11. Capitalism, the Rich and the Poor

CHAPTER

ELEVEN

Capitalism, the Rich and the Poor

It is a very popular assumption, criticized only very rarely by people, that the capitalistic system brings about satisfactory conditions for a minority of profiteers, while the masses become more and more impoverished. Of all the enormous problems connected with the monetary crisis, I want to deal with this problem especially because the most popular, or one of the most popular, ideas of Marxism is that the system of capitalism brings about the progressive impoverishment, the progressive deterioration of the economic state of affairs of the masses, for the benefit of a shrinking number of people who become richer and richer from year to year.

People believe that what is going on with these monetary problems today concern the well-to-do and that simple people are not so much interested. I want to show you how erroneous this idea is. It is thought that when the government inflates and as a result lowers the purchasing power of the monetary unit, this is of advantage to the masses, to the great majority of the people, and that only the rich are suffering. If you don’t want to use the term “suffer,” let us say have to pay higher prices for things. Now this idea, that the interested people are not the masses, not the majority of the people, but only the wealthy people and that it is only the wealthier and richer people that are concerned, is based on an ancient doctrine.

This doctrine was perfectly correct in the days of Solon (c. 638—559 BC) of Athens, or in the days of ancient Rome, of the Gracchi brothers (d. 121 and 133 BC), or in the Middle Ages. In the pre-capitalistic ages the rich people owned land and were, therefore, wealthy. They could save, increase their possessions by investing in real property, houses, businesses, landed property. Or they could increase their fortunes by dealing in a more conservative way with the forests which they owned. On the other hand there were people who were poor, very poor, people who had nothing, who might occasionally earn a small piece of money but who really had no opportunity to accumulate anything to improve their conditions. Under ancient conditions, the masses had no opportunity to save; the poor man had only the possibility of earning a few coins perhaps and of hiding these coins somewhere, perhaps in a dark corner of their premises, but this was all. He would always be under the temptation to spend them. Or he could lose them. Or somebody could steal them. The poor were not in a position to make their savings grow by lending them against interest. Even in England, the most advanced capitalistic country in the eighteenth century, it was not possible, for a poor man to save except by hoarding a few coins in an old stocking hidden somewhere in his house. Such savings bore no interest. Only the rich could invest money at interest, perhaps in mortgages, and so on.

At that time when people talked about creditors and debtors, they had in mind a state of affairs in which the wealthier a man was the more of a creditor he was, and the poorer a man was the more of a debtor he was. The whole idea was based on the assumption that the government ought to help the poor people who have heavy debts, while the rich who have claims are rich enough. Therefore, the method by which the government lowers the purchasing power of the monetary unit helps the debtors, because their debts are shrinking, and at the same time it goes against the creditors because their claims also are shrinking.

We are inclined to think that the situation today is similar, that the rich people today are creditors, certainly that they have no debts and are not debtors. But we no longer live under the conditions in which the authors dealt with these problems in the pre-capitalistic ages. The situation is very different today. It is very different because we have a very different organization of business, of business claims, and of the adjustment of business to the various individuals. Capitalism has enriched the masses, not all of them, of course, because capitalism has still to fight the hostility of the governments. But under capitalistic conditions it is no longer true that the creditors are the rich and the debtors are the poor. Capitalism has developed a great system making it possible for the masses of the poorest strata of the population, the people who have less—I don’t want to say that they are poor in the sense in which one uses the term, only that they are poorer, less wealthy, than the rich people, than the entrepreneurs, and so on—to save and to invest their savings indirectly in the operation of business. The rich people are owners, for instance, of the common stock of a corporation. But the corporations owe money, either because they have issued bonds, corporate bonds, or because they have some current connection with a bank, employing money lent to them by the banks in the conduct of their affairs. Thus the great millionaires, the owners of real estate, the owners of common stock, and so on, are in this regard debtors. The masses, the people whom we call less wealthy than the richer people, have invested their savings in savings deposits, in bonds, in insurance policies, and so on. And the banks have money from the savings accounts of simple citizens who, therefore, are creditors. And if you do something, as practically all the governments do, against the purchasing power of the monetary unit today under present conditions, you are hurting not the rich, but the middle classes and the masses of people who are saving all their lives in order to enjoy a better old age and in order to make it possible for them to educate their children and so on.

