One method employed by trusts to keep up prices at home is to sell their excess of goods in foreign markets at prices below cost.
Mr. Gary, President of the Federal Steel Company, testified before the Industrial Committee that steel had been recently shipped to Japan at a price below the domestic price.[30]
Mr. J.W. Lee, President of the three independent pipe-line organizations, testified that prior to 1895 "oil for export was sold below the cost of crude at the refinery."[31]
Again, at a time when the American trade was paying $28 for steel rails, the same steel rails were sold in Japan at $20.[32]
Obviously, the nations who are the victims of this process are not long going to tolerate it; but this is a relatively small part of the international complications produced by overproduction. The most serious consequence of overproduction is that manufacturers, when they can no longer get a remunerative price for their goods in the home markets, are inevitably driven to seek it elsewhere. They seek foreign markets, and failing foreign markets, they seek new markets by colonization or conquest.
It is impossible to read the history of the British Empire during the last 150 years without becoming persuaded that its so-called greed for conquest inevitably results from the necessity under which English manufacturers have been to secure markets for their increasing goods. Either British factories had to close, and British workmen to be thrown out of employment, or England must, by colonization or conquest, secure a price outside her own borders for the goods which competition perpetually tended to make her factories overproduce.
Indeed, the war through which England compelled China to purchase Indian opium looks like the greatest of international crimes; yet, when we understand this so-called crime of England, it turns out to have been a commercial necessity; for the remunerative prices obtained by the production of opium in India had so developed this branch of business that millions of Indians depended for their lives upon it, and either Chinese must poison themselves with opium, or Indians must die of hunger. The responsibilities of England were to her subjects first. The Chinese had to pay the price of this responsibility.
No better illustration of the wicked despotism that results from existing industrial conditions could be given than this; it brought about a condition of things under which England must commit a crime against China, or millions of her subjects must perish in Hindustan.
The millions that would starve in India if the opium market were suddenly closed remind us of the millions who are on the verge of starvation here in the United States,[33] and have been for two years past because of inherent and incurable defects in our industrial system. It is no answer to say that the evil results of overproduction are promptly remedied by the fluidity of capital to flow towards profitable and to withdraw from unprofitable manufactures. Every time such withdrawal takes place a corresponding number of workmen are thrown out of employment, are subjected to want and anguish of anxiety. The evil of this system cannot be explained away by pointing out that the capital withdrawn from one manufacture will soon be reinvested in another. A cotton-spinner cannot in a week or a month become a boilermaker. The commercial system which makes it easy for a capitalist to maintain income at cost of agony to the workingman does not recommend itself to the political student seeking the establishment of Justice in economic conditions. For, unfortunately, labor is not as "fluid" or insensible as capital. The workingman is a human being with the capacity for pain and anxiety that characterizes our race; and every time that capital profits by its fluidity to flow from one industry to another, the lives of men, women, and children are threatened by want. Even in prosperous times memories of the last panic and the certainty of a recurring panic keep their hearts haunted by fear.
Overproduction is by no means the only cause for these periods of unemployment. Indeed, the panic of 1907 was not the result of overproduction, but of overinvestment, or what the French call the "immobilization of capital." Every nation has two very different uses for wealth: one for keeping its population alive and comfortable, the other for developing the resources of the country, e.g., building roads and railroads, exploiting mines and quarries, etc. If too much wealth is immobilized in the latter, there is not enough for the former. The important function of regulating this matter is in the hands of bankers who make money not only out of the prosperity of prosperous times, but out of the panic of panic periods. Thus in May, 1907, the bankers, knowing that there had been overinvestment, took care of themselves by selling securities at top-notch prices, occasioning what was called the "rich man's panic," because the rich men of leisure were its victims; so that when the poor man's panic came in October and stocks tumbled to one-half of May prices, the bankers were able to reinvest the proceeds of May sales at fifty per cent profit. One of the consequences of this operation was that in October, 1907, neither manufacturers nor railroad men could get money to keep their work going; gangs of five thousand men at a time were summarily dismissed by railroads, and manufactures shut down.