Commentary Magazine

The National Wealth of the United States in the Postwar Period, by Raymond W. Goldsmith

Financial Parochialism

The National Wealth of the United States in the Postwar Period.
by Raymond W. Goldsmith.
Princeton University Press. 434 pp. $12.50.

Society and statistics grow together, the one in size and the other in importance. This is one of the larger meanings of living in a mass technological society. The sad fact of the matter is that we know each other by type and category, and as contributors to the figures in one column or another. The rest is for novelists and poets (who are having a great deal of trouble keeping up with the figures). Of course, the transcendence to abstraction required by this situation most of us accomplish only spottily—and without the necessary periodic effort at checking our figures and categories. Still, the statistical fact (for instance) that Negroes earn less than whites, when joined with the companion statistical fact that Negroes do not live as long as whites, affords the kind of argument to racists that is an inimitable achievement of abstraction, and that can be answered only by a further retreat into the dark recesses of racism. (At this point, one returns to the novelists and the poets).

The beautiful title of Raymond W. Goldsmith’s new book of statistics is, I believe, well merited. Mr. Goldsmith is associated with the National Bureau of Economic Research, a very special, high-level organization of scholars and other important people. And he is the author (perhaps a better word for work like this would be creative director of production) of some very basic studies called A Study of Saving in the United States and Financial Intermediaries in the American Economy since 1900. The current volume is exceptionally basic, too, consisting of 110 pages of text and primary tables, 112 pages of supporting tables, and 207 pages of fundamental supporting tables. The subject is how much and what kind of tangible non-financial wealth there is in America: the book is, in effect, the best or the only or the most comprehensive—or all of these—balance sheet of the nation.

Mr. Goldsmith’s major finding is this:

The national wealth of the United States (i.e., the aggregate value of all tangible nonmilitary assets located in the United States plus net foreign balance), measured so far as possible by the market value of the assets or the nearest approximation to it, has increased in the postwar period from about $575 billion at the end of 1945 to just over $1,700 billion at the end of 1958, or at an annual rate of fully 8½ per cent. Wealth per inhabitant thus has more than doubled from $4,100 to $9,800, a rise by almost 7 per cent per year. . . . In constant prices of 1947—49, aggregate national wealth has increased from almost $790 billion to nearly $1,250 billion, while wealth per head has risen by one-fourth from about $5,600 to $7,100. The average annual rate of growth thus amounts to about 3? per cent for aggregate wealth and to 1? per cent for wealth per head.

These are big figures concerning a big country in boom time (only two recessions during the period, not counting the one it closed with). But an increase in capital since 1945 of about $10 a month a head—including heads unborn and unworried in that happy year—in the end does not bowl one over; it should have been much more. Indeed, it could have been if we had wanted to be that much more interested in the world our children will live in (which suggests one of the uses, for parents, of a really good national balance sheet).

The “findings” of a work such as this are not really the author’s, but more properly occur in the course of attentive study by the reader. One can’t really know what they are until some good readers tell us. The author himself found the following large points in his own reading:

  1. Among many long-perspective changes in the structure of our wealth, the “most marked and significant. . . are the decline in the share of nonreproducible wealth [land, etc.] and the increase within reproducible wealth of equipment, both producer and consumer durables.” (The share of land in total wealth, especially for agriculture, is a measure of national backwardness—agricultural land makes up about 45 per cent of India’s wealth, and only 5 per cent of ours.)
  2. The share of government, even including military assets, declined from 30 per cent in 1945 to 20 per cent in 1958. (Over the period, the average value of military equipment was equal to about two-fifths of all civilian producer durables.)
  3. Both our foreign holdings and the stake of foreigners in our wealth are insignificant, which is an important difference between us and most other developed countries. (Net foreign holdings never amounted to more than 5 per cent of our wealth.)



In discussing what is involved in the preparation of national accounts such as these, Mr. Goldsmith is both a little plaintive and extremely persuasive. He utters the deep-felt hope that he won’t have to do it again all by himself. It seems that apart from a few areas of investigation—especially inventories and agriculture—there is no official and continuous counting of our long-term blessings. This stands in very sharp contrast to income estimation, which is a solidly and elaborately institutionalized field. In rough terms, the difference is between stock and flow, capital and income, production potential and production-consumption actuality. We are a very statistics-minded nation, and spend a great deal of talented effort collecting all desired data, both in and out of government; in our business-dominated society, business gets all the facts it wants, at whatever cost. Why, then, this difference? In this frenetically capitalist nation why should we be quite so remiss in our measurement of the real capital?

The answer lies, I would suggest, in the problem of financial parochialism. First of all, the primary interest of business is in assets viewed financially, rather than in real terms. And next of all, knowledge of the actual uses of things—real values—lies on the secondary, production side of an enterprise : it is the province of the engineers and other technical people to know the actual capacity of machines; the controlling financial men are not concerned until a financial issue arises, such as buying a new machine and selling a new product. (The tax system has made the real value of equipment even less significant.) Even the balance sheets of individual enterprises are mostly financial documents, designed to impress or placate the public rather than to mislead production men. The paper world of business enterprise is devoted to profit not production, so why should businessmen keep track of their capacity to produce? (Before and briefly after World War II, the military establishment was interested in such actual capacity and did attempt to catalogue it.)

Meanwhile, we have Mr. Goldsmith’s estimates of national wealth, which are presumably the best available—although, on his own statement, not nearly adequate. (The mathematics of the matter is, for this reviewer, too complicated for comment; there is a whole chapter on the algebra, which, with much else besides, I leave to the econometricians.) But some of the problems of method are quite interesting, and even comprehensible to a layman. For example, should livestock be classified as inventory or producers’ durable equipment? The latter, says Mr. Goldsmith, “as the relatively long-lived dairy cattle come to account for an increasing proportion of the total value of livestock.” So it is not all just a question of a million here, and a billion there. There is, as another example, a disagreement among the experts on whether we should put the value of roads and streets on the government side of the ledger, or assume their value to be included already in the market value of adjoining private structures. (The government, so used by business, is frequently ignored or downgraded in economic counting.) The primary national asset not included in these accounts—the one that makes all the others possible, meaningful, or worthwhile—is people and their skills. Also air, sunlight, and water. Interestingly, the most durable and the least durable commodities and objects are also not counted—e.g., works of art and food on the table.

Why count? Because we have organized our way of life around these economic proceedings, and hardly even remember any longer what we have sacrificed to them. And further because what we actually have and what actually happens in the real world of economic things is our only guidepost (or bench mark) for manipulating the world of paper. There are two problems: one is taste and proportion in what we produce and consume; the other, deeper and more immediate, problem is not to be so dominated by the hokum-reality of financial considerations that we forget where we misplaced the real world. A really good, flexible national balance sheet would also certainly be of assistance to us in our efforts to deal with the issue of non-market justice in an increasingly non-market society. Not even to bring justice about, of course, but just at least to initiate an intelligent discussion of it. Who has what, and why? And how come I didn’t get my share?



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