Spencer Heath Archive

Item 641

Random taping by Spencer MacCallum from conversation

December 1955

Here is a very impressive forecast of the economic future for the next twenty years, prepared by the staff of Standard & Poor’s Corporation. It is a marvelous pic­ture, based upon the last decade or so, of what can be expected in the way of the growth of industry in the next two decades, assuming, of course, no great world catastrophe or anything of that kind. It diagrams first the gross national product, which has leaped within the last decade alone to almost double what it was before.

So they begin by saying, “Why Our Economy as a Whole Will Double,” and then they classify it with elaborate dia­grams showing different groups of industries and what expan­sion can be expected in them and how different divisions of them will advance at relatively different rates. Then they show the growth pattern of productive corporations, showing how they expand rather slowly at the beginning, then have a rapid rise and level off.

This makes it appear that we are entering upon a period of productivity, a period of civilization that just doesn’t have any precedents so far as its magnitude is concerned. And the pattern of investment in businesses is going to change so as to effect a greater and greater percentage of rise on all investments. It is going to reflect a “spreading out” of the profits over larger and larger numbers of persons, so that the peaks will be smoothed down and the prosperity become more general than it ever has before. This will come about largely through the aid of mutual funds. Standard & Poor’s has already selected twenty-five industrial stocks which they consider having the greatest future pros­pects. If these, as they doubtless will be, are made into a mutual fund, managed by such competent people as Standard & Poor, and bought into by large numbers of persons in dif­ferent proportions, it is absolutely certain that all of them will have the same percentage of increase of what they put in — a uniform percentage. Those who put in a thousand dollars will get the same rate of improvement as those who put in a hundred dollars. But nobody will lose — whereas in hit and miss investments, the same number of people investing a thousand dollars and a hundred dollars respectively, some would lose their hundred dollars and others would make twice as much. A few would make a great deal. And some would make a little and some would lose a little, and some would make a great deal. But under the mutual fund process, it becomes practically certain that nobody would lose. They would only gain at different rates, the rate for the whole fund being the same, of course. This means that nature is departing from the pattern of concentrating earnings in the hands of very few — and thereby enabling the earnings to be plowed back, so to speak. Spreading it out. And the mutual funds plan of investment is the pattern in which the spread is taking place. Investment is becoming less and less of a gamble, more and more of a certainty. And it is moving towards a pattern in which every person who invests will receive increase in pro­portion to the amount of his investment. That doesn’t mean that all will be profited alike, because all will not invest alike. But it will give that kind of equality, which of course is all that could be desired for an ethical pattern.

“Do you think that people will be ‘gambling’ less on Wall Street?”

Yes — as the risks are taken out, the so-called gambling aspect declines.

“I’m thinking of attempts to buy and sell on the cycles, which is what Wall Street is often condemned for.”

Yes. That is what gets the disapprobation of many persons — buying speculatively for a quick change — and of course that is a gamble, and those who make, make largely at the expense of those who lose, in that kind of operations. But the pattern is so changing that nobody will be obliged to lose.

In the early growth of an economy, nature seems to con­centrate the wealth in the hands of relatively few. This insures a greater proportion of it being re-invested. It holds the standard of living for the many down in order that the great fortunes of the few can go back into industry and raise the standard for all. As we move into a more produc­tive economy, as it develops, this pattern becomes less necessary, and the whole profit is moved out over larger and larger numbers of persons. This will not cause any great decline in the reinvestment, the plowing-back, because the persons who now make the profits will already have attained such a high standard of living that they can plow back more and more of what they receive. Whereas in the earlier period, the great mass of people who were living at such a low standard would only increase their consumption out of their increase of profits. Nature has held them back in order that all may be benefited, because it looks as though nature doesn’t /words omitted? Check original/ she likes the future she is just as much favorable towards posterity as she is towards the contemporary population, and her purpose seems to be to raise the benefit of life without respect to time, raise the level of her favorite evolutionary elements.

Along with this rising economy of course will be a continuation of the increase in the life span, and as the average life span increases, even though there be no great extension at the top limits, the curve of average age in a population will change. In our early stages, say a hundred and fifty years ago, if we would take any given population and diagram the number of persons of different ages in it, say from one to whatever was its peak, which was something like 50, say, at the time perhaps 50 years or so ago, then the high point in the curve would be somewhere near infancy. Do you see that?  If we take that same curve now, the “hump,” so to speak, would have passed way over towards middle life. When that hump gets at the point nearest to infancy, farther to the left on the chart, so to speak, that is the optimum. And that means that the highest productivity will occur earliest after birth, nearest to infancy. That means that in the succeeding years of life, towards the decline, there will be an increasing level of consumption without any neces­sary increase in production. Nature will concentrate the productivity in the most productive years, which will be nearer towards youth. And that will create mankind liberated more and more from all necessitous activities, giving the human spirit a full field in which to blossom and grow.

You have enough imagination to see it. Not many people could get it quickly from just that kind of outline I have laid down there. I didn’t anywhere near do it justice in words. It is marvelous to think of the possibility that we have turned the corner, now, so that these vast governmental expenditures will not increase at the same rate as our pro­ductivity will increase. That is the simple little key to all this magnificent prospect for all mankind.