LIVING. ON OTHER PEOPLE'S MONEY
MR. A. M. SAMUEL, Parliamentary Secretary, Department of Overseas Trade, has introduced an important and interesting topic. In a recent address to the Newcastle and Gateshead Chamber of Commerce -he raised the question of what he called the " System of Trading.r The letters O.P.M. stand for " Other People's Money," and Mr. Samuel means two things by O.P.M. trading. First he refers to a growing practice on the part of manufacturers to start and even extend their businesses on borrowed money. That is one side—the producers' side—of O.P.M. But even more noticeable is -the tendency to develop this system from the consumers' end :- " Middle-class people years ago furnished their houses piece by piece. Now they purchase their furniture, carpets and decorative items all at once but they don't pay for them. They purchase on the Hire Purchase System ; this is the O.P.M. System again. Instead of its being other people's money it is other people's goods they are using. Purchasers are often not justified in furnishing their houses, not only so luxuriously all at once, but by borrowing other people's goods.'
We judge from this that Mr. Samuel will take no part in those thrilling conversations of." Mr. and Mrs. Every- ' -man," nor will be tempted " to furnish out of income " by even the plainest of plain vans. Again, he points out, that the extended use of mortgages is U.P.M. • again " Thirty years ago it was looked upon as something, to be ashamoi of to have a mortgage on one's house. One saved up until one had enough money to buy a house and then paid for it-. Even buying a house by moans of an endowment policy taken out with a Life Insurance Company as cover for a Mortgage upon the house granted by the same Life Insurance Company was-not a transaction to boast about. If a person bought a house in that manner, borrowing of a Life Insurance Company the price of it, the transaction was some- thing to be kept quiet and of which the borrower was somewhat ashamed."
Mr. Samuel has several objections to bring against this whole tendency.' In the first place. he .thinks . that the readiness by manufacturers to .borrow reduces their, will to save their own money and use it for expanding their businesses. . " The soundest method of trade---and this. applies to individuals, companies and combines—is to trade on .one's own . resources and not on borrowings." He feels that the traditional inclination of British business men to build up reserve funds is being sapped. In the same way he thinks that the other side of O.P.M., the grow- ing tendency to get goods on the hire purchase system, is sapping the saving instincts of the population.
It is interesting, to see such a controversy arising in this country. It is, of course, one of the .principal. topics, of discussion, both in private and in public, in the United States where the hire purchase system has been carried, on the initiative of Mr. Henry Ford, to far greater lengths than here. Recently some of the more .conservative business men, in particular we understand Judge Geary, have attacked this system from Mr. Samuel's point o view. -In any case, there is no doubt that the O.P.M. System is growing, and that it is well worth studying. Mr. Samuel deserves our gratitude for raising the subject. We fully appreciate his arguments,- though we do not wish now to enter into the extremely difficult economic • discussions which they raise. We would, however, call attention to one other point in his speech. He says that the production plant in the north-east coast area, as in other parts of the world, has " a productive capacity fat beyond the present consuming power of the world." Those who want to excuse the practice of living on other people's money will probably say that as our central economic difficulty, on Mr. Samuel's -admission, is not one of production but one of consumption, the practice is a tentative, ill thought-out yet justifiable • effort - increase our consuming power.
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