Economics for upper grades

Introduction

The war has stirred mightily the hearts of men. Exaltation, sacrifice, and service have suffered their inevitable reaction. The development of industry has brought new alignments, and though these would have confronted us in any case, yet now, in the reaction from a great emotion, the world that meets them is a troubled, a hesitant, a disappointed world. Old conceptions, some of them as old as the nation, which were once accepted as we accept the sunrise or the rule of three, are called upon to prove their own vaUdity. Democracy is no longer a question of a constitution or a code of laws ; it is enmeshed in problems of wages and costs and distribution. We cannot understand our politics unless we study our economics. Perhaps it is as well that Americans are being compelled to analyze the truth of principles they so long have taken for granted, if for no other reason than that they have accepted them too casually, and too indolently. The political heritage of a people will not endure neglect. Such things as representative government, the rule of the majority, the liberty of opinion, obedience to law, were gained by painful effort, and only painful effort will retain them.

These ideas and others akin to them are the sacred things of the Republic. In the Egypt of the ancients, it was the duty of a priesthood to preserve the traditions of the people. Education and those engaged in education are the priesthood of the modern time.

They it is who must keep the torch ahght and through the children pass it to succeeding generations. And because

iii iv INTRODUCTION

at this time not only the defects of our democracy, but its principles as well, are being subjected to criticism, and to assault, because any intelligent discussion of these questions must hinge on economic as well as on political principles, the schools are charged, as no other institution is, with the mission of imparting sound knowledge and right guidance.

Governments, like other human institutions, are modified from time to time, as are the conditions that influence them. New policies are adopted, new duties undertaken. But, as in every evolution, principles continue, and only their applications change. If these principles of our people are misunderstood, or if some of them are attacked through ignorance or passion or lust of gain, then imperatively must they be recognized and reestablished, not for themselves, — for they are imperishable — but for the safety of society. As in other ages, so now education must reflect the needs of the period.

In popular conception, economics is a dry, even a depressing science. Sometimes, alas, writers develop an infinite capacity to make interesting things forbidding. For there are very useful and very fundamental truths of economics, as of politics, that as they touch the life of every citizen in a very realistic fashion, are, for that reason, of peculiar interest to him. Such truths lend themselves to a wealth of illustration familiar even to the very young. A boy or girl need not wait for the high school to know the difference between money and wealth, th^ absurdity of trying to create by legislation things that can be produced only by good hard work, the difference between liberty and license, the need of the expert worker in the expert's job, the inherent fairness of keeping faith on a contract freely made, — which is only a demand of decency that a man keep his promise, — the reasons both ethical and prudential why a citizen should consider the public welfare, the need of tolerance, the folly of

INTRODUCTION V

hysterical suspicion and wild accusation against any one not of his race or nation. Th^se are not things that need really be learned, for their truth and justice even the wayfarer knows, — rather they are to be related to the life of the people in this nation and at this time. Especially must our pupils feel deeply, as well as understand, the wickedness of any type of rule which would compel the tyranny of a minority, whether of birth or of wealth, or of a proletariat, or of any group whatever.

A teacher who will use this text not as an added ''subject" but rather as a comment and a method of adjustment of present conditions made vivid by direct local references, who will apply some of it to the life in the classroom and the school, will find a ready means of enriching the composition, the arithmetical problem, the reading period, the discussion of current events.

An appreciation of history, and in some degree of geography, can be facihtated by the use of this text material ; for training in ethics and civics, the value of political and economic reference is obvious.

Economics as a science has infinite applications, some of them exceedingly complex, and not a few of the subject disagreements among economists themselves. But it is only with simpler relations that our children need be concerned. As they learn the fundamental principles and become accustomed to apply them not only to school problems, but to those that are now demanding the attention of all of us, they will begin to interpret the repubhc not as document or a declaration, but as a place where men and women may live safely and happily only as they are willing to work together and to give some of their own thought and effort to welfare. For a society like ours cannot indefinitely continue to survive in an atmosphere of suspicion, of doubt, of class antagonism, and of individual aggrandizement.

vi INTRODUCTION

It is possible to conceive that the schools of an autocracy might be indifferent to matters poHtical, social, or economic. This cannot hold true of a democracy. For the life of a democracy depends upon intelligent teamwork. A man's first business cannot be to feather his own nest, or to take care of his own- health, or to provide for the enjoyment of his own leisure. These are all proper purposes in the educational scheme, and all useful for the making of better citizens. But they do not in themselves insure good citizenship. The first business of the public school is to give to pupils that knowledge and understanding, and to inspire them with those motives which will make good citizens. A pupil cannot be a good citizen unless he believes that he must seek his own welfare only through the welfare of the group of which he is a part, and unless he acts upon his belief. It is not wholly a matter of good will: it requires understanding. To repeat, the important business of the school is to make the good citizen. This first, and all other

things may come after.

