Page:Walter Renton Ingalls - Wealth and Income of the American People (1924).pdf/236

214 other words, the surpluses supposedly earned and so carried on the books, were really not surpluses at all. Or if they may be properly viewed as such in an economic enumeration of annual national earnings, offsetting entries should be made in other years.

3. The engineer is commonly suspicious as to whether reported net earnings are what corporation managers think they are, being doubtful whether expenses include enough for the consumption of plant (depreciation, etc.). He is even more doubtful about adequate- ness of allowances for obsolescence. Professor Friday in “Profits, Wages and Prices,” expresses the opinion that corporations commonly underrate their earnings. The consensus of engineering opinion is, I think, the other way around.

In summary, the analysis of evidence in this chapter is conclusive in showing that the dividends paid by corporations of the United States increased but relatively little during the war period and in no wise in proportion to the increase in national gross and net earnings, or in proportion to the indices of commodity prices, wages for labor and cost of living. Furthermore, the net earnings of the corporations, which were apparently greatly in excess of the dividends distributed were either illusory or were subsequently lost by (a) absorption in maintenance of property (6) investment in additional plant that has become useless (c) investment in securities that have diminished in value and (d) shrinkage in inventories. In 1916 it was a precept in the teaching of investors that the corporations by their conservative policy in distributing dividends were placing themselves in positions insuring their dividends for a decade at the least.