, that has come into being since then, every
particle of which is due to the earnings and savings of somebody, to
the surplus not consumed by the workers of the past, their unexpended
and unwasted net balances year by year. Universities, churches,
libraries, parks, are included in the wealth thus handed down to us.
Our lives to-day may be richer and broader through this inheritance
created by the industry and abstinence of our forefathers. Their
business careers, now closed, we regard as the more successful in that
they earned and saved a surplus, that they had a _net_ income to show
as the result of their work.

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. As far as this majority is
concerned we might yet be living among rocks and trees, without
shelter, lacking sure supplies of food, with fig leaves to cover our
nakedness. And to-day the same conditions obtain. How many persons are
to be found among one's acquaintance who feel and act upon any
responsibility for doing their "bit" in the creation of capital? Very
few. Rather than exert himself to work with this in view, on the one
hand, and to abstain from unnecessary consumption, on the other hand,
the ordinary man will make to himself every excuse. He will contemn
money-making as a sordid aim, readily exaggerating itself into a vice;
he will dwell upon the obligations and other considerations of a
higher life, this being defined as something generous and noble, a
something compared with which money-making cannot be regarded as a
worthy object but must be included in the class of unpleasant
necessities, not to say indecencies, which ought to be relegated to
the background of life; he will summon up pictures of extreme poverty,
where any money received must be expended forthwith to meet urgent
needs, as justifying that which in his case is the gratification of
shiftless indulgence. Above all, this typical individual will not
accept and act upon the idea that his affairs, his small income and
expenditure, have any bearing upon the prosperity and progress of his
country. The most he will keep before him is that he should pay his
bills, and perhaps in some few cases, will extend the notion to the
future to include provision for the bills and possible emergencies
then to be met by himself and his family. Nor is this improvident
attitude confined to the young, to the professional and the other
non-business classes. In the business world we see it all around us;
among those who "work for a living," among clerks and employees and
among the so-called laboring classes it appears to be the normal
attitude. People who work for salaries or wages seem characteristically
to use up all their earnings in their current expenditure, to live up
to their incomes without any serious attempt to save. If they pride
themselves upon trying to keep out of debt, it is as much as they
expect of themselves, and among them the man who attempts to go beyond
this in his money affairs is certainly the exception.

One of the effects of a world-wide war is an enormously increased
demand for labor at high and advancing wages, a condition that we
might suppose would be greatly to the advantage of the laborer. But
that will depend upon his own attitude and policy. From England, and
from American towns here and there, we hear stories of the wage-earner
on whom increasing income has had the effect of lessening the effort
to work; who stops during the week when the higher wage scale has paid
him the amount he is accustomed to regard as a week's earnings. Now,
would it not seem natural to expect that any man encountering improved
market conditions for his output, whether of commodity or service,
would seek to turn the situation to advantage by increasing that
output as largely as lay in his power? If, for instance, I can
manufacture shoes to sell for $4.00 a pair and a change in market
conditions is such that I can obtain $5.00 a pair, I would endeavor to
produce more shoes in order to profit by the favorable market; and if
thereafter the price should rise to $6.00 and $7.00 and $8.00 a pair,
at each increment my efforts would be still further intensified. That,
indeed, is the normal economic attitude. Fluctuations in the price
level due to changes in the demand for a commodity are expected to
affect, and do affect, the market supply. At a higher price,
production is stimulated and more units of the commodity are brought
to the market, both from new sources and from old sources. Under
falling prices, on the other hand, the supply offered in the market
would become automatically diminished.

This is an elementary commonplace in economics, yet the laborer to
whom we have just referred does not seem to recognize it. He may find
that he can earn in, say four days, an amount equal to his former
earnings in six days and, therefore, at the end of the fourth day he
quits work for the week. Now, obviously under such increasing wage
scale, he might do one of three things:

He could quit at the end of the fourth day, having received a week's
income.

He could continue working for the six days and use his surplus
earnings for comforts, pleasures, and luxuries which previously he had
been unable to afford.

He might work for the six days and save as much as possible of his
excess earnings.