Albert Shiels.

Contents

CHAPTER PAGE

I. What Wealth Is i

II. The Conditions of Wealth 7

Chapter I What Wealth Is

" Wealth " has two meanings. The larger meaning comprises everything which makes men '' well off." Thus, a man's health, his home, his children, the salubrious climate, the air and the rain, the beautiful scenery of his country, are a part of his wealth. In this broad sense the man who enjoys life most amply, whether he has much or little property, is the most wealthy. In this sense, indeed, his best wealth may not have any money or market value.

In the narrower sense, wealth is everything which has a market value, that is, which can be bought and sold. Houses, ships, lands, wheat, cattle, furniture, books and pictures, gold, silver, iron — such things constitute visible wealth, which we can see and touch. If they were added together wherever they could be found, they would make the wealth of the Nation.

Natural wealth. — There is much that is often called wealth which has no present market value. The fish on our shores, the wild lands, the timber in Alaska, the ores in the mines — these things of unknown value may sometime be wealth, but they are not wealth until they can be bought and sold.

In the strict sense of the word, man always creates wealth — sometimes by his labor, as when he produces wheat or builds a house; sometimes by bringing a thing, Kke wild fruit, to market and offering it for sale; and again merely by claiming it as his own, as when a man fences off a piece of land in the wilderness, or discovers a mine.

The public wealth. — That is not always wealth which costs money. Thus, a city may spend millions of dollars in building sewers or constructing streets. But the sewers and streets are not strictly wealth, since after they are constructed no one would pay anything for them. There may be pubKc works also, like jails and almshouses, in which wealth is sunk. The need of such things is a pubHc misfortune, and indicates the presence of poverty and crime. A nation that had quite outgrown the necessity for jails and almshouses would be far richer than a nation that had many costly buildings of this sort. A well man, who has no need of medicines, is better off than a lame or sick man who has to keep a supply of crutches and drugs.

Wealth is likewise sunk in fortifications and warships. The nation would be richer if it had no need of them, as a man is better off if he needs no pistols to defend himself.

Wealth in men. — There is wealth in horses or mules, because they can work, and can therefore be bought and sold, or hired. There was also wealth in men, for the same reason, under the system of slavery. A large part of the property of a slave State was in men. This kind of wealth did not disappear when the slaves were made free; free men own themselves instead of being owned

WHAT WEALTH IS 3

by masters. They can hire or sell their labor, their skill, or their knowledge. A man without owning any visible wealth may possess qualities in himself, such as experience and integrity, which will bring thousands of dollars a year. A State which has a plenty of such men will have all the visible wealth that it needs. Although wealth in men, that is, their labor and skill, can be bought and sold, so that a man with no money and a good trade is richer than an ignorant man with a thousand dollars, yet this kind of wealth is not generally counted. It is not shown in the census reports; in fact, it is not easy to measure it in money. Who can tell how much a bright boy or girl is worth ?

Wealth in paper. — A man may have large wealth and never see it. Some of it may have been lent to farmers or to help build warehouses in a distant city. Some of it may have helped a company of men to build a mill, or a line of steamers, or a railroad, in a new State. Some of it may have been put into a bank, and then lent with other money all over the country. Some of it may have been lent to the government. Can you tell where it now is? While the rich man may not see anything that he owns, he has papers which show the amount of his wealth. Some of these papers are notes, signed by men who promise to pay so many dollars; or mortgages on the farmer's house and land; or railroad bonds, which are notes of the railroad company; or certificates of so many shares in the mill or the bank; or bonds of the government, which are really a sort of mortgage upon all the property of the people; or paper bills, which promise so many dollars in gold or silver.

