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XXVI

THE CONSUMER MARKET

  WHEN business is dull, business men speak glibly of overproduction because they mistakenly assume that the capacity of the market to absorb goods is the final measure of the capacity of society to consume them. But the capacity of the market is not the capacity of consumption. It is the capacity only of the consuming public's ability to buy.

  There can be no such thing as overproduction of any commodity as long as any considerable part of the population wants it but is unable to buy it. It is only when a commodity is not wanted--when tastes and needs have changed--that it is possible to overproduce it.

  Mr. C. H. Chase ("The Chessboard of Industrial Readjustment," Searchlight on Congress, Vol. V, No. 2, July, 1920, p. 23.) makes the following interesting estimate of production in relation to requirements for the year 1921:

                                  Per cent of 
                                  requirement 
                                   produced

Housing .............................  60 
Coal ................................  83 
Men's suits .........................  83 
Shoes ...............................  85  
Sugar ...............................  85 
Petroleum ...........................  90 
Fresh milk ..........................  91 
Potatoes ............................  92 
Beef ................................  95 
Wheat flour .........................  95 
Commercial building ................. 110 
Automobiles ......................... 125

  Requirements in this table are on the basis of the Ogburn family budget. They are therefore really minimum assumptions. Were requirements interpreted in terms of desires, in terms of potential demand, the actual production of the country would have been still shorter than shown. Yet in the face of the obvious shortage in the production of most commodities, we hear endless talk among so-called practical men about overproduction.

  If the inability of the consumer market to absorb the production of our industries is the underlying cause of the intense competition which produces high pressure marketing, the real problem before us is to find the reason for this inability and then devise means of expanding the consumer market.

  Modern marketing begins, very properly and sometimes very scientifically, with market analysis. In subject matter, the fundamentals of every market analysis are alike. Whether it is an analysis of a city market, like Philadelphia, or an analysis of the national market, the foreign market, the farm market, or any other market, it begins with the consideration of such questions as "How many consumers are in that market?" "What is their occupation, sex, age, marital condition?" "What do they now buy?" "What is their buying power?" "How many retailers and wholesalers of various kinds are available as outlets?" Usually it ends with an answer to the question, "How is it possible to most effectively cultivate that market?"

  Surely no better method of determining the facts concerning the consumer market can be used than the model method furnished by the modern market analysis. Business has demonstrated the practicability of this method. Business will therefore be able to understand this analysis more readily, and to consider my suggestions without having to learn a new vocabulary and to familiarize themselves with a new idealogy.

  In the year 1920, the consumers of the United States consisted of 105,710,620 souls, of whom 33,612,442 were children less than 15 years of age. Of the adult consumers, 36,920,663 were males and 35,177,515 females.

  Divorce and apartment hotels notwithstanding, their activities as buyers were principally manifested in family units. There were approximately 24,351,676 such family units--12,803,047 urban and 11,548,629 rural. The average urban family consisted of 4.2 persons; the average rural family consisted of 4.5 persons. Approximately 51,406,017 lived on farms and 54,304,603 in cities and towns. There were 9,484,550 urban dwellings with an average number of 5.7 persons per dwelling; and 11,212,654 rural dwellings with an average number of 4.6 persons per dwelling.

  In 1923, the estimated income of the people of the United States was $70,000,000,000. This, however, includes an estimate of the value of goods produced and consumed at home. It includes, for instance, the values of home-grown food, such as vegetables, fruits, milk, butter, eggs, poultry, etc., and home-sewn clothing and furnishings, which form a part of the income of those who produce and make these things for themselves, but which is not "money" income and is not passed through the retail trade. If we take into consideration the fact that a very substantial part of the income of our rural population consists of goods which they produce for themselves, it is conservative to estimate the amount of this form of income as 10 per cent. of the total income, or $7,000,000,000.

  Deduct this $7,000,000,000 from the total income of $70,000,000,000 and there remains the sum of $63,000,000,000 as the estimated money income of the people of the United States.

  This is the aggregate sum of money which the twenty-four million families in the United States received in the form of wages and salaries, as receipts for the products of their farms, as interest on loans, as profits from their businesses, and dividends upon their corporate investments.

