WHY PEOPLE SAVE

New Zealand Herald, Volume LXXV, Issue 23058, 8 June 1938, Page 10

WHY PEOPLE SAVE

NECESSARY STORES building up capital j i ■■ . " . • the relation to spending BT J. JOHNSTONE ' I" Often we hear saving and spending s ; contrasted, and their effects on society estimated, as though the saver and spender were necessarily distinct and separate parties, whose methods of dealing with the resources at, their disposal affected those around them in widely ' different ways. What, t%n, are the purposes that are served *|)y saving; what are our responsibilities as spenders, " and how is the spending power of a . community affected by the saving habits of its members? Obviously a certain amount of saving ? is one of the necessities of life. A large #nd vital portion of our production is seasonal and a portion of the harvest must always be saved for consumption in the off season, and as seed for the following year. All men and women are liable to disablement through sickness, accident and age, and so, unless thej .1 are to be dependent on others, they must make provision for a future in -1 which they may be helpless. Saving for these objects may be likened to - the saving of the bee —it is the storing up of supplies for the, time of scarcity. r ; As civilisation advances this form of v; saving becomes less and less important, • and it now occupies a relatively small » place in our econpmv. The things most vital to man cannot be preserved for a distant future, and the seasons so vary in incidence over the surface of the earth that harvesting is really continuous. Consequently, trade between cations has, in considerable part, taken the place of the storing up of perishable commodities. • - > : t How Progress Begins ; • . ''■{ V There is, however, a form of saving, ! peculiar to human beings, that knows no limits, that is boundless as the wants aud aspirations of man, and ;. which, in place of diminishing in im- - portance as civilisation advances, is born when civilisation is born and grows as civilisation grows. M( When men dSvote a portion of theii labour to the production of wheat, additional to the amount required foi immediate consumption, they create supplies for future use,, but they add nothing to' their power to product , 7 wheat or any other commodity. Thi). £ form of saving merely maintains the J/ race; it contributes nothing to its advancement. When, however, men, in place of producing surplus wheat, produce a plough, they create something _ that makes the future production of J . wheat and a host of other commodities immensely more easy. The power oi niau t'ver his surroundings is increased, something is done that marks him oil "f from the brute, and it .is by thus directing his efforts that civilisation is built up. g Whether we devote our surplus labouj to the production of additional wheat ,V« or to the production of a plough, the effort and sacrifice are the same, but the results are vastly different. Herein lies the origin of almost the whole oi our responsibility in ;-2 t ; Building and Squandering . . The family which, each year, devotes - the whole of its income to the pur- £ chase of the things that give immediate -i satisfaction, will make no contribution to the productive! power of itself or oJ V the community to which it belongs! it does not even assist in maintaining the. equipment already in existence. s The -J family which, engaged in farming, in business or any form of industry, bj ,j its industry and self-denial, is able M each year, not merely to maintain itsell and its equipment, but to make some -;v addition to that equipment, makes a .V clear addition to its own power and ii to the power of the community to ~r which it belongs. In both cases the immediate spending is the same, only the commodities purchased are different —but the ultimate effect on spendiug is vastly different. The equipment of the first familp will rapidly run down, as nothing i> - saved-for its maintenance. As equip/ ment deteriorates returns will go down ■> income will be reduced and the spend ing power of the family will fall rapidh toward the vanishing point. On the other hand, the second famih will, by constant additions to its plant • and equipment, constantly increase its ; production and income ana so " constantly increase its spending. Helping the Nation Thus this form of saving never diminishes spending, but constantly in- p creases it; and what is true of. the uidividual is true of the community. Tn e spending power of a modern community is enormous because its production P enormous and its production is enormous because of the equipment it P®?" sesses—equipment that nas been built up by the labour and saying of mankind. Take away that equipment, let it run down bv devoting all our spending power to the purchase of the things that give immediate satisfaction, and - spending power would shrink to notn&ut all men and women cannot use * fully devote their savings to the purchase of equipment. The lawyer would x not add to his usefulness by buying ploughs; the doctor .would not serve . society by purchasing manures and ; fencing materials. How, then, are they to assist in building up the resources of the nation? Clearly they must do it by saving and lending and it is n e ' that banks function to the great bene- _ 6t of the community. . , Banks collect -the savings of to people, gather them in in driblets, store ,> them in safety and lend them for tn , purchase of all that strengthens ■ hands of labour. Where cash is . > posited to be relent to clients the operations are easily understood. The bank , v . is evidently a useful agent serving tween lender and" borrower. What Deposits Mean But the use of cheques has never altered the nature of. banking, bas never changed the relations of and client. It is often said that a banK . lends 10 times the amount of its caw reserves, but this is merely sayi g that nine cheques are deposited :■ only one is cashed and the chequ posited represent the sayings ° positors exactly as cash deposits n *, Thus, all deposits make advances. pqj- y sible. If cash is deposited.lt can be re. lent. If a cheque drawn ov a borr is deposited the depositing o cheque makes it possible i t0 ; ; to advance that amount adddi • what its cash reserves would enable ;(.•>, to advance. ~ „ orinn t ' Cheques drawn on cannot of course, create deposits, the * transfer them. Thus. advances are »nade possible —deposits of cash or cheques—and all deposits p. t . possible by saving. • ■ ev eni Looked at in another way. every . loan is really a loan of good being merely the means of facilit £ . their transfer, and these Roods avan able for lending, are created b dustry and accumulated • < /T i Take away the siipplies of _ madf-%: that industry and thrift have available for a " d J use . J • cheques in the world won d K£ ste less to borrowers as so much *»_. paper.