The evidence is notorious, first in the efforts of national industry to increase the sale of goods in its own country, and then in the strife among industrial nations for access to foreign markets.
A steam calliope jamming its way through the crowded street of New York City to advertize a new model of a popular motor-car at a reduced price is a spectacle to bear reflection. It is a symptom of saturation in the home market. When Henry Ford was making only a thousand cars a day, he did not advertize. There was a ready cash-demand for the whole of his product. When his output passed five thousand cars a day, he began to advertize on billboards and to sell on the instalment plan.
As the natural cash-demand for a thing is overtaken, it begins to be pressed for sale on credit. At this point finance steps in. Credit companies with millions of capital are formed expressly for the purpose of lending buyers the money with which to buy. Desire shall be made effective. Selling on credit in this manner has latterly and suddenly assumed such proportions as to represent in the affair of business a new pattern. Some old-fashioned minds have been debating it as an evil. They attack it on the ground that it betrays the virtue of thrift. But thrift has ceased to be a virtue. To consume—to consume more and more progressively—to be able to say in the evening “I have consumed more to-day than I consumed yesterday”, this now is a duty the individual owes to industrial society.
For see what would happen if people all over the world should return of a sudden to the former ways of thrift—to the habit of doing without? There would be depression in industry. Machines would stop. Millions who tend them would be disemployed. Nothing would be safe, not even your own money, for there would be panic on the exchange and trouble at the bank.
One is not speaking of the United States alone. The multiplication of things is greater here than anywhere else because we make machines faster and work them harder; but you will find the same necessity acting also in France, the very cradle of thrift, where now cheap motors are sold on credit: anyone who will buy may borrow the money to buy with. Why is this in France? To stimulate the motor habit? To serve a private profit-motive? The habit will follow; the profit may. But there is another reason, touching foreign trade, which we are coming to elucidate.
In order to sell abroad, an industrial nation must be able to produce cheaply. To produce cheaply, it must produce in large quantities by a multiple method called mass-production. And you can safely manage this mass-production only provided you have a fairly large and constant base of domestic demand. So the sale of French motor-cars in France, though it be on credit, must be large enough to support the method of mass-production, for otherwise France would be unable to meet the competition of Ford, who now exports motor-cars to Europe—even builds them there. Then the British manufacturers, to meet the competition of both France and Ford, also undertake against their genius to produce motor-cars by the quantity method, and, having achieved the method, their next dilemma is what to do with the product. They advertize at home to create a popular motor-car habit and at the same time press their cars for sale in foreign markets, even in France and Germany, as these countries press theirs for sale in Great Britain.
Competition among industrial nations to exploit one another’s internal markets is but one profile of all that dangerous activity taking place in the name of foreign trade. The industrial powers holding their feet in China’s doorway and France fighting the native in Morocco are other aspects of the same thing. China so long as possible shall be an open market for the surplus product of western machines; there shall be more wanting in Morocco.
The industrial equipment of the world meanwhile goes on increasing, though it is already so great that its capacity cannot be fully utilized. In the United States alone there is probably enough surplus machine-capacity to satisfy the whole demand of Great Britain’s foreign customers for staple merchandise, such as textiles, iron and steel manufacturers, rubber tires, motor-cars, electrical apparatus, machinery, glass, garments, shoes, cutlery, and so on. Great Britain not only has a surplus of machine-power; she has besides an excess of man-power represented by say one and one-quarter millions unemployed. She could easily take on the entire foreign trade of France; but in France also there is a surplus of machine-power. Both Great Britain and France dread the competition of Germany, whose production of goods with her existing equipment could be increased, under incentive, nobody knows how much.
The exterior facts do not make sense. They represent industry to be witless, in that, while dreading surplus as the evil that devoureth profit, it is at the same time bent to push supply to a point beyond saturation. Industry does not do this. Necessity does it. There is an interior fact. The tendency of the divisible product of machines to exceed the sum of effective desire is the last thing that industry wishes for. It is owing to a principle hitherto mentioned, namely, the principle that the cheapness of things is in proportion to the quantity produced. Which now is to be explained.
It is the economic function of the machine to cheapen production. There is otherwise no point to it. But, if we say things are more cheaply made by machine than by hand, we speak very loosely. What we mean is that a quantity of things is more cheaply made by machine than by hand.