  What did these families do with it?

  About $12,000,000,000 out of that income they saved in some form or other. Some of the savings were deposited in banks, and served to increase the amounts available for the loans and investments which banks make. Some of the savings were represented by the amount of premiums paid to insurance companies in excess of the amounts distributed by the companies to their policy holders. Some of the savings were represented by investments in corporate stocks and bonds, and in land and buildings. And some of the savings were retained by businessmen in their own businesses and used to increase the stocks of merchandise carried or to add to their equipment or to expand their facilities for production by adding new machinery and replacing old and obsolete machinery.

  Almost in its entirety, the $12,000,000,000 was used to create a market for capital goods.

  About $16,000,000,000 out of the total income was expended for other purposes than consumption goods bought through the retail trades. It was used to pay taxes, to pay rent, to pay for doctors, nurses, dentists; to pay lawyers, and to pay barbers, bootblacks, manicures, and domestics such as cooks, maids, and chauffeurs. Other parts of this sum were expended for hotel, restaurant, and laundry service; for telephone, telegraph, gas, and electrical service; for churches and charities, theaters and movies. This part of the expenditures of the people of the United States created a market primarily for the services of people who ministered, either individually as in the case of doctors, or in groups as in the case of actors, to the comfort or well being of the people they served.

  There remained then about $35,000,000,000 of the annual income which was used to create a. market for consumption goods through purchases at retail.

  Mr. Paul H. Nystrom ("An Estimate of the Volume of Retail Business in the United States," Paul H. Nystrom, Harvard Business Review, January, 1925.) estimates the distribution of this expenditure as follows:

                                                  Billions
                   Item                              of
                                                   Dollars

Food:  
  Groceries and meats, and so forth-including
    only part sold by retailers .................   15.8 
Clothing:
  Men's, women's and children's--including both
    ready-to-wear and piece goods, but not value
    of home dress-making; footwear, underwear, 
    hats, and so forth, included ................    7.9 
Furniture and House Furnishing:
  Including floor coverings, draperies, curtains,
    and so forth ................................    2.4 
Automobiles, accessories, oil, gas, and so forth.
  For pleasure purposes only ....................    3.0
Tobacco Products ................................    1.7
Beverages (non-alcoholic), ice-cream, and so forth    .8
Candy and chewing gun ...........................     .8
Jewelry, watches, and so forth...................     .49
Pianos, organs, and so forth ....................     .46
Fur articles ....................................     .18
Perfumes and cosmetics ..........................     .15 
Toilet soaps, and so forth ......................     .15
Miscellaneous ...................................    1.17 
     Total ......................................   35.00

  If the total money income was $63,000,000,000, then the average family income--the wages, salaries, commissions, and surplus from sales of farm products received by the average family--was $2,625 per year. That does not mean that each family in the United States had an income of that amount. In spite of what the heads of the family with the assistance of "boarders," adult children and far too often minor children, might scrape together, nearly two-thirds of the twenty-four million of families could not buy all of the necessities for normal family life. On the other hand, a very small number of very wealthy families had incomes sufficient to gratify every normal and abnormal human desire. In between were various groups of families, some of them barely able to buy what was needed to maintain a minimum standard of living, while others were able to live in comparative luxury.

  Professor Willford I. King ("Wealth and Income of the People of the United States," Willford I. King, p. 235.) divides the population of the United States into four groups in accordance with their money income. The class of population which he calls the poorest received 38.6 per cent. of total income of the nation, but comprised 65 per cent. of the total population. The lower middle class received 14.2 per cent. of the total income and comprised 15 per cent. of the population. The upper middle class, consisting of 18 per cent. of the population, received 26.8 per cent. of the total income. While the richest class consisted of only 2 per cent., and received 20.4 per cent. of the total income.

  Table IX is a combination of the figures of Professor King, of the number of families, and of the amount of income in 1923 and furnishes us a basis for estimating the amount of income for the average family in each class. These amounts represent very generous estimates of the actual income of each family, especially in the case of families in the poorer classes, because the total income of $63,000,000,000 includes considerable sums which are not distributed to the general population at all, but are retained in business by those corporations which receive the income. However, for the purpose of making clear the argument which follows, the figures are sufficiently accurate.