Now, what is the wise choice for the laborer? Leaving out of account
special cases where he has a large family, or sickness at home, or is
under some other disability which in his individual case would reduce
his earning power or increase his minimum expenses, ought he not to
work for the six days, putting aside all he could of the excess as
savings for the future? It will be generally conceded that this is
self-evident. If, viewing the narrow conditions under which the
workman ordinarily lives, it should be claimed that during a period of
unusual earnings self-gratification would be not only natural but
measurably justifiable, the reply could be made that this is merely
specious, involving assumption not in accord with the facts. Excuses
of this kind we often make for ourselves in the endeavor to justify
our indulgence in present pleasure rather than perform the irksome
duty of self-restraint. The laborer whose ideals are such that he
quits at the end of the fourth day is not the type of man who is going
to spend the two holidays in pursuing higher aims in life; he is going
to pass them in inaction, quite likely at the grog-shop. The man who
fails to take advantage of the security for the future offered him and
his family through the opportunity of saving from extraordinary
earnings is one who is adding to the abnormal demand for such things
as phonographs, jewelry, spirits, and tobacco. And this helps to
explain the tremendous market for luxuries during wartime. Doubtless
there are many workmen who follow a more rational course, who are
reaping and storing the harvest for the comfort and security of
themselves and their families during the winter of life. Could any one
think that this policy involved an aim that was sordid, tending to
draw them down, and away from higher considerations of life? Certainly
a course of careful planning in one's affairs would be in so far a
better course and on a higher plane than indulgence in idleness or
shiftless expenditure of surplus for present luxuries, regardless of
future need.

This case of the workmen under conditions of abnormal wages seems
exceptional; yet the choice so presented to him is not very different
fundamentally from the choice normally presented to all the rest of
us.

The young man starting out in life may be as negligent of his
opportunities as the workman who quits at the end of the fourth day.
Or if he devotes himself properly to his vocation he may consume his
earnings in current self-gratification. If, however, he will both
concentrate on his work and practice self-restraint with the purpose
of creating a saved surplus, all will agree in considering him as so
far headed on the road towards success. In the case of the beginner
this seems clear enough, but, after all, the same considerations apply
to everybody else, whether in business or profession, beginners or
experienced, young or old; to all of us is the same choice presented
daily, and at our peril we must make it wisely. The physician, for
instance, although he cannot afford to pay more attention to
money-making than to the welfare of his patients, to his studies, to
his professional ideals, must not, on the other hand, leave out of
account these business duties and considerations which belong to him
as an economic member of society. He must produce and must consume
with his family, reasonably, decently and thriftily. He must aim at a
surplus to store away for the future. These aims are, as a matter of
course, secondary to his professional ideals, but there need be no
conflict of duty. The point is that there exists a department of his
activity devoted, and to be devoted, by him to his business affairs.
In any event, as a man, a husband, a father, a citizen, he cannot
escape from the responsibility of these business affairs. They must be
conducted in some way. Shall it be well or ill? If he fails herein it
may involve failure in any or all these relations--as a man, husband,
father, citizen. And obviously these same considerations apply to all
other men and women, whatever may be their professions, occupations,
or major interests in life. Why do so many allow themselves to be
dragged along, living from hand-to-mouth, in fear of the knock of the
bill collector at the door? Why do we associate money questions with
that which is unhappy, unfortunate, down-at-the-heel, with fear and
misery? Barring mere accidents, it is because we are careless,
shiftless; because we do not face the problem manfully, practice
reasonable self-restraint, consider the subject in its complexity and
decide upon, and carry out, a constructive programme. Even if one
happens to possess wealth, he is not exempt. Indeed, large wealth
involves still greater necessity for care in the conduct of one's
pecuniary affairs. The rich man is said to have perplexities and
responsibilities which are unknown to those in moderate circumstances.
In fine, everyone must face these money questions or be driven by
them.

Those who live on fixed incomes, whether from salary or investment,
may find it impossible to make any direct attempt to make money; for
them the problem is to be confronted and mastered on its other side,
the side of spending and saving, that the income may be apportioned as
wisely as possible for the purposes of living. But during the last few
years a new factor has entered into the money problems of the
individual, often adding to his trials, often adding to his self-made
excuses, and especially burdensome to the man on fixed income. We
refer to the high cost of living. Here it is, however, that the wage
earner can do something in self-protection, for the level of prices
may be in some measure affected by his policy in handling his
earnings.

A period of high wages is accompanied by and is in some sense an
incident of a high level of prices. Now we recognize high wages,
considered in itself, as beneficial to the community, for it gives
opportunity, at least, for comforts in life and a provision for the
future that otherwise would be lacking. But if prices have advanced as
much as wages, the apparent improvement to the laborer is merely in
nominal wages, while that which alone can benefit him is higher real
wages. Now let us see what the workman could do to advance real wages
as contrasted with nominal wages.

What will be the effect on prices of the use of surplus earnings
during a period of high wages?

If the surplus earnings are expended, they will be used either in
meeting the higher prices of customary commodities, or in meeting
these advanced prices and also in purchasing additional commodities.
The first case will occur only if, and when, the advance in price
equals the advance in wages, for only in that event will the new wages
just cover the new cost of customary commodities. Then this
expenditure of the entire income in customary commodities tends to
keep up the price level and any benefit from higher wages disappears.

In the second case, so far as the worker spends his surplus earnings
in meeting advanced prices for customary commodities, he tends to
maintain prices at