III Early Savings

I I I EARLY SAVINGS THE man who thinks that a fortune will result froni the saving of coppers and shillings is hugging a delu sion, and it would be absurd to pretend that my posi tion can be attributed entirely to the saving habit. It is, however, perfectly true that too much emphasis .cannot be laid on the fact that saving is the basis upon which the whole structure rests. I have been a saver all my life, and it is perhaps because the habit was acquired in my earliest years that it has been consistently maintained. I suppose it is unnecessary to argue with the reader that saving is the first essential to human life. Unless there is saving, life comes to an end. We have only to eat all the potatoes of this year's crop to make quite sure that no potatoes will exist next year. If we con-' sume every egg that is laid, a couple of seasons would be sufficient to eliminate eggs and poultry from the list of things we enjoy. The argument can be carried right through every branch of human activity.

We all depend absolutely for our continued exist ence upon the fact that some commodities available for consumption are not, in fact, consumed, but are held over,. or " saved," for future use. This is the bedrock of the capitalist system. It does not even matter who does the saving; the all-important thing is that the saving should be made. But· saving is out of fashion. Having regard to our increased wealth we save less 4-0 THE CONFESSIONS OF A CAPITALIST and less, and such elementary dicta as: "Penny wise and pound foolish," and "Look after the pence,. and the pounds will take care of themselves,' 'are seldom heard to-day.. , Still, we all recognise that something in the way of saving is desirable. One of the most extraordinary of the many peculiari ties of these peculiar days is that, as good fathers of families, acting upon our own responsibility in our homes, we are all anxious to some extent to save a little for the benefit of our children. Nevertheless the moment we put on our best clothes and meet together in the parish 'council, or in any other form of public assembly, we all vote vigorously for the piling up of debt which these children must eventually pay: and I am sadly afraid that future generations,' who will see this problem from a different angle, will curse us for that part of the debt bequeathed to them which is not represented by good investments. I cannot, indeed, deny to future generations their denunciations of the War Debt, which for a century they will, of course, be paying. We ourselves are still paying debts incurred in the Napoleonic wars,; but, then, we are still afflicted with notions as to the necessity and inevitability of war.

When, as is surely coming about, our great-grand children grow up in a world which has discarded this form of barbarism, which. they will fail to understand, and yet find that they have to pay for our indulgence, can it be doubted that they will denounce their great grandfathers for the terrible consequences of the last twelve years ! I· have mentioned that, when I entered the 'City at a salary of ss. a week, I saved half of it. Naturally it is impossible that I could have gone on for a couple of years eating-a 6d. dinner five.days every week and never have spent a penny'in any other direction, so I do not doubt that there must have been lapses now EARLY SAVINGS and again. But I am quite certain that the bulk .of 2S. 6d. a week was safely put away. After a couple of years, when my money was put up to 8s., I gave up the 6d. three-course dinner on the first floor of the" Apple Tree" and went downstairs with the swells, where vegetarian luxuries were served afa carte. I have to confess that the rise in social status cost me dearly, ?ecause for a time it broke my habit of saving half my Income.

At the age of twenty-four I performed the first serious and important act of saving by taking out a whole-life insurance policy for £1,000, at a cost of £19 lOS. a year. There is no finer form of investment, nor is there a surer way of saving, than life insurance, if undertaken with discretion and with proper advice. Thanks to the fact that I had a few pounds in the bank I was able to take out a policy with a premium payable once a year in advance. This is the whole trouble with life insurance. In the case of many young men that I know, the absence of a few pounds in hand to pay the annual premium drives them to other forms of policy with smaller amounts paid at shorter intervals. This is an expensive and costly process which makes insurance much less worth while than on the annual basis. Long after it was really necessary, from sheer habit I continued this practice of putting away small sums week by week. Thus, at six-and-twenty, when I became engaged to be married, a Post Office account was opened into which I paid 5s. a week with-the object of accumulating £25 by the day of our marriage to pay for the honeymoon expenses. The sum of £25 in those days was worth, of course, a good deal more than it is to-day and was a reasonable allowance for such a honeymoon as we contemplated. As a matter of fact, the whole alnount was not spent, because I 42 THE CONFESSIONS OF A CAPITALIST have had the inestimable good fortune to find a partner in life who shares my views in these matters. As the wedding-presents did not include a dinner-service, we cut our honeymoon down to ten days and bought one with the unexpended balance of our funds.

