COMMERCIAL CRISES IN GENERAL.
All these allegations are undoubtedly true, in so far as the whole world is considered one great economic system, and the aggregate of all goods, including the medium of circulation, is borne in mind. The consolation which might otherwise lie herein is made indeed to some extent unrealizable by these conditions. It must not be forgotten in practice that men are actuated by other motives than that of consuming as much as possible.[217-1] As men are constituted, the full consciousness of this possibility is not always found in connection with the mere power to do, to say nothing of the will to do.[217-2] There are, everywhere, certain consumption-customs corresponding with the distribution of the national income. Every great and sudden change in the latter is therefore wont to produce a great glut of the market.[217-3] The party who in such case wins, is not wont to extend his consumption as rapidly as the loser has to curtail his; partly for the reason that the former cannot calculate his profit as accurately as the latter can his loss.[217-4]
Thus laws, the barriers interposed by tariffs, etc., may hinder the too-much of one country to flow over into the too-little of another. England, for instance might be suffering from a flood of manufactured articles and the United States from an oppressive depreciation in the value of raw material; but the tariff-laws places a hermetic dike between want on one side and superfluity on the other. Strong national antipathies and great differences of taste stubbornly adhered to may produce similar effects; for instance between the Chinese and Europeans. Even separation in space, especially when added to by badness of the means of transportation may be a sufficient hinderance especially when transportation makes commodities so dear that parties do not care to exchange. In such cases, it is certainly imaginable that there should be at once a want of proper vent or demand for all commodities; provided, we look upon each individual class of commodities the world over as one whole, and admit the exception that in individual places, certain parts of the whole more readily find a market because of the general crisis.
Lastly, the mere introduction of trade by money destroys as it were the use of the whole abstract theory.[217-5] So long as original barter prevailed, supply and demand met face to face. But by the intervention of money, the seller is placed in a condition to purchase only after a time, that is, to postpone the other half of the exchange-transaction as he wishes. Hence it follows that supply does not necessarily produce a corresponding demand in the real market. And thus a general crisis may be produced, especially by a sudden diminution of the medium of circulation.[217-6] And so, many very abundant harvests, which have produced a great decline in the value of raw material, and no less so a too large fixation of capital which stops before its completion,[217-7] may lead to general over-production. In a word, production does not always carry with itself the guaranty that it shall find a proper market, but only when it is developed in all directions, where it is progressive and in harmony with the whole national economy. To use Michel Chevalier's expression, the saliant angles of the one-half must correspond to the re-entrant angles of the other, or confusion will reign everywhere. Even in individual industrial enterprises, the proper combination of the different kinds of labor employed in them is an indispensable condition of success. Let us suppose a factory in which there are separate workmen occupied with nothing but the manufacture of ramrods. If these now exceed the proper limits of their production and have manufactured perhaps ten times as many ramrods as can be used in a year, can their colleagues, employed in the making of the locks or butt-ends[TN 45] of the gun, profit by their outlay? Scarcely. There will be a stagnation of the entire business, because part of its capital is paralyzed, and all the workmen will suffer damage.[217-8] [217-9]
[217-1] As Ferguson, History of Civil Society, says, the person who thinks that all violent passions are produced by the influence of gain or loss, err as greatly as the spectators of Othello's wrath who should attribute it to the loss of the handkerchief.
[217-2] If all the rich were suddenly to become misers, live on bread and water, and go about in the coarsest clothing, etc., it would not be long before all commodities, the circulating medium excepted, would feel the want of a proper market—all, including even the most necessary means of subsistence, because a multitude of former consumers, having no employment, would be obliged to discontinue their demand. Over-production would be greater yet if a great and general improvement in the industrial arts or in the art of agriculture had gone before. Compare, Lauderdale Inquiry, 88. This author calls attention to the fact that a market in which the middle class prevails must put branches of production in operation very different from those put in operation where there are only a few over-rich people, and numberless utterly poor ones: England, the United States—the East Indies, and France before the Revolution. (Ch. 5, especially p. 358.)
[217-3] If England, for instance, became bankrupt as a nation, the country would not therefore become richer or poorer. The national creditors would lose about £28,000,000 per annum, but the taxpayers would save that sum every year. Now, of the former, there are not 300,000 families; of the latter there are at least 5,000,000. Hence, the loss would there amount to £100 a family per annum, and the gain here to not £6 per family. We may therefore assume with certainty that the two items would not balance each other as to consumption. The creditors of the nation, a numerous, and hitherto a largely consuming class, now impoverished, would be obliged to curtail their demand for commodities of every kind to a frightful extent; while a great many taxpayers would not feel justified in basing an immediate increase of their demand on so small a saving. Other revolutions, more political in character, may operate in the same direction by despoiling a brilliant court, a luxurious nobility or numerous official classes of their former income.
[217-4] The above truth has been exaggerated by Malthus and his school into the principle that a numerous class of "unproductive consumers," who consume more than they produce, is indispensable to a flourishing national economy. From this point of view, the magnitude of England's debt especially has been made a subject of congratulation. Compare Malthus, Principles, II, ch. 1, 9. Similarly Ortes, E. N., III, 17, to whom even the impostori mezzani and ladri seem to be a kind of necessity. (III, 23.) Chalmers, Political Economy, III ff. If it was only question of consumption here, all that would be needed would be to throw away the commodities produced in excess. Those writers forget that a consumer, to be desirable, should be able to offer counter-values.
[217-5] Malthus, Principles, II, ch. 1, 3.