                             TABLE IX
  Income of the People of the United States by Classes and Families

                                                               Amount 
                      Per               Per Cent                of In-
                     Cent   Number of    of In-   Amount of    come of
Class of Population   of    Families    come of   Income of    Average
                     Popu-               Each     Each Class   Family
                    lation              Class                  in Each 
                                                               Class

Poorest Class         65   15,600,000    38.6   $24,318,000    $1,559
Lower Middle Class    15    3,600,000    14.2     8,946,000     2,485
Upper Middle Class    18    4,320,000    26.8    16,884,000     3,908
Richest Class          2      480,009    20.4    12,852,000    26,775
  All Classes        100*  24,000,000†  100*    $63,000,000‡   $2,625

*Page 235, "Wealth and Income of the People of the United States," by Willford I. King.

 † Page 155, "Harvard Business Review," January, 1925.   "Volume of Retail Business," by Paul H. Nystrom.

 ‡ Estimated income of $70,000,000 in 1923 less $7,000,000 estimated as the value of goods produced and consumed at home.

  In Table X, an estimate has been made as to the savings, expenditures for other purposes than consumption goods, and the purchase of consumption goods by each of the four classes of the population.

                         TABLE X
Expenditures of the People of the United States by Classes

Class of Population    Income of Each       Savings of Each 
                           Class*               Class*

Poorest Class ....... 38.6%  $24,318,000    0%  (Negligible)
Lower Middle Class .. 14.20    8,946,000    5%    $ 447,300
Upper Middle Class .. 26.8%   16,884,000   10%    1,688,400
Richest Class ....... 20.4%   12,852,000   77%    9,864,300
        Totals        100 %  $63,000,000   19%  $12,000,000
  
                         Expenditures for    Consumer Market
Class of Population    Other Purposes Than    Represented by
                        Consumption Goods*      Each Class* 

Poorest Class ....... 25  %  $6,079,500      75  % $18,238,500
Lower Middle Class .. 27.5%   2,460,150      67.5%   6,038,550
Upper Middle Class .. 35  %   5,909,400      55  %   9,286,200
Richest Class ....... 12  %   1,550,950      11  %   1,436,750 
        Totals        25  % $16,000,000      56  % $35,000,000

* The following figures are in billions--000 are omitted.

  By dividing the figures in Table X by the number of families in each class, we get the figures in Table XI.

                             TABLE XI
   Expenditures of the People of the United States by Families

                                                 Exp. per   Con-
                                   In-   Savings  Family   sumer
Class of Population   Number of    come   per    for Other Buying 
                      families     per   Family    than    Power 
                                  Family           Cons.    per 
                                                   Goods   Family

Poorest Class ...... 15,600,000  $1,559 $     0  $  390   $1,169
Lower Middle Class..  3,600,000   2,485     124     683    1,677
Upper Middle Class..  4,320,000   3,908     390   1,368    2,150 
Richest Class ......    480,000  26,775  20,550   3,231    2,993

  Tables IX, X, and XI make it possible to illustrate the propositions which we shall now develop in an effort to answer the question of what effect the estimated distribution of the income among the four classes had upon the ability of the entire consumer market to absorb the normal capacity of our producers.

PLATE X
Expenditures of the People of the United States by Classes

 

PLATE XI
Expenditures of the People of the United States by Families

  Bearing in mind what has been said concerning desire--concerning the potentialities of consumer demand--is it not clear that out of the twenty-four million families in the United States, only 4,800,000 families--the families in the upper middle classes and the richest class--had incomes which enabled them to purchase all that it was possible for the average family to consume? Only about 20 per cent. of the families were able to contribute an average amount of buying power to the consumer market. Nearly 20,000,000 families, representing 80 per cent. of the capacity for consumption, were unable to buy what they could and would have liked to consume because they lacked the necessary income.

  If the 15,600,000 families in the poorest class were to have had incomes which enabled them to buy consumption goods at the same rate as the average family in the lower middle class, the market for consumption goods would have increased by $7,924,800,000. This would have meant an expansion of more than 20 per cent. in the volume of goods sold at retail.

