Popular Science Monthly/Volume 48/April 1896/The Social Function of Wealth
By M. PAUL LEROY BEAULIEU.
WEALTH—concentrated to a high degree in the hands of an individual has a mission,—a social function, which is derived from its very nature and which it alone can properly fulfill. Wealth has the power of commanding production and labor, and consequently of giving a direction to both; indirectly, without show, but very effectively, more intimately, and more familiarly, a rich man, like a politician, is a leader of men. Fortune, which is abundant wealth in the hands of an individual, constitutes a power of administration. This power of administration, whether acquired or inherited, can not be used while affairs dependent on one's self are allowed to drift; for the fortune will in that case probably be dispersed and will escape the hands that are holding it. One may try using it in a purely selfish interest; he will be likely to become richer and richer, accumulating capital and making himself useful to society by new expenditures; but he will not fulfill the social function of fortune. One may, on the other hand, place himself at a high general point of view in using this power without excluding his personality.
The gospel precept, repeated in all Christian morals, that the wealthy are the administrators of the goods of the poor, or the economists of the poor, is a pious maxim not wholly practicable from the human point of view; but it embodies the principles of the matter, particularly in its second phrase. According to Mr. Frederic Harrison's inquiry, in The Forum of 1894, into the habits of wealthy men in a republic, the first duty of fortune, as of capital in general, is to take care of itself. The prime error, whether individual, or of the family, or social, is to let one's property diminish in value; that property being a fund, susceptible of being perpetuated, useful for the production and development of enterprises, destruction, waste, or depreciation of it, whether by prodigality or by imprudent generosity, is a misdemeanor. In the interest of society, as well as of the family and the person, every one ought to respect and maintain his fortune.
Only income can be legitimately consumed. In using this, a liberal mode of living is permissible, and involves nothing opposed to morals. It is, in fact, generally commendable, provided the expenditure is within the receipt. Judicious luxury, the artistic decoration of life, without vain ostentation and frivolous arrogance, is also legitimate; but it is better to let the expenditure bear upon objects that will endure; that the generations should leave lasting traces of the elegancies of their career is legitimate. An economical obligation—and one he certainly owes to his family, if not a moral one—lies upon the wealthy man to maintain a reasonable increase of his fortune. He should continue to save a certain proportion and to create capital in order to procure for society, as a whole, the means of applying new inventions and discoveries, and to augment the productive fund with which to assuage the troubles and increase the conveniences of mankind. To save continues to be a duty in whatever situation of fortune, if only to guard against the accidents that are always possible. While the danger of such accidents has been proved to be real by past experience, which has shown that few fortunes can exist without depreciation for more than a few generations, the amount to be laid up need not absorb all the surplus beyond that sum needed to maintain a liberal and comfortable style of living. The duty of making judicious investments imposes on the man of wealth the necessity of exercising a degree of boldness without going into rashness, and of giving much reflection and study to his business. This furnishes an additional reason for prudence in saving, in order to compensate for the mistakes that may be made in investing.
The social function of wealth comes into play when the disposition is to be determined of the surplus that is left after a comfortable style of living with judicious luxury is provided for, and a proper amount has been put away.
Persons of great wealth have large opportunities for usefulness in associating themselves with and participating in efforts which seem useful, but the results of which are uncertain. Many discoveries and inventions have to pass through a period of incubation, as recently electric lighting and the transmission of force by electricity, and now the division and dispersion of motive force into small shops, experiments in photography of colors, etc. Numerous costly efforts are necessary in seeking advance in such matters which we see to be possible and even near, but which are still far from the practicable period. Outside of the professional and technical ranks the persons who can make these experiments are not of the class who are simply at ease. At most they can only devote insignificant and insufficient sums to them. Such persons may be set to their work and kept at it by the private aid of the really wealthy, who are not asked to risk a fraction of their capital, but only a small portion of their surplus income, after all its other applications have been provided for. Wealth is thus put in the way of fulfilling its social function of assisting progress; and much more is accomplished by it in this way than the multitude think. A similar field of usefulness is found in giving assistance to agricultural experimentation. The great English lords, according to Thorold Rogers in his Economical Interpretation of History, achieved much in this direction in the seventeenth century; and Arthur Young has cited the cases of numerous gentlemen and industrial proprietors in France who improved their opportunities of thus doing good. A large estate is a free school, a field of experiments in novelties from which the neighboring small property derives a full share of benefit. The trial of new cultivations, of selected seed, of improved implements, of methods suggested by science, is the task of the opulent large proprietor or of the rich manufacturer or merchant spending his vacation or his leisure on his country estate. So these large proprietors have a mission to perform in the choice of good breeders for reproduction or selection, and in the improvement of vegetable species.