Writing in 1925, having passed through times in which everything has been happening in millions, it is difficult to get one's mind back to the 'nineties, when £25 seemed such a large sum of money, not only to me, but to most people. It is doubtless this habit of thinking in big figures which makes it so hard for most of us to appreciate the importance of little sums of money. There is good reason for thinking that it . is responsible for the extraordinarily scant attention given by this generation to such questions as saving. Few of the politicians, for example, who are so ready with theories of how to obtain everything, ever men tion this humble method. The habit is of far-reaching importance and has wider ramifications than are apparent in the mere putting aside of single shillings. The money which is actually saved is not nearly so valuable as the psychological effect which it produces. Saving, like mercy, is twice blessed. There has to be added to the first shilling another one which would be wasted by a person with the spending habit. Natural savers are very few and far between. The average man is by nature prodigal and cannot do things economically. ·There are some who find it impossible to move from one town to another without a shower of telegrams or a string of taxicabs. These things are usually quite unnecessary and are nearly always the acts of those who can least afford them. It is a strange confession to come from one who is commonly supposed to be so free from financial worry as I am, but the fact is that even at this period of my life I have never acquired the teleEARLY SAVINGS 43 gram or taxicab habit. I feel that I have so many people shooting telegrams about and rushing in and out of taxis at my expense that I myself cannot afford to. use either of these conveniences.

The girl or the youth who is penniless can seldom play a game of tennis without losing a balI-a piece of sheer waste for which it is generally difficult to find the slightest justification or excuse. I give this common illustration to show that there is a great deal more in the saving habit than is generally realised. It leads to a sense of the value of things. Paradoxical as. it may seem, saving in my case does not mean that I have " got any money." I have all my life been saving and all my life been owing. It will be necessary to go into this more complicated question of finance in a later chapter, but I mention it here to dispel the notion that the saving of money means the hoarding of money. In my case, I have merely used the little I have ·saved as a means to cover the risk ofmuch larger transactions, and I have always owed much money. The point can perhaps be illus trated from an experience through which I am going at the moment of writing. I have just completed arrangements to erect a building at a cost of £15°,000.

I do not possess £15°,000, but, thanks to years. of careful saving, I do poss.ess enough to carry the com paratively. small margin of risk involved in a £I 50,000 transaction and am therefore able to borrow or arrange the financing of this building, at the same time tech nically owning it. This leads to another profound truth which an economist will some day set out scien tifically for the benefit of mankind-the truth that there is no such thing as money, that the stuff does not, in fact, exist. Deep down below all the cheques and ledgers and banks and details involved in my £15°,000 building transaction i~, I think the siJ;11ple 44 THE CONFESSIONS OF A CAPITALIST fact that, having, over a number of years, established a character for responsibility in the balancing of things, I have satisfied my fellow-citizens that I am to be trusted to control affairs. Hence all the, detailed machinery called; finance comes automatically and naturally to my help and service, and I am able to answer for a building the size and importance of which are indicated by the monetary fig:ure'of £15°,000. But it is the building which exists and not the money,and it comes into being because there is a man who, so bankers and others think, is' the proper person to see. the business thrqugh without undue loss or trouble.

But I must return to my earlier days. My eldest boy was born in 19°4, a year after our marriage. At that crucial moment the saving habit again asserted itself and I began anew the practice of accumulating small weekly sums. A Post Office account was opened it:l my boy's name, and into it my wife and I each paid a shilling ,every week. We ,did this for each of our five children, with the result that they will each of them possess a useful little sum on attaining years of dis cretion. The reader, I fear,. will be tiring of these shillings and half-crowns, which would not appear to have much b.earing upon the figure at which my present income is reckoned were it not for other and more important things. These trifling Post Office savings accounts were but the beginning, and I mention them only to make the story complete, to show exactly where and how I began, and to try to convince the reader that there is something in my theory that anyone can make a fortune who really wants to do so. 1 began, it is true, with very great advantages in being the son of my father--advantages which in many ways cannot be over-estimated-, ' but ,they did not include any money, EARLY SAVINGS 45 and it is with the making of money that this book is concerned.

