Frank Albert Fetter.

Source book in economics, selected and ed. for the use of college classes online

. (page 23 of 30)
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cent. Recent investigations in New York, that of Mrs. More
in her Workingmen 's Budgets, and that of the Committee of
the New York Conference, agree in showing a steady falling
off in percentage expenditure for rent with each increase of
one hundred dollars in income. The percentages found in
the latter inquiry were 24 for incomes between $600 and $700,
and for successive income groups, rising by $100 stages, 22, 20,
19, 18, 16 — the last for incomes over $1100. The congestion
of population in New York, fortunately exceptional, doubt-
less accounts in part for the fact that in that city house rent
claims one-quarter of the $600 incomes.

An examination of the percentage expended for food,
housing, and other purposes suggests that the proportion of
income devoted to each of them may not always move in the
same direction as we pass from one income-group to the next
higher. The $400 families in the Labor Report of 1903 spend
a higher percentage for food than the $300 families. If the
comparison is carried far enough upward in the scale of in-
comes, a point is reached in New York where rent ceases to
fall off in percentage expenditure, and clothing ceases to de-
mand a larger proportion than in the group preceding. The
fact seems to be that each of the three primary wants takes
its turn in urging its claims vociferously, and when these have
been pacified, the desires for the things that make life worth
living begin to be heard. In regard to each class of wants in
turn a point of relative saturation is reached, and a more ade-
quate satisfaction of the next one becomes possible.

Changing ratio for housing. In New York City the most
imperative need on the lowest incomes is for housing. Some
place of shelter must be provided, and, however wretched, it
will not be cheap. Thirteen dollars a month was the average
rent paid by seventy-two families whose average income was
$650. But this amounts to $156 a year, or 24 per cent, of the


total income. When the cost oi' shelter demands a quarter of
the whole income, food and clothing must take what is left.
But the accommodations obtained as the minimum that can
be lived in by the families with $650 a year are practically
good enough for those with an income one and two hundred
dollars greater. Seventy-three families whose income aver-
aged $846, spent only fourteen dollars a week on the average
for rent. But this was only 21 per cent, of their larger total
expenditure. Meanwhile their food percentage was practi-
cally as high as that of the $650 group (44.3 per cent.), repre-
senting an increase in average amount expended from $290 to

Changing ratio for food. In food the point of diminishing
percentage was not reached until after the $1000 line was
passed. The food-percentage increased, as with the families
in the United States Labor Keport of 1903, on passing from
$400 to $500, and from $500 to $600. This may be due in
part to exaggeration in the returns of expenditure for food.
In part it was due to the fact that until an increase of $800
was reached one-third of the families were underfed. The
proportion of the total food-expenditure that was given for
animal food increased, and that expended for cereal food
diminished. The cost of animal food comprised 29 per cent,
of the total food bill of the families in the $600 income-
group, and 32 per cent, of those in the $1000 group. Cereals
dropped correspondingly from 21 to 17 per cent. The ex-
penditure for alcoholic drinks increased, taking into account
only those families that reported this item, from the average
of $27.25, or 4.2 per cent, of the total expenditures in the
$600 group, to $59.96, or 5.2 per cent., in the $1100 group.

Clothing; other wants. Clothing comes last of the three
to a constant or a diminishing proportion of the expenditures.
In the New York families under consideration the percentage
expenditure rises slightly with each increase of $100 in in-
come until the $1100 group is reached, and thereafter remains
constant at about 15 per cent. The expenditures for other


purposes than these three primary necessities are kept under
until these wants are met. By the time something like an
equilibrium among these three has been reached, say at $800
for our New York families, the expenditure for recreation, so-
cial obligations, care of the health, and all other purposes save
fuel and light, claims a larger proportion of the income. The
proportion is 1 per cent, higher at $700 than at $600, but at
$800 it rises from 14 to 16 per cent, of the total expenditure,
and continues to increase without sign of stopping. That is,
the culture-wants are beginning to claim their own, which,
under the necessity of keeping the wolf from the door, they
could not be permitted to have.