The fact that government bonds are to some extent tax free means the government gives special privileges to the rich in order to attract them to the market for government bonds and so to become creditors. It is a very complicated system; one could call the system simply privileges in the way of lower taxes in order to make the wealthier strata of the population also interested in buying government bonds and in this way to make it possible for the government to spend more. But by and large we have to say that the great, the much greater part, of the privileges, of the “benefits”—“benefits” in quotations marks—which the people derive from the government’s inflationary policy does not go to the masses but to those who are better off. And so the “benefits” of the inflation are paid for by the masses.

Not so long ago, there was the very powerful Nazi movement in Germany. Whatever you may say about Germany, you cannot say that it was an illiterate country. You couldn’t say that the population of Germany was inexperienced in problems of capitalism and modern industrialism. In that country, Germany, one of the main slogans, a very popular slogan which brought millions of votes to the Nazi Party was: “Do away with interest slavery. You are slaves in paying interest to the rich people and we shall do away with interest slavery.” Now what was this “interest slavery”? This was a fantastic idea, you know, for it was really to the masses, the poorer people, to whom the big corporations and other such institutions made interest payments. Yet practically nobody objected to this slogan. One eminent German newspaper, perhaps the best informed German newspaper with regard to economic problems, the FRANKFURTER ZEITUNG, published an article in which it said: “You people who accept this program of the Nazi Party of doing away with interest slavery, do you know that you are creditors and not debtors?” And they were, but they didn’t know it. On the day when the FRANKFURTER ZEITUNG published this article on its first page, I was on the way to London traveling in the express train from one end of Germany to the other, from the Austrian frontier of Germany to the Dutch frontier. I could observe people reading this article and I told myself, “They don’t understand these things, and so they are bound to suffer the consequences.” And did they suffer the consequences? Of course! The mark became zero. This meant that all the assets, all the savings of the people, the creditors, disappeared, to the benefit of the debtors.

People in a country like the United States are saving in the years when they are in full vigor and can earn money. They are saving not only to meet unexpected conditions which could develop one day; they are saving systematically to enjoy income without working any longer in their old age. For instance, people are taking out life insurance policies; they are accumulating savings deposits; and they are making agreements with their employers according to which their employers are bound to pay them definite amounts as pension rights later; and so on. Now when there is an inflation going on, all these people are suffering, suffering because they are continually losing with the progress of inflation, because the progress of inflation means that the purchasing power of the monetary unit decreases. If we want to have a system in which the individual can plan for his own life and for the life of his family, if we want to have a system in which people can say: “If I have the opportunity to work and to save I will improve my own conditions and the conditions of my family.” Then you must have a regular system of what one used to call “bourgeois security.” But if the governments destroy the savings of their citizens again and again by inflating they bring about a situation in which the people do what these people in various European communist countries did and in which you hear again and again of violence and actions of destruction.

The example of Germany may help you realize that there are still many things to be learned about economic problems by everybody, not only by the managers of big banks, professional editors of journals of business, and so on. It is for this reason that I think everybody should be interested in these problems, not because they are more important than other things, nor on account of the fact that one should increase one’s theoretical knowledge, but on account of the fact that one should know, in one’s capacity as a voter and as a citizen, how to cooperate in the formation of one’s own country, nation and the whole world’s economic system. This is one of the reasons why one ought to deal with these problems. They are not very interesting to many people; they are not easy to study; but there is some reason to say they are fundamental for the preservation of one’s own economic safety. We have to change the opinion of the people who believe that the monetary problem is something that concerns only groups of business, small groups of people, and so on.