  If both the poorest and the lower middle classes were to have had incomes large enough to buy at the same rate as the average upper middle class family, the market for consumption goods would have been larger by the enormous sum of $17,006,400,000. This would have meant an increase of nearly 50 per cent. in the volume of goods sold at retail. Instead of consuming thirty-five billion dollars worth of goods in the year, the consumers of the country would have absorbed over fifty billion dollars worth.

  A more careful calculation than that which the data at my command has enabled me to make might change these amounts, but such a calculation is just as likely to increase, as to decrease them.

  Our manufacturers are engaged in frantic efforts to extend their markets. Many of them indulge in the costly follies of high pressure marketing in the hope of securing for themselves larger shares of the market represented by the wealthier classes of the population and in persuading those classes to consume more and more of their products. Others under the tutelage of the Department of State and the Department of Commerce, try to extend their markets all over the world, overlooking the fact that the products which they export must be paid for sooner or later with products which we import and that these imports must be sold in the apparently satiated domestic market. Still other manufacturers, when all other methods of extending their markets sufficiently to enable them to operate profitably fail them, turn to the cutting of wages in order to lower prices and thus extend the market, or to the operating of their factories on part time in order to secure high enough prices to operate profitably. And all the time they are overlooking the illimitable possibilities of their own domestic market.

  Yet it is plain that the inadequacy of the consumer market is caused by the financial inability of the poorer two-thirds of the population to buy what it might consume, and the physical inability of the richer one-third of the population to consume what it can afford to buy.

  Naturally the competition among manufacturers for the possession of the market represented by the purchases of the prosperous one-third of our population is intense. The consumers who form this part of the consumer market have the ability to buy all that the various industries produce, but unfortunately for our manufacturers, they have not the physical capacity for consuming it. Quantitatively, the amount of food and clothing, shelter and entertainment which the average individual can consume is limited. The fact that some people can afford to buy more clothing than others, does not necessarily prove that they can actually consume more. With only one-third of our population able to buy all the clothing that they can consume, and two-thirds unable to buy all the clothing that they should, it is a foregone certainty that our wool-growers will produce more wool, our woolen mills produce more cloth, and our manufacturers produce more clothing than the entire consumrr market will be able to absorb.

  Table X makes it very plain that the bulk of our poorest classes, perhaps 60 per cent. of the total number of consumers, have to live upon incomes too small to purchase the essentials of a decent standard of living for a family in the United States. Obviously these consumers--mainly farmers and unskilled and semi-skilled workers--cannot contribute to buying power what they should if the entire consumer market is to absorb the products of industry. But neither can the bulk of the middle classes. Only the richest classes of families have incomes which enable them to consume as every family should if industry is to be kept normally busy. But the richest classes include only 2 per cent. of the families. In spite of the fact that they can purchase all the essentials and all the luxuries which it is possible for them to consume, they have not the physical capacity to consume enough to make up for the underconsumption of the other classes. Most of their incomes are therefore saved--and reinvested in additional facilities for production.

  An increase of income for the wealthier classes results in no substantial increase in their consumption of food, clothing, or furnishings. It results merely in an increase in their savings and in greater investments for expanding our capacity for production. But an increase in the income of the poorer classes results immediately in an increased demand for food and clothing and furnishings. Anything which enables our poorer classes to increase their buying power enormously increases the market for consumption goods. Every increase in the income of these classes results in practically the entire increase expanding the consumer market. This is an incontestible fact. Men may differ as to the best means for increasing the buying power of the poorer consumers, but once they understand the situation, intelligent men cannot differ on the desirability of increasing the buying power of the masses. If nothing can be done to dam the stream of consumption goods in which we are being drowned, anything which increases the ability to consume of those classes who are not now consuming to the limit, is an economic virtue. And by the same token, everything which reduces their capacity to consume is an economic crime. Our farmers must receive better prices for their products, because farm families generally are not consuming to the limit. Our wage earners and white collar workers must be better paid because their families too are not consuming to the limit. And yet prices must be reduced, because lower prices have the effect of enabling those whose incomes are comparatively stable to consume more.