A striking example of this tendency of subsistence-wants to
claim the lion's share of all increasing income is found in
Engel's comparison of the Belgian returns of 1853 with those
of a similar investigation made in 1891. At the latter period,
although the average income had nearly doubled, the expendi-
ture for food comprised 65.7 per cent, of the total in 1891 as
compared with 64.9 per cent, in 1853. In fact, food, clothing,
rent, and fuel and light consumed 96 per cent, of the income
in 1891 and only 94 per cent, in 1853.

Minimum standards of consumption. The same general
conclusion as to the relative insistence of the several classes
of wants may be drawn from another method of handling the
New York returns. A minimum standard, as exact as could
be determined, was applied to the expenditures for food,
clothing, and housing, and the number of families counted in
each income group who came short of the standard. For
food, the minimum was set at an expenditure at the rate of
22 cents per man per day, as calculated after the manner
made familiar by W. 0. Atwater in the Bulletins of the De-
partment of Agriculture. This figure was reached, after
an analysis of one hundred of the family reports, by Dr.
Frank P. Underbill, of Yale University, a competent expert.
Professor Atwater 's estimate on the basis of data gathered in


New York City a few years previous, when a lower scale of
prices prevailed, was from 23 to 25 cents. For housing the
minimum was fixed at one and one-half persons per room, that
is, not more than six persons to four rooms. For clothing the
minimum was set at an allowance of $100 for the assumed
family of five persons, expenditures for washing being in-
cluded in this sum.

For our present purpose the accuracy of these estimates of
a minimum recpiirement for physical efficiency does not con-
cern us, but only the variations in the departures from them
that appear in the several income-groups. Measured by these
standards, of the families with incomes between $400 and
$500 all are underfed, 88 per cent, are underclad, 63 per cent,
are overcrowded. That is, the want of shelter is being satis-
fied at the expense of food and clothing. In the next income-
group ($500-$600), the underfed are 65 per cent., the under-
clothed, as before, 88 per cent., the overcrowded 71 per
cent. In paying more attention to the need of food, less at-
tention is paid to shelter. A higher rental is paid, but more
persons are crowded into the accommodations offered. In
the next income-group ($600-$700) the underfed have fallen
to 33 per cent., the underclad to 63 per cent., the overcrowded
to 57 per cent. For every income-group thereafter, the over-
crowded families preponderate over both the other classes.
Even in the $1100 income-group 21 per cent, are overcrowded,
but none underfed, and only 6 per cent, underclad. These
figures, taken as a whole, imply that the most urgent need at
the minimum income is for shelter, outclamoring not hunger
perhaps, but at least the want of adequate food. With a
larger income a pause can be set to the desire for better hous-
ing, while more attention is given to the providing of food.
With an income still larger, of $900 and above, the deficien-
cies in diet are supplied, and at $1000 the minimum allow-
ance for clothing has been attained by practically all the
families. Not even at this point, however, does the desire for



adequate housing, at the price which must be paid for it, suf-
fice to persuade more than three-fourths of the families to go
without enough of other things to secure it.

Saving. Another alternative to expansion of expenditures,
for whatever purpose, as income increases, is saving. Saving
becomes easier as income increases. But the point where
savings begin is not necessarily the point where a standard
even of physical efficiency is attained. There are families
that save at the expense not only of comfort, but even of
health, and there are families that no increase of income would
induce to save. Of the underfed families just alluded to,
one-half reported a surplus of income over expenditure of at
least $25; 65 per cent, of the families reckoned as under-
clothed, and 44 per cent, of the overcrowded likewise reported
such a surplus. "When this is compared with the percentage
of all families that reported a surplus, namely 36.5, it seems
fair to infer that the desire to save represses expenditures to
meet actual physical necessities.

