With these facts in mind we are now in position to interpret our recent industrial history. We have generally had our hard times in America at ten year intervals, with especially severe crises at twenty year intervals. We had our last severe attack in 1893, and we were due to have one of the lesser sort in 1903. What happened then was very interesting to watch, in the light of the views just explained. In the early winter and spring of 1904, the avalanche was well under way. Here, for instance, is an item clipped from the Chicago Tribune in April of that year:
“Organised labour is facing the greatest wage crisis since the panic of 1893, if the forecast of its leaders is correct. It is estimated that before the close of the year the greatest employing concerns of the country will have dismissed nearly one million men, most of them labourers and general-utility workers. Of this number the railroads are expected to discharge two hundred thousand employees; the mine operators, fifty thousand; the machine shops, iron, steel, and tin plate plants, two hundred and fifty thousand; and the building trades, forty thousand. The railroads and the steel mills have already begun the work of reducing their forces, and the wage liquidation threatens to become as sensational as was the recent liquidation in stocks.”
And then on May 25th following, the New York Herald reported that the railroads of the country had laid off seventy-five thousand men; and quoted the following in an interview with James J. Hill:
“The whole question falls back primarily upon decreasing business and the reason for it. Why are the railroads carrying less freight than they were a year or two years ago? Because the demand for the products of the United States is not commensurate with the supply. We manufacture and we grow and we mine more than we can consume in the United States. Hence we are dependent upon foreign markets in order to sell the surplus.”
The reasons why we got over this period of liquidation with only a severe scare are two: First, because there came in the fall a “bumper” crop of unprecedented proportions, which gave the railroads a new start; and second, and most important, because it happened that at the precise hour of our stress, there broke out one of the greatest military struggles of all history.
The war, you understand, was a new world-market. All at once a million or two of men were set to work at destroying manufactured articles; and at the same time several millions more were taken from their regular tasks to provide and maintain them while they did it; and the greater part of the surplus capital of civilisation was drawn off to pay the bills. It was not merely that during the first four months of the conflict Japan and Russia bought fifty million dollars’ worth of our spare products, or that they took hundreds of millions of our spare cash. It made no real difference where the money was raised, or where it was spent; the man who got it spent it again, and sooner or later the bulk of it came to us, because we had the things to sell. Under the conditions of modern Capitalism, all the world is one; and when a nation goes to war, whoever has a spare dollar lends it to pay the bills, and wherever in the world there is an idle labourer, he is put to work to help support the fighters of both nations. In return, the world gets from the warring governments a paper promise to wring an equivalent amount of service out of their people at some future date.
Before going on I ought to mention that there is another view of the events of 1904. I have heard Mr. Arthur Brisbane maintain that we are to have no more overproduction crises, for the reason that, competition having been abolished in all our principal industries, our trust magnates can so adjust supply to demand as to mitigate the stress, and give instead periods of partial idleness in widely scattered industries.
Diagram prepared by Wilshire’s Magazine
DIAGRAM SHOWS HOW HIGH PRICES FOLLOW WARS
Range of average prices of 25 leading Railway Stocks for the past 22 years
If this is true, it is very important, for it means a long continuance of Trust government; but I do not believe that it is true. The trusts have, of course, put an end to blind production without any assurance of a market; but even assuming that our industry were so far systematised and our management so conservative that we never manufactured goods except upon a definite order—how would that be able to hold in check a community gone mad with prosperity-drunkenness? For instance, the steel trust now has orders enough ahead for two years; and upon the basis of these orders, its administrators are going ahead building a new “steel city.” Yet does the steel trust know what proportion of its orders for steel rails are intended for the transportation of purely speculative freight? Does it know what proportion of its orders for structural steel is intended for buildings for imaginary tenants? Does it concern itself with the problem whether its customers are going to be able to find any use for the materials which they have bought?