In the field of finance and credit it has evolved a mechanism of the highest dynamic intensity known; yet the speculative abuse of credit is an unmitigated scandal, and nothing whatever has been done to eliminate or diminish those alternations of high and low prices, inflation and deflation, which produce panics and perilous political disorder. On the contrary, business continues fast in the antique superstition that such things happen in obedience to inexorable laws.
In the Great War American business amazed the world, itself included. In 1914 the United States was a debtor nation, owing Europe 3 billions of dollars. By the end of 1920 we were the largest creditor nation on earth, other nations owing us 15 billions. This means simply that in six years this country produced in excess of its own needs and sent abroad commodities amounting to 18 billions of dollars. In 1921, to the naïve astonishment of business, the foreign demand for American goods slumped because foreign countries had not the means to go on buying at any such rate. The result was an acute panic in prices here, trade prostration, unemployment, and sounds of despair. The case was stated by leaders of business and finance in these ominous terms: “America is over-equipped. It has the capacity to produce more of everything than it needs. Therefore unless we continuously sell our surplus abroad, unless the American government will lend foreign countries the credit with which to buy our excess production, prosperity is shattered. Factories will shut up, fields will lie fallow, labour will suffer for want of work. Moreover, we are threatened with a deluge of foreign goods, for presently the countries that owe us 18 billions of dollars will be trying to pay us with commodities. If we open our markets to their goods our own industries will be ruined. So we must have high tariffs to protect American producers from the competition of foreign merchandise.”
Ruined by over-plenty!
We are equipped to produce more of the goods that satisfy human wants than we can use, our command over the labour of foreign countries by reason of the debt they owe us is enormous, and business desponds.
Attend. To keep our prosperity we must sell away our surplus, or if necessary give it away to foreign countries on credit, and then protect ourselves against their efforts to repay us! The simple absurdity of this proposition is self-evident. We mention it only for what it signifies. And it signifies that business is a blind, momentous sequence, with extravagant reflex powers of accommodation and extension and almost no faculty of original imagination.
American business despairing at over-production and the American Indian shivering on top of the Pennsylvania coalfields—these are twin ironies.
John Law’s Mississippi Bubble dream three centuries ago was a phantasy of escape from the boredom of toil. The bubble itself has been captured. That is the story of American business. But who has escaped, save always a few at the expense of many? There may be in fact no other way. Still, the phantasy will not lie. And nobody knows for sure what will happen when business is no longer a feudal-minded thing, with rights and institutions apart, seeking its own profit as the consummate end, and perceives itself in the light of a subordinate human function, justified by service.
Garet Garrett
ENGINEERING
American engineering made its beginning almost immediately after the end of the War for Independence. The pursuits of the colonists under British domination were mainly agricultural. Manufacturing was systematically thwarted in order that the Colonies might become a market for the finished goods of England. Objection to this form of sabotage subsequently developed into one of the main causes of the Revolutionary War. It was but natural, therefore, as soon as the artificial restrictions imposed upon Colonial enterprise were removed, for the new citizens of America to devise machinery, build roads and canals, and plan cities.