Business & Economics Collection: Thorstein Veblen Edition (30+ Works in One Volume). Thorstein Veblen

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СКАЧАТЬ advances made by banking houses, for instance, rest on the lender's presumptive ability to pay eventually, on demand or at maturity, any claims that may in the course of business be presented against the lender on account of the advances made by him. It is a business truism that no banking house could at a moment meet all its outstanding obligations.⁶² A necessary source of banking profits, e.g., is a large excess of the volume of business over reserves.

      As to (b): Another great part of the basis of such loans is made up of invested funds and collateral held by the lender. These at the same time are much of the basis on which rests the lender's presumptive ability to pay claims presented. But these investments, in industry or real estate, in interest-bearing securities and collateral of whatever description, represent future income of the lender's debtors (as, e.g., government and municipal securities), or property which is already either engaged in the industrial process or tied up in forms of wealth (as, e.g., real estate) which do not lend themselves to industrial uses. Loans obtained on property which has no present industrial use, which cannot in its present form or under existing circumstances be employed in the processes of industry (as, e.g., speculative real estate), or loans on property which is already engaged in the industrial process (as, e.g., stocks, industrial plant, goods on hand, real estate in use),⁶³ represent, for the purpose in hand, nothing more substantial than a fictitious duplication of material items that cannot be drawn into the industrial process. Therefore such loans cannot, at least not directly, swell the aggregate industrial equipment or enhance the aggregate productivity of industry; for the items which here serve as collateral are already previously in use in industry to the extent to which they can be used. Property of these kinds - what is already in use in industry and what is not of use for industrial purposes - may be "coined into means of payment," and so may be made to serve as additional pecuniary (business) capital, but such property is mechanically incapable of serving as additional material (industrial) capital. To a very considerable extent the funds involved in these loans, therefore, have only a pecuniary (business) existence, not a material (industrial) one; and, so far as that is true, they represent, in the aggregate, only fictitious industrial equipment. Even such inconsiderable portion of them, however, as represents metallic reserves also adds nothing to the effective material apparatus of industry; since money as such, whether metallic or promissory, is of no direct industrial effect; as is evident from the well-known fact that the absolute quantity of the precious metals in use is a matter of no consequence to the conduct of either business or industry, so long as the quantity neither increases nor decreases by an appreciable amount. Nummus nummum non parit.

      So that all advances made by banking houses or by other creditors in a like case, - whether the advances are made on mortgage, collateral or personal notes, in the form of deposits, note issues, Or. what not; whether they are taken to represent the items of property covered by the collateral, the cash reserves of the banks, or the general solvency of the creditor or debtor, - all these "advances" go to increase the "capital" of which business men have the disposal; but for the material purposes of industry, taken in the aggregate, they are purely fictitious items.⁶⁴ Cash loans (such as savings-bank deposits ⁶⁵ and the like) belong in the same category. All these advances afford the borrower a differential advantage in bidding against other business men for the control and use of industrial processes and materials, they afford him a differential advantage in the distribution of the material means of industry; but they constitute no aggregate addition to the material means of industry at large. Funds of whatever character are a pecuniary fact, not an industrial one; they serve the distribution of the control of industry only, not its materially productive work.

      Loan credit in excess of what may serve to transfer the management of industrial materials from the owner to a more competent user - that is to say, in so far as it is not, in effect, of the nature of a lease of industrial plant - serves, on the whole, not to increase the quantity of the material means of industry nor, directly, to enhance the effectiveness of their use; but, taken in the aggregate, it serves only to widen the discrepancy between business capital and industrial equipment. So long as times are brisk this discrepancy ordinarily goes on widening through a progressive extension of credit. Funds obtained on credit are applied to extend the business; competing business men bid up the material items of industrial equipment by the use of funds so obtained; the value of the material items employed in industry advances; the aggregate of values employed in a given undertaking increases, with or without a physical increase of the industrial material engaged; but since an advance of credit rests on the collateral as expressed in terms of value, an enhanced value of the property affords a basis for a further extension of credit, and so on.⁶⁶

      Now, the base line of business transactions is the money value (market or exchange value, price) of the items involved, not their material efficiency. The value of the money unit is by conventional usage held to be invariable, and the lenders perforce proceed on this assumption, so long as they proceed at all.⁶⁷ Consequently, any increase of the aggregate money values involved in the current industrial business enterprises will afford a basis for an extension of loans, indistinguishable from any other block of capitalized values, even if the increase of capitalized values is due to credit advances previously made on the full cash value of the property hypothecated, The extension of loans on collateral, such as stock and similar values involved in industrial business, has therefore in the nature of things a cumulative character. This cumulative extension of credit through the enhancement of prices goes on, if otherwise undisturbed, so long as no adverse price phenomenon obtrudes itself with sufficient force to convict this cumulative enhancement of capitalized values of imbecility. The extension of credit proceeds on the putative stability of the money value of the capitalized industrial material, whose money value is cumulatively augmented by this extension itself. But the money value of the collateral is at the same time the capitalized value of the property, computed on the basis of its presumptive earning-capacity. These two methods of rating the value of collateral must approximately coincide, if the capitalization is to afford a stable basis for credit; and when an obvious discrepancy arises between the outcome given by the two ratings, then a rerating will be had in which the rating on the basis of earning-capacity must be accepted as definitive, since earnings are the ground fact about which all business transactions turn and to which all business enterprise converges. A manifest discrepancy presently arises in this way between the aggregate nominal capital (capital plus loans) engaged in business, on the one hand, and the actual rate of earning-capacity of this business capital, on the other hand; and when this discrepancy has become patent a period of liquidation begins.

      To give a readier view of the part played by loan credit in this discrepancy between the business capital and the earning-capacity of industrial concerns, it will be in place to indicate more summarily what are the factors at play.

      The earnings of the business community, taken as a whole, are derived from the marketable output of goods and services turned out by the industrial process - disregarding such earnings as accrue to one concern merely at the cost of another. The effective industrial capital, from the use of which this output, and therefore these earnings, arise, is the aggregate of capitalized material items actually engaged in industry. The business capital, on the other hand, is made up of this capitalized industrial material taken as a fund of values, plus good-will, plus whatever funds are obtained on credit by using this capitalized industrial material as collateral, plus funds obtained on other, non-industrial, property used as collateral. Through the competitive use of funds obtained on credit, as spoken of above, the nominal value of the capitalized industrial material is cumulatively augmented so as to make it approximately equal to its original capitalization plus whatever funds are obtained on credit of all kinds. On this basis of an expanded collateral a further extension of credit takes place, and the funds so obtained are incorporated in the business capital and turned to the like competitive use, СКАЧАТЬ