THE PLACE OF INTEREST IN ECONOMICS

vidual has spendthrift tendencies, their indulgence isfacilitated by access to a loan market; and reversely, ifhe desires to save, he may do so the more easily if thereis a market for savings. In like manner, the businessman may, by recourse to loans, either lose or gain. Theinequality of the distribution of capital is thus funda-mentally caused in large part by exchanging present forfuture income. A rate of interest is simply a market pricefor such exchange. If all individuals were hermits, itwould be much more difficult either to accumulate orto dissipate fortunes, and the distribution of wealthwould therefore be much more even.

It is true, as the socialist maintains, that inequality isdue to social arrangements, but these arrangements arenot, as he assumes, primarily such as take away thechance to rise in the economic scale; they are, on thecontrary, arrangements which facilitate both rising andfalling, according to the choices made by the individual.The improvident sink like lead to the bottom. Once there,they or their children find difficulty in rising. Accumu-lation is usually a slow process, and especially slow be-cause the great numbers of the poor competing againsteach other reduce the values of their services to so lowa point that the initial saving becomes almost impossible.While it is true that waste begets poverty, it isequally true that poverty begets waste. Whole commu-nities and peoples, for example, the Chinese and Indians,are steeped in misery not because of any inherent ex-travagance, but because they are so poor they must use.up all they produce, leaving no margin of savings for bet-tering their methods of production. Occasionally a Rocke-feller, a Carnegie, or a Ford rises from near the bottomand ascends to the top. But the great masses, once they

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