Such success as I have achieved is to be attributed to the fact that my money has all, or almost all, been invested in my own business. There is no form of investment that can compare for satisfaction or for safety with that made in a business under the investor's own control. Such money is well spent and always has full responsibility behind it. Therefore the business will be, as a rule, well run and free from any of that sense of irresponsibility sometimes associated with the handling of other people's money. In J)1y early days in business I was dependent upon credit. Those who know what that means will be aware that any' money I could save and invest in the business would immediately produce and yield a hand some return. ,The man using credit in business is paying very' highly for it. The difference between prices for supplies at three months net and monthly less Zt per cent. represents a rate of interest of IS per cent. per annum. This will sound to the Socialist like usury, but the bulk of that IS per cent. is not in reality interest at all. By paying cash and taking what is called a cash discount, the buyer is really shifting the risk of his bankruptcy from the shoulders of his creditors to , his own and is actually paying to himself the premium to cover that risk. Thus IS per cent. is not some figure arranged by Capitalists as a price they demand for the use of their money. It is a figure arrived at by a natural process and is really like all interest or discount, the measure of the pressure necessary upon each of us to make us save. But even IS per cent., excessive as it may appear, does not by any means represent. the extent of the profit that can sometimes be made by one's own money in one's own business. Prompt pay ment means better buying. Suppliers offer the best 4-6 THE CONFESSIONS OF A CAPITALIST goods to buyers known to pay promptly, and, when there is not enough to go round the market, the man who asks credit is left out in the cold. I had definite evidence of this natural reaction when there was a shortage of paper during the War. Publishers, on the whole, are not prompt payers. There are plenty of brains in publishing, but there is not too much capi tal, and paper is for the most part supplied on long credit. Happening to be one who pays promptly, I had a minimum of difficulty throughout the war shortage.

On the other side of the ledger, if you have enough money in your business you will be able to give ex tended credit to your customers, and, provided you exercise discretion, there is no more remunerative way of utilising savings. Just as you can make money by paying promptly for what you buy, your customers can lose money to you by taking credit terms. By using half my income over a period of over thirty years to develop business in this and similar ways, I have been able to increase my trade in regular pro gression. If the reader will do a little figuring, he can work the whole thing out. When I took charge of my father's. business, the total turnover from all sources was a matter of £5,000 a year. To-day my business totals approximately £400,000 a year. Not a very big sum in the light of modern business per haps, but good enough for the work of one man's lifetime. This is apart of my business story worth stressing. Many a young business man may consider that a turnover of £400,000 is something bigger than he can ever hope to secure. Given enterprise, given a trade in which there is room for expansion, and a conservative basis of finance, built upon saving, there are very few business men who could not, in thirty years, put together a 'yearly turnover such as mine.

· EARLY SAVINGS 4-7 It is not so easy to build up as it was, and in my own experience each year has been a little more difficult. My father's business of £5,000 a year was carried on at a profit of more than 20 per cent. He and 'his brothers were able, in accordance with contemporary practice, to secure for themselves a sufficient income out of a trade of £5,000. The young business man in this position can work it out. Starting with a trade of £5,000 and a pr<?fit of £ I ,000, saving half his profit and re-investing it in his business, turning it over five times a year (which is a good average rate), thus adding £2,5°0 to the second year's turnover, and going on repeating this process thirty times~ representing thirty years, he will see that a turnover of half a million is not so impossible a thing as he imagined. f; The calculation, however, is. not quite so simple as this. If to that tedious sum I have set him he will add the complication arising from the fact that the rate of profit over the thirty years will steadily diminish, his figure at the end will be something near the figure I have given.

In my own experience, the 20 per cent. profit with which I started has diminished until to-day it is well under 5 per cent. This question of the diminishing rate of profit is a very important one in considering the larger question of the Capitalist System with which political discussion is so much occupied to-day. It is true now, as always, that no big investment can ever produce the rate of return obtainable upon the shilling with which I started. As my business has developed and increased, my' rate of profit has shrunk; and as I have been able to invest larger and larger sums from my savings, so those investments have always and steadily· become less and less worth while. This is as it should be, for the reason that the simple shilling is a good deal more difficult to save than the bigger sum out 48 THE CONFESSIONS OF A CAPITALIST of greater wealth. The man with the big bank balance must invest it, and the natural tendency is for his return to be, lower than that upon the shilling, "where there is no pressure to invest-indeed the pressure is all the other way. It is, from the point of view of economics, fundamentally more important that the shilling should be invested, and therefore the return on the shilling is better than on the bigger sum.