  We are thus brought face to face with what is really the central riddle of our present system of economy. Is it possible under the existing economic system to enable the poorer classes to purchase enough so that the consumer market as a whole will be able to absorb all that our factories can produce? Will it be necessary for us to abandon our present conception of private property or to abolish the title of the richest classes to some of the vested rights which enable them to secure so large a proportion of the total income, in order to enable the other three classes to increase their buying power?

  An answer to these questions is beyond the scope of this study. I shall content myself with a few suggestions which are designed to show that it is possible to expand the consumer market by (1) lowering prices, thus enabling the poorer classes to buy more; (2) increasing the incomes of the poorer classes and thus enabling them to buy more; and (3) increasing the ratio of expenditure for consumption to expenditure for capital goods, thus both expanding the market for consumption goods and checking the expansion of our capacity for production.

FIRST SUGGESTION--MORE COMPETITION

  The first suggestion which I should like to make is that we cease the habit of rendering mere lip-service to the principle of competition.

  Ours is supposed to be a competitive system of economy. As a matter of fact, is has become more truly a competition to secure privileges which enable their possessors to operate outside of the competitive market. We are engaged not only in a competition to secure the obvious forms of privilege, such as franchises, patents, and subsidies, but the more insidious forms which are based upon licenses, tariffs, taxation, and nationally advertised trade-marks. All these forms of privilege involve interferences of some kind with the principles of free competition. Each privilege enables someone to set up an internal tariff which restricts the freedom of the market. Prices tend to be higher, because they are based not upon the "higgling" of the market, but upon the principle of charging all that the traffic will bear. If we believe that the competitive system is truly economic, then we should recognize that all these interferences with it are undesirable and, instead of ignoring them, undertake to reduce their numbers and to curtail their extent.

  That they can be reduced, if not entirely abolished, by legal and political action is true. But their effectiveness can be very largely reduced without new legislation by the simple expedient of consistently establishing free markets at every stage of the distribution process.

  We have a free market in the distribution of raw cotton, and the price of cotton is determined substantially by competition between buyers and sellers. For the competitive system to work perfectly we must have similar free markets for cotton yarn, gray goods, and finished goods. Prices between grower and spinner, between converter and wholesaler, between retailer and consumer should be fixed by competition unhampered by privileges which enable some factor in the process to ignore the quotations in his market and charge all that the traffic will bear. Such markets require, as has been shown, (1) the establishment of grades and standards, (2) market quotations that become matters of general knowledge, and (3) recognized places in which buying and selling can conveniently take place. Markets of this character do exist for some of the more important commodities and raw materials. They are exceedingly sensitive to fluctuations in supply and demand and they enable buyers to keep prices down to the minimum. But we need desperately markets of this sort for every commodity and for every stage of distribution. Most of the responsibility for uneconomic high prices--prices which check consumption and prevent the consumer market from absorbing the products of our farms and factories--may be traced to the absence of real competitive markets at the various stages of the distribution process.

SECOND SUGGESTION: MORE CUTTING OF COSTS

  The next suggestion which I have to make is that we give serious consideration to the question of reducing unnecesary costs which burden distribution and in this way both free multitudes of workers for really productive effort and expand the market for consumption goods.

  Nearly one-fourth of the consumer's dollar paid across the retailer's counter is paid for the transportation of what he buys. Anything which reduces the proportion which he pays for transportation increases by very nearly a corresponding amount the consumer's ability to buy what industry is capable of producing. Consumers buy approximately thirty-five billion dollars worth of goods at retail. About eight billion dollars of this represents direct and indirect payments for transportation. Every one per cent. reduction in the transportation bill would expand the market for the products of our farms and factories by more than eighty million dollars.

  Until the year 1917, the cost of transportation per ton mile was constantly being reduced. Since that time it has risen to levels the true significance of which are little appreciated. The subject of lower freight rates should be given earnest consideration by producers because a reduction in transportation costs would expand the market for consumption goods by more than the full amount of the reduction in rates.

  For the same reason that we should lower transportation costs, we should give serious consideration to the effect upon the consumer market of the incidence of taxation.

