Because Society is the Sum of all individuals, and the behaviour of one can have and impact on the outcome of the others we cannot discard the Individual in the outcome of a Nation.
Frugality or Prodigality dictates the Present and the Future of a Nation, if it Rises or Falls, if their people flourishes or becomes poorer.
To Start, we must first do an introduction before explaining how does this individual behaviour has effects on society has a whole.
A portrait of Adam Smith
Photo: DEA PICTURE LIBRARY De Agostini/Getty Images
According to Adam Smith, In the Production there are comprised Wages, Rents, Interests and Profits, when the entrepreneur decides to input capital into labouring activities we wishes to retrieve revenue from it, in order to produce he need to employ Productive Labour, this is, a labour that pays for itself and retrieves profit. Creating value over the materials and provisions we works on in order to maintain itself, the facility and the entrepreneur. The end product of this type of Labour can be stockpiled, and sold after a given period of work (day, month, year).
Examples may be: manufacturers, farmers, artificers etc.
On the Contrary, there are Unproductive Labour, these individuals despite their work being useful they do not contribute to the gross production of a society because their labour does not consist on producing goods that can be sold or stockpiled, the product of their work extinguishes itself when consumed. Examples are: Professors, The Military, Physicians, Artists, etc.
Adam Smith analyzed the condition of commercial and industrious cities across the England and Holland and discovered that the lowest ranks of society were generally prosperous and sober.
In cities where the lower class were maintained by revenue, being from rents or from public offices the people where generally pour, idle and stagnant (Rome, Versailles, Compiegne, etc)
Generally, in the cities where there was a large amount of imputed capital, there was more prosperity, on the contrary we could see only the well being of the Landlord and State Officials.
“ The proportion between capital and revenue, therefore, seems every where to regulate the proportion between industry and idleness. Wherever capital predominates, industry prevails: wherever revenue, idleness.
Every increase or diminution of capital, therefore, naturally tends to increase or diminish the real quantity of industry, the number of productive hands, and consequently the exchangeable value of the annual produce of the land and labour of the country, the real wealth and revenue of all its inhabitants.”
– Adam Smith – An Inquiry Into the Wealth of Nations.
Capitals are increased by Frugality, and diminished by Prodigality and misconduct.
The Capital of an Individual can only be augmented by what he saves from his revenue, the same with the capital of a society, which is the some of all individuals.
One of the most important traits an Entrepreneur/Business Man may have is frugality, if his frugality did not save or store up, his capital would never increase.
Increasing the fund which is destined for the maintenance of the industry and productive labour naturally tends to increase the number of jobs and infrastructures that add up value in what they are employed.
Therefore, it increases the exchangeable value of the annual produce of a Nation.
Frugality, and not industry, is the immediate cause of the increase of capital.
Industry, only, provides the subject what frugality accumulates.
The portion of revenue of which a rich man annually spends is, in most cases, consumed by idle guests and menial servants, who leave nothing behind them in return for their consumption.
That portion which he annually saves, for the sake of profit that it is immediately employed as a capital, is consumed in the same manner, but by a different set of people, by labourers, manufacturers, and artificers, who reproduce with a profit the value of their annual consumption
All the Unproductive Labour is maintained by the profits gained by the business man, because, from all the production the first use of the output will be for the wages of the productive labour, and to maintain the imputed capital wasted in the process, the second use of the produce will be used to maintain all the unproductive labour and the ones who do not work at all.
The Prodigal Business Man Perverts this Natural Order.
By not confining his expense within his income, he pays the wages of the unproductive labourers with the funds that the frugality of his forefathers conserved, that were originally consecrated to maintain the industry.
Diminishing the funds destined for the improvement of his industry or the employment of productive labour, he necessarily diminishes, so far as it depends upon him, the value of the annual produce of the whole country, with it, the real wealth and revenue of its inhabitants.
With regard to Profusion, the principle which induces to expense is the passion for present enjoyment. Which, since the beginning of the 20 Century, is being prompted, and about in the middle of the century, strongly favoured in the Western Civilization, opposing to the former conservative/frugal way of living that channeled the gains of work into productive activities.
Nowadays we can find many Middle and Upper Middle Class individuals who in ancient times constituted the majority of industrious and productive activities being easily diverted from that kind of activity.
This is due a Society that was mainly conservative, but now views the business owner as someone who exploits the worker, and exploits society as a whole, only for personal gain, it is not easily considered the contribute he makes to society.
It is often heard that “Companies should pay more taxes” and that there must be more regulation on multiple aspects of business, that the Minimum Wage should rise and that coercive progressive redistribution must take place and be harsher.
All of this is a heavy burden on someone that despite contributing so much to the well being of society, is given the stamp of exploiter and selfish person.
It’s in is self interest alone that he benefits society as a whole.
This Social Paradigm along with the large scale promotion of hedonistic behaviour contributed to a fairly stagnant growth since the 21 Century in the Western World.
Pushing disdain of frugality and conservative action in the others only favours the one who practices it in a concelad way.
An Individual must always be thoughtful and alert on this kind of stimulus, though sometimes violent and very difficult to be restrained, is in general only momentary and occasional.
But the principle which prompts to save is the desire of bettering our condition, a desire which, though generally calm and dispassionate, comes with us from the womb, and never leaves us till we go into the grave.
Incresing Fortune constitutes the Mission of the Great Majority of Man.
This, is only possible, if he has a Frugal Attitude, wisely spending his Capital.
We, as individuals, should practice frugality and be conservative over our revenue, also, we should encourage this behaviour to our friends, relatives, neighbours and generally, to our fellow men.
We can also bend the market and society when we do our purchasing decisions, choosing the ones who are industrious, energetic and devoted to their cause, being them the ones who create day-by-day a better future to society as a whole.
In politics we must be against any law and regulation that restrains economics freedom, or that punishes the success through redistribution and progressive taxation.
At the same time we should punish and discard profusion as a whole, as it is only obtained through the sweat of our forefathers and it rapidly vanishes or with the servitude of our children.
“We must not let our rulers load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude.”
– Thomas Jefferson.
João R Freitas