National Savings

The National Aggregate of Private Savings.

It is not statistically practicable to ascertain the savings of each individual or of each family in the United States and then to add these sums together to obtain the aggregate of private savings for the nation. In fact, the only type of private savings for which any records are available consists of the savings of corporations as shown by their respective accounting systems.

At present, every corporation in the United States is required to report annually to the Bureau of Internal Revenue both its net profits and the amount of dividends which it has paid out during the year. Obviously, by subtraction, one can arrive at the amount of saving shown by its corporate accounts. The aggregate of sav ings for all corporations, as indicated by the reports for the vari ous years, are as follows: 1922, 1924, $2,456,328,887; 1925, $4,126,908,269; 1926, 1927, $2,245,249,983; 1928, $3,663,022,280; 1929, $3,513,845,350. With the advent of the depression, deficits took the place of corporate saving, the figures being as follows: 1930, 1931, —$6,927,686,000; 1932, 000; 1934, —$1,914,161,000; —$517,537,000. In 1936, savings reappeared, the amount reported being $391,554,000.

Could we accept these figures as valid, we would have covered one important field of national savings. Unfortunately, however, since the validity of the amounts reported as saved depends upon the accuracy of the estimates of the values of property owned by the corporations at the beginning and at the end of the year, and since, doubtless, in very many instances, the valuation placed by the corporate accountant upon the property of his corporation may be materially in error, the above figures indicating the total volume of corporate savings must be taken with many grains of salt. Nevertheless, it seems clear that, during the 1930-35 de pression, the corporation temporarily ceased to function as an instrument of national saving. In that period, such saving as took place was primarily the work of individuals.

It has long been known that the percentage of individual in come saved depends largely upon the size of the individual's in come, but not until the United States Government in 1935-36 in vestigated the incomes and savings of native white non-relief families living in eight American cities was it possible to measure with any degree of exactitude the relationship existing between income and savings. The data just mentioned have been analyzed by Horst Mendershausen in the American Economic Review of Sept. 1939. His study indicates that, in medium-sized cities, families do not begin to save until they have incomes of $1,300 to $1,600. In large cities like New York and Chicago, $1,800 is the usual minimum income for saving families. Families having incomes materially smaller than those mentioned tend either to go deeper into debt each year or to live on charity. As income per family rises above the "break-even point," the percentage saved tends to vary as follows: $ 2,000 3,000 5,000 14% io,000 23% 20,000 33%To no small extent, both corporate and individual savings are either frittered away or lost in unwise ventures, in which cases no net increase in national wealth is likely to result.

National Saving from the Social Standpoint.

From the social standpoint, a nation's savings during any period are com prised of increases in: (I) The stock of wealth in the form of material goods used either for production or consumption by the nation or its inhabitants. This type of saving evidently includes improvements in the land itself as well as additions to the stock of buildings and of movable goods. (2) Valuable claims against other nations or their inhabitants. (These claims are equities in a stock of tangible goods located abroad which either have been produced or which it is expected will be produced in the future.) (3) The accumulated store of scientific knowledge and organiza tion of productive forces. (4) The productive power of the in habitants resulting from education, hygienic measures, etc.

A confessedly rough estimate made by the present writer in The Journal of the American Statistical Association for Dec. 1922, shows the estimated value (in terms of dollars having pur chasing power equal to that of 1913) of that fraction of the na tional savings falling in the first category only. Such savings appear to have amounted to about one-seventh of the total income of the nation during the years 1909 to 1918 inclusive. When trans lated into terms of dollars of 1913 value, the amounts estimated to have been saved annually are indicated in Table I.

Social Savings during the 10-year Period rgo9-19iS States during the nine or ten year period ending approximately in 1918. Since, for many important categories of wealth, no sam ple data are available, and since some of the available samples may not be entirely representative, this method of estimation yields results which are admittedly only rough approximations. However, it is believed that they approach the truth. The figures thus derived indicate that the nation's wealth increased by about one-third in that period of nine or ten years.

A similar estimate for the decade ending in 5926 or 1927 showed a wealth increase of approximately 38%. Table I indicates that the decade ending around 1937 witnessed a sharp shrinkage in the volume of national savings, for in these ten years wealth in creased by less than ii%, and the only recorded categories show ing notable increases were highways, the electric utilities, motor cars, and gold held in the Federal Treasury. The indications of this table are largely confirmed by the investigations of Dr. Roland P. Falkner of the National Industrial Conference Board who finds that, when measured in dollars having purchasing power equal to that of 1926, the nation's wealth increased by only $14,874,317,000, or less than 5%, during the decade ending in 1937.

The striking decline from the previous decade in the volume of net savings is probably explained partially by the fact that a large fraction of the working force of the nation was idle during this period and hence was doing nothing to increase the nation's wealth, and partially by the existence of such a lack of confidence in the future outlook for business that men hesitated to invest their funds in wealth producing enterprises. Sharp increases in the tax burdens on large incomes and large estates probably con tributed also to the decline in the savings rate for the nation.

. (W. I. K.)