Enduring Versus Temporary Banking

The development of a nation is similar to the development of an individual, best exemplified by the life of a primitive man in a primitive community. As a youth he is interested only in having a good time. He fishes and shoots for the sport of it. Work has no attractions at all and the boy lives simply to get a few hours' play each day. As he becomes older and has a family of his own he becomes interested in working to get food, clothing, and shelter. With the incentive of a family he is truly interested in his work. He enjoys catching fish to eat; he enjoys building a hut in which to live; and he enjoys shearing the sheep in order that his wife may weave the wool into clothing.

As the children begin to grow up, however, the aims of the wise father even in primitive days were of a more enduring nature than were the aims of young manhood. He was no longer interested - when he became a grandfather - merely in providing the food, clothing and shelter which was consumed during the year; but he laid plans to perpetuate his family. As a man becomes older he unconsciously looks ahead and devises means to provide that he and his family shall have food, clothing, and shelter after they reach the age when they can no longer work. The first third of a man's life is given to play, the second third to filling his and his family's stomachs; but the last third is given to developing sources of income which will be permanent and serve him after the natural resources are gone.

A nation goes through these same three stages. The first stage for America was during the Revolutionary and Colonial times; the second stage began with the developing of our great West when the Homestead Laws provided the incentive for that development; but we are now entering the third stage when we unconsciously seek protection. The railroads are seeking protection through legislation; the wage workers are seeking protection through their labor unions; manufacturers are seeking protection through tariff laws; while the rest of us are seeking protection by trying to suspend the workings of the law of supply and demand.

Like primitive man, we may now be justified in directing our energies to perpetuating our position rather than to creating new positions; but even so we should go at it in the right way. The primitive man did not attempt to perpetuate his income by legislation or fictitious agreements of any kind. He did so by systematically setting aside a larger proportion of his earnings each year for permanent improvements. Each year he spent a smaller proportion on his stomach and clothing and more labor on houses, barns, felling his forests, developing the power of the little stream running through the farm, and stocking the farm with cattle, pigs and fowl. This is the way to develop enduring prosperity and enduring investments.

More Information Needed

The government departments in Washington are doing a great many good things, but they could give us more information as to the condition of different lines of industry, the amount of goods on hand and in the process of manufacture, and how the money of the nation is being spent. For instance, the Federal Reserve Board publishes the so-called "Bank Clearings" of the country, but no subdivision is made as to industries. Hence, when the bank clearings show that business is declining we don't know in what industries the decline has taken place. Suddenly the country is astounded by a surplus or shortage of a certain commodity. With advance information preparation could be made to avoid the catastrophe or at least to provide a substitute for the commodity. The sugar episode following the war could have been easily avoided had the government collected and published monthly figures on the sugar available.

A great opportunity exists in the publication and classification of bank loans. Such a classification would show what percentage of our credit is being used for the production of goods, what percentage is being used for the storage of goods, and what percentage is being used for the marketing of goods. It would also be interesting to see whether more money is being loaned for the manufacture of fashionable adornments or for the manufacture of useful labor saving devices. The government cannot make people good, but it can supply data which, when a sensible man reads, will cause him of himself to determine to be good.

Herbert Hoover has said in this connection:

"Viewing the disastrous phenomena of booms and slumps in the light of what the government can properly do, there has been a great underestimation as to the potential importance to commerce and industry of an adequate service of statistics. The stability and soundness of business can be greatly enhanced and that vicious speculation can be curtailed by a more adequate information service maintained by the government.

"We should have more timely, more regular, and more complete information of the current production and consumption and stocks of every great commodity in the United States. We should go even further than this; that we should secure and publish the proportion of the total equipment of more important industries, that is, in current production, together with the total proportion of labor complement that is in service; and that in a few commodities it may be well to procure and publish the primary prices.

"If, for instance, in 1920 the public had realized that our stocks of coal on the surface were probably above normal, that at the time they were bidding for coal at $15 per ton, the actual realization at the mine was probably less than $4.00; if they had been aware that the limitation of supply was due to railway difficulties which would be solved with a little patience; then I am convinced that many sensible people would have stayed out of the coal market, and that we should have had no buying public, with its profiteering, its consequent slump and great losses.

"Another instance is the rubber industry. If there had been an accurate monthly statement of the current ratio of production capacity and operation in the different branches of the industry, and of the stocks of major manufactured and raw materials in hand, there would have been saved tremendous losses not only in over-accumulation of goods, but also in over-expansion of equipment.

"Various industries have tried time and again to secure such data informally, but it is essential to success that it should be collected and presented to the whole commercial community, buyer, seller, and banker, by some department of the government which approaches the problem in a purely objective way, which will hold the individual's return absolutely confidential; and from which the whole public and the industry can enjoy equality of service. Such services are partially conducted in many different bureaus of the Government, but to accomplish their real purpose and greatest value, they must be consolidated and conducted more efficiently and from a much broader point of view. I have little doubt that the present expenditures of the Government, if directed by consolidated effort, would cover the entire service necessary."