This paper wealth, these bonds and notes and certificates, may be bought and sold in the market, but they have no value in themselves; the country would not be poorer if they were burned. Yet they are often counted as so much wealth. Thus, the State of New York is said to have so many billions of dollars in visible wealth, and so many billions more in paper wealth. In this way the same wealth is often counted twice. The railroad-is counted once for its visible value in land, rails, stations, and cars; and then it is counted again for the paper bonds and shares, which merely show who its owners are.

So with the mortgage on the farmer's land. It shows that for the present some one else owns part of the farm. Perhaps a savings bank has the mortgage, in which case the depositors in the bank have a share in the farm. We have seen that the government often attempts to tax the same property, first as visible and again as paper wealth.

The wealth in paper may sometimes mean an addition to the real wealth of a State. Thus the people of Great Britain own a vast amount of wealth all over the world in lands and mines, etc. The bonds and paper certificates show that the people in other countries are so much in debt to the people in Great Britain. So, also, the people of Philadelphia may hold paper bonds and shares in stores and mills in cities in the West, and the people oi other cities may own land and buildings in Philadelphia in the same way.

False wealth. — There may be wealth, or things which can be bought and sold in the market, which harm the persons who use them. Thus, if ardent spirits hurt and degrade a community, the distilleries and saloons used

WHAT WEALTH IS 5

by the liquor business lessen the wealth of the people. Although, therefore, the national census of wealth may add hundreds of millions for the distilleries and saloons, a true estimate would subtract this value, since that cannot really be wealth which does not in some way make men better off. It is Kke a vicious animal which destroys every year more than his value.

How wealth varies. —That which is wealth in one place may not be wealth in another. An acre of land in New York City may be worth milHons of dollars, but an acre of land in Greenland is worthless. What is a picture worth in Patagonia? Wealth depends on a market, or on the desire of men to buy and sell. Even the same market may change from one year to another. Thus London and New York are the markets of the world, where all sorts of things are continually bought and sold. But, in case of a great disaster, men's desire to buy and sell may suddenly be checked. In that case the value of many kinds of wealth falls, though the things themselves remain.

Robinson Crusoe's lands and goats, though precious to him, were not strictly wealth till other men appeared to purchase them, that is, to make a market. Even gold is not wealth on a lonely island, for one man alone has no use for it.

Wealth is constantly being destroyed, or used up, or worn out. Some kinds, like food, are good only for immediate consumption. Clothing lasts a little longer, but soon has to be renewed. Houses and buildings at last go to decay. The gold and iron wear out. Perhaps one eighth of all the wealth in a country is used up in a single year. Among a poor or barbarous people the proportion is larger. The land is the one thing which remains the same; but its fertility may be exhausted, while the demand for it is constantly changing.

The increase of wealth. — Although wealth is constantly being destroyed or worn out, it is also being recreated. The harvests of each year renew it; the labor and skill of millions of persons change the raw products into new and higher values, as in the case of a steel watch-spring, worth many times the cost of the crude iron ore. Even the land may increase in value by being tilled, or the growth of a city may give each square foot of land a greater value than an acre possessed before the city was built. Possibly half of the wealth of people who Hve in cities consists merely in the land upon which stores and houses are crowded together. The greater the city, the more the value of this land.

The wealth of a people is thus like the body of a man. It is in a state of constant change or flux. It is always being renewed or made over. How much can you find that has lasted over fifty years? Thus, again, we find that the skill, the learning, the energy, the character, the ideals, and the purpose of a people — in other words, what education gives — constitute their real wealth.

Chapter II The Conditions Of Wealth

If a household of children were rude and destructive, or had not learned how to use toys or articles of furniture, it would be impossible to keep anything of value; they would have no wealth. So with a savage people. As long as men were barbarous, the duties of business and property were extremely simple. The land belonged to the whole family or tribe. There was little furniture in the rude tents or huts where the people lived together in alternate plenty and want. There was little or no barter or exchange of goods, and no shops or merchants, and for a long time there was no coined money. The chiefs lived much like the common people, as is still the case among the American Indians. As men came to live in cities, life grew less simple: all sorts of luxuries were demanded; various trades arose; and there became everywhere a wealthy class, living differently from their neighbors. The growth of cities brought travel, and therefore more trade, as the people of one place learned to desire the things which another place produced. There came to be great trading cities, like Tyre and Carthage, which sent their ships beyond the Mediterranean Sea.

Unfavorable conditions. — There were serious obstacles, however, in early times in the way of industry and commerce and the amassing of wealth. Some of these obstacles continue.