There is an opportunity here for some literary genius, some writer with the ability to grip the· imagination of the public, to tell us the story of the shilling a· week. The well-being of mankind itself might be woven round this simple little act of saving. Begtnning with the most elementary and obvious fact as it exists to-day, everyone knows, or at least everyone ought to know, that if he will take the trouble to put away a shilling a week for a period of twenty years, he and his successors can for ever afterwards receive an income of 2"S. a week. That is the rock upon which Mr. John Wheatley came to grief in the grotesque explanation of the finance of his housing scheme, which will go down to history as the most absurd utterance ever made from the Treasury Bench. It seems on the face of it, and I admit this frankly to the Socialists, a gross injustice that, because some parsimonious person is willing to put a shilling a week into the Post Office Savings Bank on behalf of his infant son, and continues to do so until the son is twenty years old, that favoured boy, through no merit of his own, and having made no effort in the matter, but merely by being the son of his father, should thereafter be able to exact' from his fellow-creatures, not only for his own life, but for the lives of all his successors in title, an income of 2S. a week. Yet that is the~fact, and a fact which, when we come to work it out, is right, just and proper. ,It is not a capitalistic scheme to rob the workers of the surEARLY SAVINGS plus of their production; it is not a conspiracy of pro fiteers-it is simply the natural operation of a most natural law.

Let us begin our investigation with a statem.ent which will not, I imagine, be disputed by the most heterodox of modern economists-that saving is essential. It £01 lows\ that a saving must arise from the willingness of some individual to restrain his desire, to defer some .' act of consumption, and to wait. The saving which is essential to all of us will thus be seen to depend upon the amount of inducement found to be neces sary to make the individual willing to refrain frorn some form of indulgence. We \vill reduce this to the simple terms of a daily experience. As I walk to the station in the morning, I light a pipe of tobacco. I look at my pouch and consider how suitably I am supplied with tobacco, how much I shall need before I return home at night, and this is the sort of mental.process through which I go: " You want some tobacco-No, you don't-Y ou':ve a couple of pipe-fulIs-One after lunch-One on the way home-' You're smoking too much, my boy-The doctor says it's not good for you-If you buy a shilling's-worth of tobacco you'll only smoke more and waste a shilling-Put that away and it'll be 2S.

in twenty years-Two shillings will be of much more use to your kids than a shilling's-worth of tobacco to you-. All right, I'll have my two pipes and walt till to-morrow-I don't know-·I've got a lot to do and I may as well be comfortable-. This pipe tastes rather nice-Somebody may borrow a pipe-full and then I shan't have one to come home with-. What's the good of saving a shilling?-Itonly means more income tax And then I'd forgotten, there's that Capital Levy .... " By the time I h~ve gone through that argument I D 50 THE CONFESSIONS OF A CAPITALIST am at the station, a tobacco shop is near at hand, and I buy my ounce, and fill up my pipe again. That is the sort of process that is going on in many different forms in the minds of forty millions of us every day of the week, and it is upon the issue of those millions of little mental strugg!Ies that the upward, or the downward, movement of the general standard of living depends.

I have said that the shilling a week put away for twenty years will produce approximately £100, but, for the sake of accuracy and to forestall the meticulous critic, it is as well to point out that the investment will want careful and systematic management to bring about that result. As soon as the shilling has mounted up to a sovereign it should be transferred from the Post Office deposit account and invested in some form of Government Security, where it will ,begin at once to earn interest nearer 5 per cent. than the 21 per cent. allowed on deposit. If National Savings Certificates are included in this scheme, the rate of increment will be a little higher, but, in any case, experience shows that the present inducement of 5 per cent. is not suffi cient to lead enough of us to make the sacrifice neces sary to save for the benefit of all. Having accumulated the £ 100 by the wearing process of twenty years of saving, it is possible to invest it at 5 per cent. and secure for ever an income of approxi matelY£5 per annum, or 2S. per week. But this is the smallest return obtainable from this sacrifice. As a matter of fact, it is very easy in these days to invest £ 100 and get a return of 25 per cent. The advertise ment columns of newspapers are full of tempting offers of houses. Thanks to the operations of building socie ties and other organisations, £ I 00 cash will secure a house, the balance of the purchase-money being paid out of the rent. Assuming the proper rent to be lOS.

