Business cycle

“ With whatever phase of the business cycle analysis begins, it must take for granted the conditions brought about by the preceding phase, postponing explanation of these assumptions until it has worked around the cycle and come again to its starting point. ”

“ The falling prices, the shattered credit, and the financial losses force many factories to close; many workmen are thrown out of employment, and business must again enter upon a period of retrenchment, for it has completed the cycle of changing prices. ”

“ As business cycles have continued to run their round decade after decade in all nations of highly developed business organization, the idea that each crisis may be accounted for by some special cause has become less tenable. On the contrary, the explanations in favor to-day ascribe the recurrence of crises after periods of prosperity to some inherent characteristic of economic organization or activity. The complex processes which make up business life are analyzed to discover why they inevitably work out a change from good times to bad and from bad times to good. ”

“ But demand tends to fluctuate not only thus in detail, but, what is far more important, as a whole and bodily. Ever since the closing years of the eighteenth century, economists have noticed that our trade regularly oscillates in periodic cycles of good and bad times, these being usually reckoned at ten or eleven years. The tide of activity, then, pulses by a general ebb and flow, which dominates the whole economic life of the nation, and enables the history of its collective business to be mapped out into eras of progress and stagnation. ”

“ The men in industry must first create the mechanical possibility of such new and more efficient methods and correlations, before the business man sees the chance, makes the necessary business arrangements, and gives general directions that the contemplated industrial advance shall go into effect. The period between the time of earliest practicability and the effectual completion of a given consolidation in industry marks the interval by which the business man retards the advance of industry. ”

“ Except during short periods of transition, there is almost always either great briskness of business or great stagnation; either the principal producers of almost all the leading articles of industry have as many orders as they can possibly execute, or the dealers in almost all commodities have their warehouses full of unsold goods. ”

“ With an advance in a people's public economy, we find an increased rapidity of circulation connected, both as cause and effect. Every improvement, every thing which shortens the process of production, must facilitate and accelerate the circulation of commodities. And so, the perfecting of the means of transport of commodities, of the media of exchange and of credit, an increase in the number of middlemen who make it their business to purchase in order to sell again. On the other hand, the more rapid the circulation of wealth, the more can it promote production. ”

“ All through the year we go on and on in the eddying whirl of business. Money comes and goes, circulates, attracts other money, vanishes; and the fortune of the firm, like a slippery, gleaming snake, always in motion, expands, contracts, diminishes, or increases, and it is impossible to know our condition until there comes a moment of rest. Not until the inventory shall we know the truth, and whether the year, which seems to have been prosperous, has really been so. ”

“ The scale of the industrial market corresponded to the scale of industrial economy. Industrial markets are optimally served by the sequential nature of literacy and the linearity inherent in its structure. Production cycles are long, and one cycle follows the other, like seasons, like letters in a word. Remember when new model automobiles came out in October, and only in October? A large manufacturer embodied permanence and so did its product. In this framework, a lifetime warranty reflects a product's promised performance and the language describing this performance. ”

“ There never plays upon their imagination the least glimpse of the wonderful complexity of the mechanism of finance nor of the amazingly intricate organization of buying and selling. Who can blame them—they have never been told. I have kept a meeting of workmen keenly interested for an hour, after the conclusion of some official business, in a simple explanation of the functions played by finance in industry, and of the various kinds of financial operations entailed in the marketing of the product of their particular factory. ”

“ Modern methods of production have also brought about a great expansion in the time-area of the market. Competition covers a wider range of time as well as of space. Production is no longer directed by the quantity and quality of present needs alone, but is more and more dependent [100] upon calculation of future consumption. A larger proportion of the brain power of the business man is devoted to forecasting future conditions of the market, and a larger proportion of the mechanical and human labour to providing future goods to meet calculated demands. ”

“ In proportion as the industries of the world multiplied and became complex, and the volume of capital involved was increased, these business cataclysms became more frequent, till, in the latter part of the nineteenth century, there were two years of bad times to one of good, and the system of industry, never before so extended or so imposing, seemed in danger of collapsing by its own weight. ”

“ In demonstrating the thesis, Hull contends that agriculture, commerce, and finance fluctuate within relatively narrow limits. Agriculture provides the necessities of life, commerce distributes them, and finance adjusts the bills. The volume of all this business is fairly constant, because the demand for necessities is incapable of sudden expansion or contraction. Industry, on the contrary, may expand or contract indefinitely—especially that part of industry devoted to construction work. ”

“ Still, unless the depression is of exceptionally short duration, there is always some new investment going on. More or less of new capital continues to find its way into industrial business in competition with the concerns that are already in the field. (18*) In case of a protracted depression the aggregate of new investments so made may, in the course of years, amount to a very considerable addition to the industrial outfit, and the production of the new establishments may very appreciably increase the aggregate output. ”

“ The period between the expenditure of funds for the purchase of materials and the payment of expenses and the receipt of money from the sale of the finished product is much longer. More working capital must therefore be provided and its rate of turnover is less. A larger element of risk enters in. Raw materials must be worked and fashioned, machinery must be employed, a different class of labor must usually be handled, perhaps will have to be trained—these are problems calling for a special type of management for the manufacturing end of the business. ”