  Our present scheme of taxation is about the most absurd that could well be devised. It burdens the consumer because it results in the passing on of many taxes to the consumer pyramided over and over again, and handicaps the producer both by increasing prices and shrinking the capacity of the consumer market to absorb what he produces. But business men who are harassed with the multiplicity of taxes upon their operations should give real consideration not only to the reduction of taxation, but also to the simplification of this necessary evil. The elimination of many of the forms of taxation which now hamper trade and make monopolistic restrictions common would result in more economic production and distribution and correspondingly expand the market for the products of our farms and factories.

  Partly because of the Utopianism with which the subject of the taxation of land values has been advocated, and partly because of the hostility of land speculators to the principle upon which Henry George's idea is based, the fact that it is an economic method of taxation has been overlooked. The taxation of land values may not be a panacea for all the ills of mankind, but it certainly is a thoroughly practical method for stimulating building and thus of lowering rents. The substitution of land values taxation for other forms of taxation is a policy which is ideally adapted to an individualistic and competitive economic system. Instead of the present policy of more and more government in business, it would mean a policy of less and less government in business.

THIRD SUGGESTION: MORE CONSUMER BUYING POWER

  The next suggestion that I should like to make is that our industries should give collective consideration to increasing the buying power of those classes of the population whose incomes prevent them from consuming to their full capacity. We have trade associations and chambers of commerce which give earnest thought and sustained effort to advancing the interests of their members. Why shouldn't they give a little thought to expanding the market for what we produce--not by trying to divert the expenditure of prosperous people, from one industry to another--but by enabling a greater number of consumers to buy what we have the capacity to produce?

  The manufacturers of clothing acted in 1926 as if they had only a remote interest in the shrinkage in buying power of the farmers in the corn region caused by the abnormally low prices which farmers received for corn in 1925. It seems to me that the clothing industry, and every industry for that matter, would have been wiser and infinitely more far-sighted if it had faced the fact that it was to its interest to remedy a state of affairs which prevented these farmer-consumers from purchasing clothing and other consumption goods. Anything which increases the buying power of farmers, wage earners, and all the lower middle classes, increases the capacity of the market to absorb consumption goods. The farmers' organizations which are trying to get higher prices for farm products, are really engaged in extending the market for clothing and for every other product which farmers desire to consume. If as a result of their activities, the farmers have more money to spend, the manufacturers of goods which farmers use are immediate beneficiaries.

  Strange as it may seem to manufacturers, this also is true of the activities of the labor unions, especially of those unions which strive to secure higher wages for the poorest paid classes of our workers. These workers are potential consumers of precisely the same quantities of food, clothing, and shelter as their more prosperous and better paid fellow citizens.

  If the unions are able to increase their wages, the immediate result is always an increase in the buying power of these consumers. The market for food, clothing, furniture, and every possible commodity which working men consume is expanded. Startling as this may sound to business men who look upon unions solely with apprehensive regard as to the effect of their activities upon the cost of labor in their own establishments, it is nevertheless undeniable truth.

FINAL SUGGESTION: MORE PATRONAGE OF THE ARTS

  The final suggestion which I should like to make may seem a rather fantastic one. And yet none of the suggestions which I have made is grounded upon a more substantial economic basis. If it seems to be somewhat remote from the day to day battle for the market, it is not because it is lacking in practicability, but solely because it is so novel and unusual.

  It has, I think, been made clear that one of the principal reasons for the high cost of distribution is the extravagances of high pressure marketing caused by the continuous increase in our production facilities. Each year our capacity for production expands. It expands because the richest classes of the population feel under a social compulsion to invest their excess income. If this excess income were to be diverted by them into other channels than investment, and if it were to be used to increase the buying power of classes of the population who are not now consuming to capacity, it would both expand the market for consumption goods and check the expansion of our capacity for production.