EARLY SAVINGS 51 a week, it will be seen that the £I 00 is in fact invested at a rate of interest of 25 per cent., and that at the end of another fourteen or fifteen years. that simple IS. a week may have turned itself into a capital sum of £500, £600, or £7°°. This chapter on saving would be much better under stood in America, for nearly every street in that country has a savings bank at one corner-a fact which, it may be, explains the absence of that enthusiasm for Trade Unionism and other forms of collective activity which is at present a leading characteristic of our country. It is interesting to speculate on what would have hap pened if the money contributed over the last twenty years in ;Trade Union dues had been applied by indi viduals to the purchase of houses. The melancholy fact is that, had the drive and enthusiasm which two decades ago forced the bulk of the workers to econo mise so as to support the Unions been put into a great movement to buy their own houses, we should to-day have had 10,000,000 house-owners and no housing problem. That this is not the dreamy conjecture of a person obsessed with the saving idea is demonstrated beyond question by the well-known fact that there are .

in the United States I 1,000,000 workil?g men w~o own their homes, apart from the 10,000,000 who possess motor-cars and the larger number enjoying such minor advantages as telephones. Saving may be described as a form of foresight, as the action taken upon thinking always twenty years ahead. The whole science of Capitalism wants bring ingdown from the lofty p~raseology of economists to the solid basis of the shilling-a-week. Regarding things from an opposite angle, consider the large fortunes made out of the shilling-a-week by the traders who supply on the hire-purchase .system. Think of the numbers of armchairs now reposing in 52 THE CONFESSIONS OF A CAPITALIST the parlours of the workers for which payment is made by this magic shil1ing~a-week. Here you have the ob verse of the Capitalist coin. The essence of saving is that the sacrifice must precede the benefit. Hire purchase is an attempt to put_the benefit in front of the sacrifice. Many years ago Mr. Micawber called attention to the vital difference existing between 19S. 6d. and 20S. 6d., and Dickens in that way began the story, which so badly wants developing, of the power and benefit of the shilling-a-week.

Much more might be made of the tremendous advant age which the small investor, very properly and very naturally, has under Capitalism. Illustrations could be given of how small sums can be invested at 100 per cent. Suppose, for instance, that ~a pair of bad boots cost a sovereign and last six months. The buyer of those boots pays £2 a year to keep himself shod. Then suppose that he has lOS. in hand which he has saved and is therefore ~n a position to buy better boots at 30S. a pair having a life of twelve months. His annual expenditure on footwear is thus reduced to 3os. and the lOS. is giving him 'a return of 100 per cent. If that buyer has managed to save rather more and has a five-pound note in hand and is thus able to invest in three pairs of boots, using them in rotation and giving them enough time to recover before he start~ out again on a wet day, it will be found that the boots will last almost. indefinitely, and his investment will multiply more rapidly. Exactly the same thing is true of most small requirements of life. The poor pay through the nose regularly. and systematically, because they have so few shillings in hand to. enable them to resist the attractions of cheapness. This fact is gener ally recognised, but what is not recognised is that there is no remedy except the remedy to be found in individual saving.

EARLY SAVINGS 53 This chapter does not pretend to explain the present size of my income, which could never be reached this way, and this way only. My purpose in setting out all these simple and trumpery little matters is to give the reader an insight into the sort of person that I am, and the way I look at things, because therein lies the whole secret. The business man might be described as the great economiser, the great saver. The business classes are nothing· but that. small section of the community which is doing· the saving necessary for the continued existence of the whole. That saving, essential to all of us, brings great advantages to those who make it and if there is a feeling that those advantages are too great, that the price paid is too high, the remedy is not to destroy the business man-that would merely bring everyone else down with him. The remedy is simple, obvious, and in the hands of each one of us. It is to multiply the number of business men, to develop the business habit, to increase the number of savers. In so far as we succeed in doing this we diminish the benefits which accrue to those who save.

. There are various ways of serving one's fellows, but the service rendered by the savers, the business classes, is not recognised at its true value. So far, indeed, from being recognised,. the successful business man is held up as an abuse, and that is, to my mind, one of the greatest injustices of these extraordinary times.