My jaw dropped when I read Roger Sandilands's claim that "the business   
sector as a whole is usually a net saver."  I have always understood   
that the household sector is the net saver while the business and   
government sectors are the net borrowers.  If Roger's claim were true I   
would expect the household sector to be net issuers of IOUs and   
businesses the net holders of demand, savings, time deposit, money   
market deposit, and money market mutual fund accounts, as well as   
purchasers of stocks and bonds.  But all the financial data I have seen   
show otherwise.  I wonder which economy Roger is referring to.  
  
I also think Roger is using the term investment in the narrow but   
misleading sense to apply only to the purchase of capital goods (what   
unfortunately far too many textbooks tend to do).  Otherwise, what does   
he mean by "in the aggregate the supply of business savings from   
depreciation accounts and retained earnings is consistently larger than   
the volume of business investment"?  As the classics taught, and as in   
the language of the marketplace, see also Marshall(1920, 60, 647; 1923,   
46), investment on the part of households is the purchase of interest-   
or dividend-earning assets while, on the part of producers, it is the   
employment of funds (typically borrowed) to earn profits.  To achieve   
the latter end, producers devote some of the funds to purchasing or   
hiring capital goods, including raw materials, renting land and hiring   
workers, and keeping some on hand to facilitate transactions: even the   
vendor needs to keep some cash on hand to make change.  Also note that   
retained earnings constitute a borrowing from stockholders who otherwise   
would have been paid their full dividends in return for their   
"investment" in the enterprise.  
  
It is such narrow usage of the term "investment" to apply only to the   
purchase of capital goods that denies some analysts the ability readily   
to recognize the truth to the classical explanation that savings promote   
investment or capital accumulation, e.g., "The investment market can   
become congested through the shortage of cash.  It can never become   
congested through the shortage of saving.  This is the most fundamental   
of my conclusions within this field" (Keynes 1938, 669).  
  
Back to George, I don't think his denial that the wages fund derives   
from past savings is helped by Roger's attempted defense.  And for   
George to argue, in effect, that the wages-fund explanation by the   
classics was some wool they pulled over our eyes so we wouldn't   
recognize the evil role of rental incomes in denying higher wage rates   
to labor should be recognized as plainly mistaken.  And dangerous, to boot.  
  
Roger is correct in noting that "Though many workers are paid in advance   
of the sale of the product, it is very rare indeed that they are paid in   
advance of their work."  I never argued otherwise.  But without the sale   
of their produce, employers have no means of paying workers other than   
from borrowed savings or capital -- the wages fund.  
  
By the way, specie or paper money in the hands of businesses amounts to   
the same thing: part of borrowed "capital."  Neither of them is   
manufactured by the business, save for counterfeiters.  It betrays   
George's misunderstanding of capital in the financial sense to have   
argued the point Roger restates.  
  
James Ahiakpor