On the othel* hand, by no means all families on a larger in-
come preferred saving to spending. Not until $1300 is
reached is there a constant increase in the number of
families that report a surplus of income over expenditures.
This indicates that there are Micawbers on large incomes as
there are misers on small incomes, but also that the social
influences of New York City, at least, encourage adding to
the good things included in standards of living quite as much
as they encourage saving. The proportion of savers among
the Russian and Italian families was found to be much higher
than among families of more thoroughly Americanized stock.

Oonclusions. On the whole the conclusions drawn from the
New York investigation substantiate the restatement of
Engel's "laws" given by Stephen Bauer in his article
" Konsumtionsbudget " in Conrad's Handworterbuch, as fol-
lows :

With increase of income :


1. The proportion spent for food, especially for vegetable
food, falls.

2. The proportion saved constantly increases.

3. The proportion spent for housing, fuel, light, falls until
a certain income is reached, then remains constant or in-

4. The proportion spent for animal food, drink, clothing,
culture, and recreation rises until a certain income is
reached, then remains constant or falls.


[An address with this title was given by W. M. Daniels, then pro-
fessor of political economy in Princeton University, before the Scottish
Society of Economists in 1906, and printed in The Accountants' Mag-
azine, for May, 1907. It is here somewhat abbreviated and edited,
with the approval of the author.]

Before 1820 the custom had grown up for British travelers
to the United States to make a book out of their transat-
lantic impressions. Despite their curiously varied verdicts,
there was one aspect of contemporary life upon which they
were in singular accord. This was the all-important in-
fluence exerted by an almost boundless unoccupied domain
beyond the line of actual settlement. The vivacious Miss
Martineau, in her "Travels in America," published in 1837,
has recorded that "the possession of land is the aim of all
action, generally speaking, and the cure for all social ills
among men in the United States. If a man is disappointed
in politics or love, he goes and buys land. If he disgraces
himself, he betakes himself to a lot in the "West. If the de-
mand for any article slackens, the operatives drop into the
unsettled lands. If a citizen's neighbors rise above him in
the towns, he betakes himself where he can be monarch of all
he surveys. An artisan works that he may die on land of his
own. He is frugal that he may enable his son to be a land-
owner. ' '

Miss Martineau and her colleagues were quite correct in
their insistence upon the dominant role that an imperial
abundance of unoccupied territory was to play. The first
period of our national development, economic and political,
corresponded roughly with the duration of a free public



domain, which challeugecl the pioneer and settler to the further
eon(iuest of physical nature. The second period began about
1880 with the exhaustion of our free lands and the vanish-
ing of the frontier. The first era was one of expansion and
settlement; the second, in which we still live, is one of re-
adjustment and recoil.

In treating of the economic causes which have affected the
political history of the United States, I shall speak first of the
manner in which free land reacted upon our constitutional
system; second, of the clash of slavery and free labor; and
lastly, of the power of concentrated financial control.

I. Free land and democracy. The process of westward
expansion and settlement has too often been described in its
external aspect, in the baldness of its objective statistical de-
tail. But without some apprehension of the economic society
which that expansion into new lands called for a time into be-
ing, the most thorough-going political transformation in our
history cannot be grasped.

The notion may be dismissed at the outset that the winning
of the Western wilderness was largely an automatic process,
due merely to the growth and spread of population into va-
cant, contiguous territory. The instinct for successful mi-
gration and colonization is a rare endowment, found only
among a few peoples, and exercised by them only inter-

"The tide of Anglo-Saxon settlement was for two centuries
held in by mountains near the Atlantic shore-line, and then
swept to the base of the Eocky Mountains in much less than
half that period." Not until the tenuous girdle of French
trading-posts along the great lakes and the Mississippi was
snapped, did the pent-up spirit of colonization find a second

How very imperfectly this westward trend of settlement
was then grasped, even in the United States, may be gathered
from the locating in 1790 of Washington, the national
capital, at what is practically the middle of the Atlantic sea-


board. Supposed originally to be centrally situated for all
time to come, it is to-day hundreds of miles from the center of
population, and three thousand miles from the States on the
Northern Pacific. Since 1800 the center of population has
moved regularly with each decade towards the west, in some
decennial periods as much as eighty miles, and rather curi-
ously has always closely hugged the 39th parallel of north
latitude. The lure of free land has been the steady magnet,
while industrial depression in the East has by a process of
repulsion occasionally reinforced the steady pull westward.