  Of the nearly fifteen billions of dollars which we are saving today, perhaps one-half is needed to replace capital which is lost by obsolescence and depreciation. This means that approximately seven and one-half billions are annually invested to increase our capital structure. A very large proportion of this is used to increase our facilities for producing consumer goods. If one-half of this seven and one-half billion dollars were to be used to adorn and enrich our civilization, it would give employment to nearly one million writers, singers, musicians, artists, sculptors, architects, and craftsmen of all kinds. With each of these the head of an average urban family of 4.2 persons, 4,200,000 persons, whose consumption capacity is now of a much lower order, would increase their consumption in accordance with the increased demand for the services of their breadwinners.

  Every time a wealthy man would divert excess income from an investment in a so-called productive enterprise to the purchase of current art, he would, in effect, reduce employments which ultimately result in the manufacture of capital goods and increase the numbers engaged in ministering to culture and the beautiful life. This in turn would have a two-fold consequence; it would reduce competitive extravagances among the producers by checking the increase in productive capacity, and it would expand the consumer market by increasing the total buying power for consumption goods.

  The increase in the numbers engaged in professional service and craftsmanship would result in a relative decrease in the numbers engaged in mass distribution and mass production. Reducing the numbers in distribution would lower the cost of distribution and reducing the numbers in production would lower the intensity of competition among producers. The first would directly reduce the cost of living, and the second would indirectly reduce it by making high pressure methods of marketing by manufacturers unnecessary.

  The family of the Medici were typical of the wealthy classes of medieval Europe. The Medici, who corresponded economically with our present day captains of industry, devoted great portions of their excess incomes to the support of retinues of artists, sculptors, architects, and musicians, scholars, and poets. The services of poets, artists, and skilled craftsmen were in infinitely greater demand then than in our much wealthier era. The result of this system of liberal support for the fine arts was the Renaissance. Curiously enough, the fact that the wealthiest classes of those days preferred to use their excess income to dot the landscape of Europe with beautiful buildings and to fill them with current productions of artists and sculptors instead of investing them almost entirely in factories--such as there were in those times--has paid their descendants enormous dividends not only in satisfaction, but in cash to this day. Long after the factories, which our wealthy classes are so busily engaged in building, are crumpled into dust because of changes in the demands of the public, we shall continue to spend good money for the opportunity of seeing the world of art for which the medieval rich used their excess income.

  Why shouldn't our wealthy classes indulge in a form of investment which pays dividends such as this? Why shouldn't they occasionally prefer to purchase a painting by a living artist to the purchase of bonds or shares of stock in some promising corporation? Artists are generally more interesting and entertaining fellows than bond salesmen. Our wealthy classes evidently prefer the company of the salesmen because then they can maintain their precious belief that the only practical use for their excess income is investment in business. The day they discover, in sufficient numbers, that there is more sheer joy of life in devoting the bulk of their excess incomes to the enrichment of their environment, they may also make the astounding discovery that real support of living artists, musicians, and scientists will expand the consumer market and at the same time check that menace to all their existing investments-the constant expansion of the capacity for production. Thus they would make the quest of sales less hectic; demand and supply would be more closely equated; prices and business conditions would become more stable; profits more certain and losses less frequent.

  But even if more patronage of the arts by itself doesn't result in quite all these desirable developments, there is one thing it is certain to do, and that is make life infinitely more worth while living.

  The world--to be a tolerable place for a really civilized people--should consist of only two classes: artists and patrons of artists. It ought to be the ambition of every family to own a few good works of art by contemporary artists, and to live with them in a beautiful home. There ought to be a real market for paintings, sculpture, architecture, music, literature, the teachings of the social sciences and philosophy. There is the mere wraith of such a market in existence today.

  I do not mean to imply that all that is needed to produce a nation-wide culture is adequate financial support for the arts. The artist is the product of two forces: his personal genius, and the genius of his audience. To produce great artists, we need great audiences--sensitive, critical, educated audiences. Such audiences would not only support the arts, but they would help to produce the artists.

  If our wealthier classes were to really undertake to patronize the arts, in time not only would the patronage of the arts become as fashionable as the patronage of brokerage houses is today, but it would become at least as fashionable among the middle classes and the great masses as is the consumption of nationally advertised food and clothing, soaps and dentifrices, phonographs and radios.

  Strange as it may seem, nothing would more certainly add to the joy of living and lessen the cost of living in what I have called the distribution age.


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