It is not sufficiently borne in mind, also, that the whole progress of civilization results in a differentiation of new wants and desires. To take but a single instance, with the growth of the artistic sense the articles of common use change their entire form; and the advances in the arts disclose new commodities which satisfy the world's desires, and for these new satisfactions people are willing to work and produce in order to attain them. With education also comes a wider horizon and a more refined perception of taste, which creates wants for new things for which the mind before had no desires. A little reflection, therefore, must inevitably lead us to see that no person, no community, ever had, or probably ever will have, all its wants satisfied. So far as we know man, it does not seem possible that there will ever be a falling off in demand, because of a satiety of all material satisfactions.
§ 4. Origin and Explanation of the notion of general Over-Supply.
I have already described the state of the markets for commodities which accompanies what is termed a commercial crisis. At such times there is really an excess of all commodities above the money demand: in other words, there is an under-supply of money. From the sudden annihilation of a great mass of credit, every one dislikes to part with ready money, and many are anxious to procure it at any sacrifice. Almost everybody, therefore, is a seller, and there are scarcely any buyers: so that there may really be, though only while the crisis lasts, an extreme depression of general prices, from what may be indiscriminately called a glut of commodities or a dearth of money. But it is a great error to suppose, with Sismondi, that a commercial crisis is the effect of a general excess of production. It is simply the consequence of an excess of speculative purchases. It is not a gradual advent of low prices, but a sudden recoil from prices extravagantly high: its immediate cause is a contraction of credit, and the remedy is, not a diminution of supply, but the restoration of confidence. It is also evident that this temporary derangement of markets is an evil only [pg 370] because it is temporary. The fall being solely of money prices, if prices did not rise again no dealer would lose, since the smaller price would be worth as much to him as the larger price was before. In no matter does this phenomenon answer to the description which these celebrated economists have given of the evil of over-production. That permanent decline in the circumstances of producers, for want of markets, which those writers contemplate, is a conception to which the nature of a commercial crisis gives no support.
The other phenomenon from which the notion of a general excess of wealth and superfluity of accumulation seems to derive countenance is one of a more permanent nature, namely, the fall of profits and interest which naturally takes place with the progress of population and production. The cause of this decline of profit is the increased cost of maintaining labor, which results from an increase of population and of the demand for food, outstripping the advance of agricultural improvement. This important feature in the economical progress of nations will receive full consideration and discussion in the succeeding book.[256] It is obviously a totally different thing from a want of market for commodities, though often confounded with it in the complaints of the producing and trading classes. The true interpretation of the modern or present state of industrial economy is, that there is hardly any amount of business which may not be done, if people will be content to do it on small profits; and this all active and intelligent persons in business perfectly well know: but even those who comply with the necessities of their time grumble at what they comply with, and wish that there were less capital,[257] or, as they express it, less competition, in order that there might be greater profits. Low profits, however, are a different thing from deficiency [pg 371] of demand, and the production and accumulation which merely reduce profits can not be called excess of supply or of production. What the phenomenon really is, and its effects and necessary limits, will be seen when we treat of that express subject.