Savings

SAVINGS. - I. NOTION. - It is the positive difference between income and expenses (in the case of a business it is identified with profit). It arises and increases in two ways: a) by increasing income; b) by reducing expenses. The first way requires ingenuity, initiative, prudence, industriousness, but also an increasing employment of fixed and circulating capital; the second way, besides prudent management that eliminates all waste, requires renunciations and limitations in consumption: which, however, beyond a certain limit, affect productivity itself and cancel out saving. The two forms must coexist, the first being more suited to classes with variable incomes, and the second rather to classes with fixed incomes: and necessarily complementing each other, since neither of the two has the character of a universal norm. Nor indeed would the first form (of productive saving) manage to be realized without the capital supplied by the second, nor could the latter (abstinence saving) be generalized without provoking very serious crises as a consequence of the reduction of consumption.

The connection, therefore, that is ordinarily established between the concepts of saving and of sacrifice is relative: it is a matter of a preference given to productive consumption (also called consumption of saving) over consumption for enjoyment, on the basis of calculations of convenience into which moral, providential and speculative elements enter.

The saver, by "setting aside" the things saved in order to hoard them, or to transform them into instruments of new production (capital) either directly, if he is at the same time an entrepreneur, or by lending them to others against interest or income, demonstrates that those same things constitute for him, at present, the "superfluous"; that which, according to the Gospel, must return to the poor through the normal way of the productive employment of capital, source of new work and of new saving, or through the extraordinary ways of charity (almsgiving, donations and various forms of assistance). The act of the saver thus defines in practice the concepts of necessary and superfluous, subjective and indefinite in theory.

II. TRANSFORMATION OF SAVINGS

The transformation of savings into instruments of new production and therefore of income (houses, workshops, ports, railways, machines, raw materials, patents, etc.) constitutes a function of capital importance in the economy, called precisely for that reason the "capital function": hence the names "capital" given to savings thus transformed, "capitalist" to the saver who has carried out the transformation, and "capitalism" to the economic system that recognizes the capital function as its own foundation (today, however, this word is used in a pejorative sense, to designate excessive and pathological forms of the system, weighing with their economic and moral effects on social life).

Savings, as firmly bound to the free choice between immediate consumption for enjoyment and productive consumption, is an act of will, and therefore a moral act: in fact it depends on industriousness, enterprise and generosity (prevalent in the first of the forms considered above), on the virtues of prudence, on temperance and on renunciation (prevalent in the second form). Where such qualities and virtues are held in little esteem, savings do not form in the quantity annually necessary, and economic life languishes. Strong peoples, who have firmly established their fortunes, have always been saving peoples; and so too individuals, families and firms.

III. SAVINGS IN THEIR FORMATION AND USE

Saving, in its formation and in its use, is also the fruit of a specific culture and of the degree of contractual capacity of the saver, manifest especially in the choice of investments. It is in particular the preoccupation with risks and with devaluation that clips the wings of initiative, and makes people prefer consumption for enjoyment or hoarding, or else indirect investments, short-term and socially less useful. This is deleterious for economic life, which can bestow the well-being due to progress, and maintain the demand for labor and its remuneration at high levels, only if it is annually fed by the masses of new saving needed at least to employ the new workers (on average millions of lire are needed for each labor unit), well distributed between fixed and circulating capital and among the various branches of industry. Otherwise the well-known phenomena of overproduction occur, with a consequent decrease in real wages and therefore in consumption, so that producers gradually cease to produce and to save.

As always, this scientific and practical requirement of economics too is foretold in an evangelical precept, the parable of the talents, which makes the good use of saving a moral obligation, linked with the other obligation of returning the surplus to the poor who made it possible by their labor, even though they were not in a position to save.

IV. HONESTY OF SAVINGS

Contrary to collectivist theories, honest saving represents an indisputable property of the saver: and there is no reason why this criterion should change according to whether the things saved are used in one way or another. Leo XIII in Rerum novarum wrote: "If therefore (the artisan) by his economies has come to make savings and, to secure them better, has invested them in a piece of land, this land is in the end nothing other than his wage disguised in form, and consequently his property no more and no less than the wage itself." The expropriation or, worse, the confiscation of capital is therefore to be rejected as contrary not only to morality and to law, but to reason itself and to the general and particular advantage. There exist other means, legitimate and effective, for making workers participate in the ownership of the means of production: individual saving productively employed, the various types of association contract with entrepreneurs, worker shareholding, cooperative societies, etc. Every threat to property ("vital space of the family," as Pius XII defined it), takes away from the individual the possibility of resisting attacks on his own freedom: and it means re-establishing a hundredfold the exploitation from which it claims, in words, to liberate him. It means, also, beyond the offense to the person, depressing enterprise, with the consequence of a grave diminution in the yield of labor, and therefore of production and consumption. And indeed it is well known how in countries under a collectivist regime, or where State capitalism prevails, the yield of labor falls to extremely low levels, revealed both by the very high prices of products on the international market, and by the compensation sought in the various forms of activism and emulation, and finally by the unusual extension of forced labor.

V. PROGRESS IN THE GENESIS OF SAVINGS

Progress in the formation, collection and investment of s. is oriented toward technical insurance forms achieving an ever higher fragmentation of risk, and toward the invention of contracts and institutions that raise the degree of marketability of the symbols and, to a lesser degree, protect them from devaluation (v. SVALUTAZIONE MONETARIA). Toward a total insurance form tend both the so-called capitalist countries, with their land and building credit, their financial, fiduciary and securities companies, the holdings, the trustees and government securities themselves; and the countries in which the State functions as a centralized economic organism, absorbing all of s. itself and distributing it according to planned criteria (v. PIANIFICAZIONE). What characterizes the two so-called political blocs on the economic plane is above all the path chosen in advance for the collection, insurance and investment of s. An intermediate conception could be the extension of the insurance method to all the symbols of s. of all the countries of the world by an autonomous economic organism, on a basis of freedom; whereby s. would end up losing its monetary and national characteristics.

Mario Baronci