The founders of the new Western States were from the
native Eastern stock, but sifted out of it by a self-chosen
career of adventure in confronting and vanquishing primeval

The pioneer class could not be recruited from an exploited
fringe of an early proletariat, or from raw immigrants. De
Toequeville had noticed in 1835 that immigrants to America
did not push west, and had explained that "the desert cannot
be explored without capital or credit, and the body must be
accustomed to the rigors of a new climate before it can be
exposed to the chances of forest life." In later decades free
transportation has often been furnished to induce the immi-
grant to locate at a distance from his port of entry. But
the pioneer was seldom an immigrant, and the early settler
w^as seldom a peasant. "Everything about him," testifies
De Toequeville, "is primitive and unformed, but he is him-
self the result of the labor and the experience of eighteen
centuries. He wears the dress and speaks the language of
cities, and penetrates into the wilds of the New World with
the Bible, an ax, and a file of newspapers."

I have dwelt upon the origin and character of the early
Western settlers because it was the central West that was
destined to transform the political habit of the United States.
That influence, however, we shall seek in vain in the shifting
ebb and flow of early political conflicts. The fairly whim-
sical way in which not only the West but the other sections,


New Euglancl and the South, shifted their political pref-
erences until slaver}'- had become the one imperious issue
reminds one of Talleyrand's cynical remark, that a man who
aims to be true to his party must be ready for frequent
change of his principles.

But while no decipherable progress can be conjured out of
alternating party triumphs in the central West, the unprec-
edented economic opportunities long enjoyed by all the in-
hal)itants of the new commonwealths in approximate equality
were destined to transform the whole political fabric. The
abundance and fertility of the soil yielded to the unflagging
energy of the new settlers a crude but very bountiful subsist-
ence. The hired laborer was able to wrest from his employer
a wage commensurate with that which the worker could com-
mand for himself by resorting to fertile and unappropriated
land. The standard of wages and of comfort was high, and
divergences in incomes and even in possessions were small and
unimportant. From this fundamental economic equality
there resulted in these frontier communities, unused to social
distinctions, and untrained in the notion of class subordina-
tion, a fierce e(iualitarian spirit which found its earliest ex-
pression in their local politics. "Every age," says Burke,
"has its own manners and its politics dependent upon them."
The manners and customs of the early West were the prod-
uct of approximately equal earnings and possessions. These
first found expression politically, in the newer States, in man-
hood suffrage (negroes alone excepted), and in the practice of
making almost all official positions elective, with a short, fixed
term of service. By contagion these forces were destined to
invade the older States, and eventually to prevail throughout
the Union. It was through these innovations that a serious
dislocation of the older constitutional system was to be ef-
fected. . . .

In all of the older States the suffrage was hedged about by
limitations — ecclesiastical, residential, and pecuniary. . . .
Eligibility to office was still more narrowly guarded. The


property qualifications restricted office-bearing- practically to
the local notables or gentry. . . .

