Altes Elliott-Wellen-Forum - Will Savings Save Us? / Interessanter Artikel

Will Savings Save Us? / Interessanter Artikel

verfasst von JüKü, 24.06.2002, 15:54

<div>
http://www.mises.org/fullstory.asp?control=985
</div>
<div>
 
</div>
<div>
Will Savings Save Us?

 

by Antony P. Mueller

[Posted June 24, 2002]

[img][/img] The
subject of financing the needs of an increasing portion of elderly people is a
matter of growing concern in many countries. Given the current demographic
trends, the established systems of social security are no longer viable to
guarantee the standards of the past.

As a remedy, governments have initiated programs to foster
private savings programs in order to provide a supplement to the governmental
old age insurance systems. This way, old-age pension is said to gain an
additional foothold, as the public pay-as-you-go system is accompanied by
private capital-based systems.

The incentive created by government to do more private
financial investing in order to save for retirement is the result of the
failure of the Social Security system to deliver its promises. But like the
pretense that it is government that would guarantee wealth accumulation,
savings under the umbrella of pension and investment funds are also prone to
create an illusion with the promise that these vehicles represent guaranteed
forms of the preservation and accumulation of wealth.

While the deficiencies of state-run old-age pension schemes
are well known, it is less recognized that the problems posed by large
demographic shifts cannot be easily overcome either by capital-based systems
or by other forms of private saving. Savings per se do not solve the problem.
The heart of the matter is that saving is not the same as real capital
formation, and that the connection between today's capital formation and
future economic growth is less strict than aggregate macroeconomic models
assume.

Austrian capital theory in the tradition of Menger, Hayek,
and Mises reminds us that monetary saving is not necessarily investment, and
investment is not necessarily capital formation which renders yields and could
bring forth appreciation by some compound interest formula. Real capital does
not exist as a homogenous lump in the sense that there is a capital stock that
enters the production function to produce the national income. Real capital
exists in the forms of diverse capital goods, and as such, they do not
represent a source of a permanent income. In a nonstationary economy, capital
goods render an income stream only insofar as they are constantly rearranged
and renewed according to the changing market conditions. Capital without
entrepreneurial activity is an empty concept.

The term"capital" as it is frequently used and
applied when calculating the financial state of households, companies, and
pension funds is purely an accounting concept.<a title href="http://www.mises.org/fullstory.asp?control=985&FS=Will+Savings+Save+Us%3F#_edn1" name="_ednref1"></a> Only
in terms of accounting can capital be said to be preserved or accumulated. In
contrast to monetary capital, real capital, as it is represented by
heterogeneous capital goods, has a limited period of usefulness. Capital goods
wear down by rendering the yield, and they easily become obsolete when the
production process must be altered because technology or specific demand has
changed.

Current consumption comes from current production. The goods
that will be required for the satisfaction of the needs of a growing portion
of elderly in the future cannot be preproduced now and saved for consumption
later on. It will be the state of the economy at the point of time in the
future when the consumption needs arise that determines the degree of meeting
the new specific demands. Because future demand will be different from today's
pattern, the capital structure currently in existence will become inadequate,
and it is only by constant adaptation and new capital formation that the
production process will provide the flow of consumption goods in future
periods.

High investment rates now are said to bring forth increased
productivity, which would provide the basis to sustain a larger portion of
economically inactive persons in the future. But given the different needs of
an aging population, higher productivity now does not mean that its level can
be maintained, or that the areas where high productivity shows up now will be
the same that will be needed in the future.

In contrast to the thesis that high saving now would
guarantee prosperity later on due to the accumulation of capital, Austrian
capital theory leads to the conclusion that without continuous rearrangement
and the production of new capital goods, productivity cannot be maintained.
Whatever the level of savings and investment now, in a relatively short period
of time it will be almost exclusively the availability of new funds and their
entrepreneurial management by which the level of wealth will be determined.

The accumulation of financial assets may be regarded as
investment from a personal perspective, but it does not necessarily mean that
real capital will be created. Most of the stock trade is pure rotation. In a
generational shift, when a strong cohort discovers the stock market as a
vehicle for retirement savings, the direct effect will be an increase in stock
prices which later will tend to fall when this cohort enters retirement age
and begins to withdraw the funds.

 Even less so does lending to government constitute the
acquisition of capital goods. Governments spend most of the money on salaries
and other items that are mostly consumption. In terms of saving via government
bonds, there is little difference between a pay-as-you-go system and a
capital-based system, because in both cases the savings of one group is
consumption by another one, and no real capital formation takes place.

In interventionist and socialist economic systems, high
savings and investment rates go along with capital destruction. But in
capitalist countries, too, high rates of savings, investment, and economic
growth can be very deceiving indicators about the future performance of an
economy. If it were merely aggregate investment that mattered, economic
development and continuous wealth creation would be  child's play. Poor
economies could become rich overnight by borrowing abroad; and rich economies,
where sufficient savings potential is available, could deliberately choose
their desired future wealth levels.