War. — There was almost constant war. A rich city was always Hable to be pillaged and burned. The caravans of merchants were likely to be attacked by robbers. Men had to defend themselves, or to obey ambitious kings, and they lived close to the line of famine.

Piracy. — The seas were infested with pirates, - who saw no harm in seizing merchant ships, and selling their crews for slaves. Ships driven on shore by storm were mercilessly plundered.

Slavery. - — Slavery also obstructed industry and business. The slaves did less work than free men could do, and the latter were less wilhng to work. There came to be a class of idle and unemployed people.

Caste. — In some countries also, as in India to-day, there were castes, that is, classes of people, the members of which could not change their occupation. The son of a tanner had to be a tanner. Thus bright men in the lower castes were kept from rising. Ambition and invention were checked, and warriors were thought to be better than workers.

Privileges and monopolies.^ — ^ Suppose a single family owned the only spring of water in a town and charged the others for the use of the water. This would be a monopoly. The old world was full of monopolies. The man who owns a valuable copper mine has a monopoly. He and the other owners of copper mines possess the privilege, since every one must have copper, of taxing all the people. In other words, they have a power and source of wealth which others lack. So the owner of valuable land, whose grandfather secured a title from the King of England, may do nothing himself, but live by the rent of his land. When a country has many

THE CONDITIONS OF WEALTH 9

people who possess privileges or monopolies which the rest of the people cannot enjoy on equal terms, there must be more or less hindrance to free industry and therefore to the growth of wealth. A few may be very rich, but the many may have to work for the few. This has long been the condition of England, Prussia, and other countries where land has been largely in the hands of the few. Monopoly of land is already a danger in the United States.

The physical conditions of wealth ; the climate. — Certain countries, so far as we know, have never had any wealth. In the arctic regions, where the energies of man are nearly exhausted in the fight with winter, there could never be a rich civilization. Civilization has not flourished in the heart of Africa or under the equator. On the contrary, the richest nations dwell in temperate regions. The climate of a country is one of the conditions that help or hinder the wealth of a people.

Natural resources. — Certain countries are poor by nature. The soil may be sterile, fuel may be scarce, the supplies of valuable minerals may be scanty. Other countries enjoy rich lands, ample forests and coal fields, vast water power, good harbors, and inexhaustible mines. The United States is thus magnificently endowed with the materials of wealth. China is another such country which supports a vast population of industrious people.

The spur of necessity. — Why is it that the beautiful islands of the Southern Pacific Ocean have Httle wealth ? The people are too comfortable to need to labor. The abundance of fruit contents them; the mild climate requires little clothing and makes unnecessary the buildlO RIGHTS AND DUTIES OF BUSINESS AND LABOR

ing of permanent houses. We find few of the arts, or books, until men learn to work, and few would learn to work unless there were some necessity.

As soon, however, as the conditions of living become harder — when fruits have to be cultivated; when cold and wet demand clothes for men's bodies; when men require shelter and permanent houses — wealth begins through the spur of necessity. Necessity teaches men to work, and all work requires more work to perfect and secure it. The field once tilled has to be fenced or protected from wild creatures; the house has to be enlarged and improved; appliances are invented to save labor, and the inventions in turn demand new kinds of labor and new appliances, that is, more wealth. The introduction of the telephone into a town requires an increased force of men and women to manage the business, and the increasing numbers require more houses and more telephones. Even the effort to save labor presently calls for new- forms of labor and produces more wealth.

The necessity to labor at first seems to be a misfortune. The long, cold winter requires fuel and hay, and more labor to supply these necessaries. A considerable portion of all wealth consists in wood, coal, hay, and substantial buildings, which the rigor of the climate demands.

Everything that men esteem precious thus arises from some kind of necessity, either real or imaginary. The need of bread or shoes or tools stirs them to work to overcome the need, and thus to grow rich. Would you not rather live in the United States and have to work fo]' your living, than to live a lazy life in Tahiti?

THE CONDITIONS OF WEALTH ii

Intellectual conditions ; enterprise or energy. — There are some races, and certain persons in every race, who are more easily contented or more indolent than others. They do not keenly feel the spur of necessity. One condition of wealth, therefore, is energy or enterprise or will. The enterprising farmer will work more hours in a day, take better care of his cattle, provide warmer buildings, fertilize his land, and grow rich by his labor. The joy of life consists largely in doing things, in creation, in working out plans.