This entire regime of a restricted suffrage, of class control,
of appointive offices obtainable only through interest, and of
permanent incumbency of such positions, was alien to the
spirit of the new West. Economic equality to the new States
had been translated into radical political equality. To the in-
dustrial opportunities which that section afforded were now
added the proffer of wider political rights and opportunities
than were enjoyed in the East. Partly by a process of po-
litical infection, many of the older States began to reshape
their franchise on more liberal lines. The center of political
gravity was thus being continually shifted within the older
States; and by 1824 the new electorate had become conscious
of its power in the arena of national politics. The Congres-
sional Caucus which had named the succession to the presi-
dency for half a century fell into abeyance as the new device
of nominating conventions was launched. These nominating
conventions were composed of delegates from the various lo-
calities, chosen by popular voice. They now named candi-
dates for the presidency as they had previously done for other
State and local offices. No sooner had the nominating con-
vention system been established than virtue departed from the
Electoral College. Thenceforth its members ceased to exer-
cise any deliberative or independent volition, and simply
registered the presidential choice of the party which had
elected them. Thus the election of the president was finally
made dependent upon the popular vote; and with a repre-
sentative hero in the person of Jackson, the new democracy in
1828 forced the doors of the old regime, and "the political
control of the gentry, which the Constitution framers had
counted on as perpetual," passed forever away. The charac-
ter of the presidential office became radically changed. From
being an embodiment of executive prerogative, independent of
popular choice, it became an elective kingship ; and where the
incumbent is himself a forceful character, like Jackson, or


Lincoln, he wields the immense powers of tribunative au-

It cannot in fairness be denied that this transformation of
our constitutional system had likewise a very seamy side.
The spoils system which had already infected local politics
was now introduced into national politics, and wholesale pro-
scriptions of office-holders became the rule when the opposi-
tion party came into power. The envious traits of democracy
Avere so played upon, that the possession of even moderate
wealth became a positive obstacle to a political career.
Moreover, in its haste to take the government out of private
hands, and to subjugate the old hereditary bureaucracy, the
new democracy had created a vast multitude of elective of-
fices with short official terms; and some enginery was neces-
sary to organize the frequent nominating conventions, and to
manage the complicated business of frequent elections. As a
result, a new set of party managers, a sort of outside unofficial
magistracy, — the so-called Machine, a body unknown to the
law, and subsisting originally on the spoils of offices, — became
a permanent fixture. Thus the original economic equality in
the new "West had transformed the older constitutional system
of class rule into one based practically on universal suffrage.
It had made the political organization or Machine national in
its extent of power. It had made the president a popular
tribune; but it had dislodged an enormous mass of social
debris, — a result which is often the price that must, tem-
porarily at least, be paid even for a peaceful revolution.

II. Slavery and free labor. In the original Southern
States, and in the new States to the south of the Ohio Eiver,
economic life and development had been profoundly modified
by negro slavery. In earlier colonial times slavery had pre-
vailed in all the colonies; but the negro cannot thrive in the
rigorous climate of the farther North, and has always been
numerically a negligible element in its population. For in-
tensive farming, as for mechanical labor, recjuiring skill, the
negro had been found to be a costly laborer. These causes,


reinforced by humanitarian views, led to the early and easy
abolition 'of slavery in the North. In the South, conditions,
both climatic and economic, were different. The black could
and did increase and multiply in that region. The cultiva-
tion of tobacco on the seaboard by negro labor was at the out-
set immensely profitable, the negro's lack of skill being offset
by the unparalleled richness of the soil and by the wasteful
system of soil-exhaustion. But as this process of earth-
butchery about reached its limit, it seemed for a time likely
that economic causes would cooperate with the humanitarian
sentiment, originally very prevalent amongst the Southern
gentry, against the slave system. At the same time, the
numerous negro population of the South rendered extrication
from the impasse difficult in the extreme. Removed often by
only a generation from primitive African savagery, they were
clearly untrained for self-rule or for immediate political
equality with the whites. Slavery with all its drawbacks was
essentially a system of government, and an effective alternative
which would have afforded security to the whites and subsist-
ence to the negro seemed practically unattainable. It ap-
peared for a time not impossible that the moribund system
might develop into the mild patriarchal rule of a primitive
agricultural state. But the invention of the cotton-gin in

Online LibraryFrank Albert FetterSource book in economics, selected and ed. for the use of college classes → online text (page 23 of 30)