A similar illusion is in place when saving for old age via
pension funds and the other vehicles deemed to augment financial security for
retirement. The major impact of higher inflows into these instruments is a
change of ownership and higher asset prices. But it is not ownership by itself
in the form of stock and bond holding that is the source of income and wealth;
rather, it is the entrepreneurial use made of the capital goods in the
production process.<a title href="http://www.mises.org/fullstory.asp?control=985&FS=Will+Savings+Save+Us%3F#_edn2" name="_ednref2">[ii]</a> 

Only insofar as the money gets into the hands of companies
that are able to adapt to market conditions will savings contribute to future
prosperity. It is the entrepreneurial quality of the management and the
overall socioeconomic conditions that determine whether the savings are put to
proper use or squandered. 

Popular thinking about economic growth is still strongly
influenced by the productivity theory of capital, which presumes that capital
engenders the yield like the fruits from a tree. In the models of high
aggregate macroeconomics, too, saving and investment come to be seen as the
main sources of growth. In this view, more saving implies more investment, and
more investment means a higher capital stock, which in turn augments future
yields. When discussing old-age pension, the assumption of a proper fertility
of capital is sometimes even transferred to the accumulated monetary capital
as it is represented by an investment portfolio which is said to grow more or
less automatically toward higher returns.

Only as an accounting tool--as"monetary
capital"--can capital be measured and said to grow or to diminish. But
capital in the sense of capital goods cannot be expected to grow or to be
stored for a long time. On the contrary. By the very act of rendering yield,
they lose their value. Capital goods deteriorate during production and finally
actually disappear from the process of production. It is not accumulated
monetary capital that brings forth output and renders profits and interest,
but only capital in real terms as a heterogeneous ensemble of capital goods,
and as such, it renders yield only insofar as it is constantly remodeled by
entrepreneurs who buy labor, find and employ new techniques, and adapt the
structure of production to changing conditions.

An individual member of a generational cohort may improve
his position in relation to the average by currently saving more, but it will
be the state of the economy in the future that determines the level of
well-being in absolute terms. The savings will contribute to the aim of
maintaining an adequate capital structure when the money gets into the hand of
capable entrepreneurs and when society maintains an environment where the
entrepreneurial qualities are allowed to thrive.

Expecting future returns from the stock market as a
wealth-generation machine is as foolish an idea as the belief that the
government actually pays for social security checks. The expectation
that it is primarily financial investment now that guarantees future yields is
illusory, like the promise by the state social security system that more
contributions now guarantee higher pensions later. By concentrating on
financial schemes, the focus is diverted from the real issue to an accounting
concept. Then, higher stock market valuations appear as real wealth creation,
and it gets ignored that it is not the price of an asset that constitutes
wealth but the solid profits that come from the process of production. 

There is no escape from permanent efforts to rearrange the
production process. The future levels of wealth are linked to the overall
conditions of the economy as it evolves in time. The need of constant renewal
of real capital requires an on-going flow of funds in terms of free capital in
order to maintain the production process.<a title href="http://www.mises.org/fullstory.asp?control=985&FS=Will+Savings+Save+Us%3F#_edn3" name="_ednref3">[iii]</a> Financial
assets will appreciate insofar as net savings continue to be generated in the
future and if they get into the hands of able entrepreneurs. Saving and
investment will be pure waste when companies are run by managers who lack
foresight and prudence or when institutional settings emerge that hamper,
transform, and destroy these entrepreneurial qualities.

<hr align="left" width="33%" SIZE="1">

Antony P. Mueller is a professor of economics at the
University of Erlangen-Nuremberg, Germany. He was a Fulbright Scholar in the
U.S. and currently serves as a long-term  visiting professor at the
Universidade Federal de Santa Catarina in Florianópolis, Brazil, under the
German-Brazilian academic exchange program. He is an adjunct scholar of the
Mises Institute and recently contributed to the QJEA. Send him MAIL,
and see his Mises.org Articles
Archive.

<hr align="left" width="33%" SIZE="1">
<div>
<div id="edn1">

[i] Ludwig von Mises, [i]Human
Action, pp. 517, Auburn, Alabama, The Mises Institute, 1998.

</div>
<div id="edn2">

<a title href="http://www.mises.org/fullstory.asp?control=985&FS=Will+Savings+Save+Us%3F#_ednref2" name="_edn2">[ii]</a> Ludwig
Lachmann, The Market Economy and the Distribution of Wealth, p. 674, in:
Richard M. Ebeling (ed.), Austrian Economics. A Reader, Hillsdale,
Michigan 1991, pp. 670-686 (The Ludwig von Mises Lecture Series, Vol. 18).  

</div>
<div id="edn3">

<a title href="http://www.mises.org/fullstory.asp?control=985&FS=Will+Savings+Save+Us%3F#_ednref3" name="_edn3">[iii]</a> Richard
von Strigl, Capital
and Production,  pp.  13,
61et passim, Auburn, Alabama, The Mises Institute, 2000.

</div>
</div>

</div>

<center>

<HR>

</center>

Thread gesperrt

gesamter Thread:

Will Savings Save Us? / Interessanter Artikel - JüKü, 24.06.2002, 15:54
- Re: Will Savings Save Us? / Interessanter Artikel - Popeye, 24.06.2002, 16:04
- Re: Interessant? Bestimmt! Aber Reinhard hätte es kürzer gesagt. - Theo Stuss, 24.06.2002, 16:30