“ These are some of the reasons why the economic life of the modern world has grown at haphazard. Each industrial director put his own ideas into his business, and as it grew in response to them, the various businesses differed as much in shape, size and character as did the early factory buildings.
The time seems to have arrived when a new working plan of economic life may be adopted. The faults and failures of the old are glaring and the clamor for the new is reasonable and insistent. ”

“ Hard times or prosperity spread through the system by means of business relations, and are in their primary expression phenomena of the business situation simply. It is only secondarily that the disturbances in question show themselves as alterations in the character or magnitude of the mechanical processes involved. Industry is carried on for the sake of business, and not conversely; and the progress and activity of industry are conditioned by the outlook of the market, which means the presumptive chance of business profits. ”

“ A general survey of the history of every industrial nation reveals the fact that business [114] conditions undergo alternate periods of prosperity and depression extending in clearly defined cycles of substantially uniform length. ”

“ And the close-knit, far-reaching articulation of the industrial processes in a balanced system, in which the interstitial adjustments are made and kept in terms of price, enables price disturbances to be transmitted throughout the industrial community with such celerity and effect that a wave of depression or exaltation passes over the whole community and touches every class employed in industry within a few weeks. ”

“ Money poured into the coffers of men who had done nothing to build these businesses; they had only been astute enough to see that the market was ripe for flotation, and as the public cried for cycle shares they got them. ”

“ The circumstances which condition the work of consolidation in industry and which decide whether a given move in the direction of a closer and wider organization of industrial processes will be practicable and will result in economies of production, -- these circumstances are of a mechanical nature. They are facts of the comprehensive machine process. The conditions favorable to industrial consolidation on these grounds are not created by the business men. ”

“ Turning our attention again to the industrial organism, we shall strive to ascertain the chief changes that have been brought about in the size and structural character of industry, in the relations of the several parts of the industrial world, of the several trades which constitute industry, of the processes within these trades, of the businesses or units which comprise a trade or a market, and of the units of capital and labour comprising a business. It will then remain to undertake closer studies of certain important special outcomes of machinery and factory production. ”

“ It is perfectly possible, with the reorganization of business and finance that is bound to come about, to take the ill effect of seasons, if not the seasons, out of industry, and also the periodic depressions. Farming is already in process of reorganization. When industry and farming are fully reorganized they will be complementary ”

“ In order to build up a clear conception of industry it is possible to take either of two modes of inquiry. Taking as the primary cell or unit that combination of labour and capital under a single control for a single industrial purpose which is termed a Business, we may examine the structure and life of the Business, then proceed to discover how it stands related to other businesses so as to form a Market, and, finally, how the [11] several Markets are related locally, nationally, internationally so as to yield the complex structure of Industry as a whole. ”

“ Soon or late this expansion of orders reaches back to the enterprises from which the impetus to greater activity was first received, and then this whole complicated series of reactions begins afresh at a higher pitch of intensity. All this while, the revival of activity is instilling a feeling of optimism among business men, and this feeling both justifies itself and heightens the forces which engendered it by making every one readier to buy with freedom. ”

“ Every great market is organized with a view not merely to the purchase and sale of a commodity at once, or “on the spot,” but also with a view to the future requirements of buyers and sellers. This organization arises naturally from the necessities of business, Future Delivery. since modern industry and commerce are carried on continuously, and provision has to be made for the requirements, say, of a spinning-mill, by arranging for the delivery of successive quantities of cotton, wool or silk over a period of months “ahead.” ”

“ It is at this point that the business man comes into the industrial process as a decisive factor. The organization of the several industries as well as the interstitial adjustments and discrepancies of the industrial process at large are of the nature of pecuniary transactions and obligations. It therefore rests with the business men to make or mar the running adjustments of industry. The larger and more close-knit and more delicately balanced the industrial system, and the larger the constituent units, the larger and more far-reaching will be the effect of each business move in the field. ”

“ The great, at the present stage of development perhaps the greatest, opportunity for saving by consolidation, in the common run of cases, is afforded by the ubiquitous and in a sense excessive presence of business enterprise in the economic system. ”

“ The oscillation between good times and bad is as wide and as frequent as ever, although the average level of material well-being runs at a higher mark than was the case before the machine industry came in.
This visible difference between the old order and the new is closely dependent on the difference between the purposes that guide the older scheme of economic life and those of the new. Under the old order, industry, and even such trade as there was, was a quest of livelihood; under the new order industry is directed by the quest of profits. ”

“ He should serve in a textile factory, on a railway, a farm, should hold a post in a bank or a city office, a wholesale and retail store, so as to have real understanding of the business terms and facts he has to handle as economist. ”

“ Thus in the evolution of the modern business we see not only a number of processes in the production of a commodity, each of which constituted a separate business-unit in the earlier division of labour, growing together into a large complex whole, but a growing together of analogous processes in the production of different commodities, a lateral aggregation of processes. ”