A second social function of wealth is found in enterprises requiring patronage and remunerative philanthropy. The term "remunerative philanthropy" may have an odd sound to some persons. It is, however, true that rich men render great social services by the performance of the kind of work which we have designated thus. A portion of the revenue of the wealthy might well be devoted to enterprises of general and public utility, which would also, if well directed, produce a modest but respectable remuneration. There are a number of kinds of businesses capable of returning a small profit, but in which the chances of gain, though not absent, are too limited to attract private speculators, careful only of their personal interest, which might be undertaken by wealthy men satisfied to put out a part of their revenues for low interest. An investigation made about fifteen years ago by the Industrial Society of Upper Alsace brought to light several enterprises of this character, inspired by a philanthropic feeling, and yet giving a modest indemnification for the capital invested in them. Among them are societies of Popular Credit, of which Schulze-Delitsch and Raiffeisen have described admirable types, consumers' co-operative societies, workingmen's insurance under a variety of forms, baths and lavatories for workingmen or for the small middle class, workingmen's lodgings, cheap dining houses, and other establishments of similar character. All these organizations that concern the people are usually despised by professional speculators and by capitalists.
Wealthy men might well apply a part of their disposable revenues to enterprises of this sort, not as alms, but on the score of general utility; and there would be no impropriety in their deriving a modest interest from them. Many organizations of this kind have been formed during the past quarter of a century in England, the United States, and France, and have demonstrated the applicability of the method. Associations formed for such objects should rigorously maintain the self-supporting principle, or aim to pay their own way.
Besides the numerous examples furnished by Alsace since 1850, there are many others in demonstration of the practicability of the plan we have sketched. Some, in the shape of dwelling houses for men of small means, have been described by M. Arthur Raffalovich, in his book, Le Logement du Pauvre (The Housing of the Poor Man). Some very successful enterprises which might have come under this head have been carried out in the United States, England, and France. There are in England 2,372 building societies, the most of which are based on this principle, which comprised 587,856 members at the end of 1892, and had the disposal of £40,641,000, of which £24,729,000 were paid in by shareholders and £14,911,000 by depositors. Their profits amounted to £1,897,000, or five per cent of the capital devoted to the construction of convenient dwelling houses for the poor. In a very successful experiment made by a number of practical philanthropists at Lyons, France, ninety houses, containing a thousand simple but convenient and healthful suites, returned a profit of five and a half per cent, of which the investors received four per cent, the statutory maximum, while the rest went to increase the reserves. The objections which have been alleged against these enterprises are not really of great importance. It does not follow that because they are not of advantage to every one or to the poorest class they are not useful to a very considerable class of workmen and small clerks. And while there is danger that in the course of time—say after fifty or seventy-five years—they will deteriorate or become corrupt, we have no right to conclude that they will not have rendered good service in the meantime. It only proves that nothing is lasting, and that types and methods will have to be modified, every half century, for example. These establishments foster a taste for neatness and hygienic conditions in the house, and provide models which private builders may imitate. What has thus been done in reference to the house may also be done with relation to food. In this, Lyons again has given an instructive example, in the provision that has been made there of popular restaurants with low-priced dishes, which yet pay a very convenient interest of from three to four per cent. In association with enterprises of this kind wealth performs its social function without suffering depreciation.
A third social function of wealth lies in the gratuitous patronage of unremunerative works, a sympathetic way of giving help where it will be worthily bestowed and thankfully received.
Next are great foundations of general interest, such as a few millionaires, whose names are honored and perpetuated by their deeds, have taken pleasure in making. The finest examples of this kind of benevolence have been found among the Americans and in the little states of ancient Greece; museums, schools, observatories, public parks, churches, orphanages, hospitals—institutions with which every man possessing a fortune of the first class might deem it a privilege to have his name associated. No considerable curtailment of the amount to be transmitted to heirs or gradual transformation after death of private fortunes into collective fortunes need be contemplated in these foundations. Such transformation would be of mischievous economical effect; for money, except in a few rare exceptions, is better administered by individuals who possess it than by collective organizations of any kind. Many fortunes, however, are large enough to afford considerable sums for these foundations. There are many other beneficent works that might tempt millionaires. Among objects worthy of attention are African and Asian exploration, experiments in acclimatization of animals and plants, subventions of scientific and medical investigation, and others. Under the triple form we have pointed out, the social function of wealth, as distinguished from its economical function, is to be initiative and auxiliary. This function can not be imposed by law, but must be promoted by tradition, conscience, and a taste for useful and sympathetic activity. It would be well if it were supported by a compliant public opinion, but the absence of that condition affords no reason for ignoring it.—Translated for the Popular Science Monthly from the Revue des Deux Mondes.