Intelligence. — An ignorant people have few wants, and therefore little wealth. An ignorant people could not have invented the steani engine, neither would they have felt the need for the articles which the steam engine helps to produce. It is only when the intelHgence of a people rises to demand a vast supply of many things, that the new necessity urges inventors to harness the forces of nature to help them in shops, mills, and railroads. The single invention of the steam engine, called forth by intelligence, has increased the wealth of the world in a century more than it had grown in a thousand years. Science constantly brings to view new sources of wealth.

Taste. — A certain portion of wealth is for enjoyment or decoration. Pictures, statues, beautiful buildings, instruments of music, the products of the various arts, constitute this kind of wealth. It arises from higher kinds of need, as men want satisfaction for their sense of beauty. As soon as a people have learned how to provide a sufficient quantity of food and clothing, a larger number of their skilled workmen are set free to produce and to cheapen the articles of taste.

A multitude now have pictures, books, and pianos, which once the few rich people could hardly obtain. The more taste people have, the larger is the production of this form of wealth. The call for works of art, taste, comfort, and luxury requires more shops and houses, that is, greater wealth of other kinds. Even the taste for natural scenery adds a new value to rocky hills and wild shores, for which persons without taste would see no use.

Moral conditions: honesty. — There are certain moral conditions of wealth. There will be little wealth if thieves and robbers are abroad. For men will not labor and gather abundance, if their riches are immediately snatched away from them. Neither will they have the heart to work, if the government is dishonest and takes their savings ruthlessly, as most governments used to do.

Good faith or trust. — Wealth is daily changing hands. A vast portion of business consists in trade. Wool, cotton, and wheat must be brought from distant States and manufactured articles returned. But trade is impossible unless men trust each other. Trade is carried on in the faith that men will do as they promise, that they will pay for what they buy, that they will furnish articles . as good as they promise. Even a few men who break their word injure business, cause distrust, and compel higher prices which the honest have to pay. On the other hand, if all men keep their word, more business can be donej at cheaper rates, and every one can have more wealth. We all gain or suffer together.

A state of peace. — When the early colonists were at war with the French and Indians, their cornfields and towns were often burned and their ships captured.

THE CONDITIONS OF WEALTH 13

They could not make wealth in time of war. But as soon as peace returned, the French and the Indians helped them to get more wealth. The Indians brought them furs, and took cloth and iron in return. Their ships sailed to France, and both the French and the Americans profited by trading together. The Americans sold their furs and salt fish, of which they had more than they needed, and bought from France silk and other articles, such as they could not make so well as the Frenchmen. Trade made more wealth in both countries, but trade depended on the nations being at peace.

Courage. — Sometimes vast amounts of wealth are suddenly swept away, as by a fire or a flood. These are the occasions for courage, not only at the time, but afterwards, when men must go to work to repair the damage or to rebuild a new and better city from the ruins, as the men of Chicago did after the great fire of 187 1. In various industries, in the management of steam and electricity, on railroads and on ships, there is daily demand for the same kind of daring to take necessary risks and even to brave death, as used to be called for in the hazards of battle.

In general, when men are friendly with each other, when their ships sail freely into all seas and foreign nations welcome each other to their ports; when many travelers go from one country to another and see what others can do better than they, this friendly travel and interchange help to make wealth. Men who see beautiful works of art return home with fresh zest for their own work. Men desire foreign fruits and products, — tea and coffee, pineapples and bananas — and bring them to our markets. New ships and steamers must be built to carry the trade of the world; new warehouses must be erected to accommodate the growing trade; more fields must be tilled and more mills built to make things with which to pay the people over the sea for what they send us. Wealth not only rests upon good faith and friendliness, but the getting of wealth brings distant peoples together, and teaches them to trust each other rather than to fight. We see thus how the whole world may some day become a cooperative Commonwealth.

Chapter III To Whom Wealth Belongs, And How It Is Divided

Labor alone does not make wealth, as some think. Wealth is partly natural, as the land, the fisheries, and the ores in the mines. Intelligence, skill, and taste are also necessary in creating and managing it. Public order is necessary; honest, industrious, and faithful men are necessary. If reHgion enhances the worth of human life, or furnishes motives for noble conduct, it also shares in creating wealth. Property is worth more in the United States, with its schools, benevolent institutions, and churches, than in Morocco or Siberia.