Economic boom

“ 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 efficiency of the new manufacturing processes has provided a large surplus of goods that must be taken somewhere, exchanged for food and raw materials, which must, in turn, be brought to the producers of manufactured goods. In the course of these transactions, a generous share of the values produced goes, in the form of profit, to the owners of the industry, another considerable portion goes into reinvestment, thus swelling the volume of productive capital.
The increased wealth, the larger capital and the greater amount of surplus all make possible the maintenance of a larger population. ”

“ Commercial intercourse has increased enormously; the age of invention has brought about a veritable revolution in the processes of manufacture; and agriculture has been indirectly, but deeply, affected by these influences. Despite the growth, however, in the volume of trade, in the mass of wealth, and in the numbers of the population, similar principles of economic policy and commercial enterprise have been in vogue all this time. ”

“ But there is a distinction to be made between industrial efficiency and business prosperity. Americans have hitherto identified prosperity with a furious economic activity, and an ever-increasing economic product—regardless of genuine economy of production and any proper distribution of the fruits. ”

“ The economy, a mixture of private enterprises of all sizes and extensive government intervention, experienced enormous difficulties in the late 1980s, notably declining real growth, runaway inflation, foreign debt obligations of more than $100 billion, and uncertain economic policy. ”

“ IV.14 But the amount of trade is dependent, almost entirely, on other things than the quantity of currency, so that an increase of currency cannot, even temporarily, very greatly increase trade. In ordinarily good times practically the whole community is engaged in labor, producing, transporting, and exchanging goods. The increase of currency of a "boom" period cannot, of itself, increase the population, extend invention, or increase the efficiency of labor. ”

“ The challenge of greater productivity growth is of supreme importance to America's future. Only through productivity gains can real living standards be improved. Greater productivity growth is the cornerstone of price stability and sustained economic growth. ”

“ Looking ahead, the forecasters are projecting that next year we will enjoy even stronger economic growth. They suggest that the gross national product will rise by a healthy 3.2 percent, which should translate into lower unemployment, more jobs, and higher take-home pay. ”

“ We will work to increase effective demand, shore up weak links, and give full play to the leading role of domestic demand, particularly consumer demand, in driving economic growth.
Second, we must adjust the structure of the economy to raise it to a higher level of development. In changing the pattern of development, we will continue to focus on economic restructuring and independent innovation. ”

“ But if, on the other hand, growth in the supply of money does not keep pace with the economy's current production, then prices will fall, the nations's labor force, factories, and other production facilities will not be fully employed, or both. ”

“ Capital is increasing faster than labor, and consumption is growing relatively more luxurious; dwellings, furnishings, equipage, clothing, and food are improving in quality more than they are increasing in quantity. Goods of high cost are predominating more and more, and the subgroups that produce them are getting larger shares of both labor and capital. Population drifts locally toward centers of manufacturing and commerce. ”

“ The continually growing productivity of industry makes necessary a corresponding growth of the market, if disaster is to be avoided. But to enable producers to sell their growing output promptly prices must be reduced and wages must be raised in proportion as the supply of goods increases. For it is only by combining an increase in the money income of the mass of the population with a decrease in the cost of commodities that a country's home markets can be kept expanding with the progress of industrial methods. ”

“ Industry, commerce, shipping, and banking concentrated in the narrow area of less than 200,000 square miles, earned yearly returns equal as a rule to the total of the capital invested. Money changed hands rapidly, credits did the work of capital, and the rapid growth of population added large unearned increments to the fortunes of those who owned land or had established themselves in trade. ”

“ As I said, we've got experts from a wide range of business sectors, and what we're going to talk about is, are there mechanisms that we can start putting in place where we see the kind of growth that used to characterize the U.S. economy -- export-driven growth, manufacturing growth, growth that pays high wages and provides high living standards for a broad-based middle class. ”

“ Production had been overdone by most of the employers using their best efforts to keep their hands at work in the face of a falling market, or no market at all. Shelves were packed with goods everywhere. We were on the eve of a great change, and it would be some time before values would become stable again. If the balance of trade (high-sounding, but imperfectly understood term) could once more turn in our favor; if we could export our surplus goods, and find new markets,—as no doubt we would,—every shop and factory would soon be ringing with the cheerful sound of labor. ”

“ A reduction of prices and wages. That point has a significance to which I will return.
The second cause is the distorted balance which grows up in every boom between different branches of industrial activity. When trade is good, we invariably build ships, produce machinery, erect factories, make every variety of what are termed “constructional goods” upon a scale which is altogether disproportionate to the scale upon which we are making “consumable goods” like food and clothes. ”

“ There has been in the past decade an unparalleled growth of our industrial and commercial efficiency and our consequent ability to consume. I do not refer to that growth of productivity which should naturally be expected to accompany the addition of 14 millions to our population during the last decade, nor do I refer to the increase in dollar figures due to higher prices. Entirely over and above these contributions to increased figures, we are producing a larger amount of commodities per capita than ever before in our history. ”

“ Recently, there have been signs that the economy is picking up steam. Last month, we saw the strongest job growth in five years, and have added more than three-quarters of a million private sector jobs in just three months. ”

“ Sir, I firmly believe that abundance and cheapness of provisions is one of the constituents by which the continuance of manufacturing and commercial pre-eminence may be maintained. You may say the object of these observations is to flatter the love of gain, and administer merely to the desire of accumulating money. I advise this measure on no such ground. I believe that the accumulation of wealth, that is, the increase of capital, is a main element, or at least one of the chief means by which we can retain the eminence we have so long possessed. ”

“ Economic growth has liberated societies from the natural pressures that forced them into an immediate struggle for survival; but they have not yet been liberated from their liberator. The commodity’s independence has spread to the entire economy it now dominates. This economy has transformed the world, but it has merely transformed it into a world dominated by the economy. ”

“ The annual surplus of production, tho larger than before, is only sufficient to provide for the new undertakings which the growing optimism demands. Interest rates rise moderately in response to the added demand for capital. A few years further along, as business activity increases and success appears plainly to wait upon new ventures, the demand for new capital with which to develop increased facilities and new enterprises exceeds the annual supply of wealth created. Prosperity having increased, another factor commences to assert itself. ”

“ Men may compute the probable profits of labour employed in manufacturing, by computing the cost of raw material with the expense of manufacturing it, and what it sold for. But the enormous wealth that has accrued to America,—by the increase of population incident to manufacturing, by the development of its resources, and the gigantic improvements that have followed it—would be utterly out of the reach of all human industry to compute. ”

“ Because whether we're looking at industrial production—which has registered the biggest 12-month increase in 7 years—or factory use—now at a 2-year high—or the drop in unemployment-which has been faster than in the past six recoveries—or inflation—which remains below 3 percent, the best performance since 1967—we're looking at an economy whose engines are humming with open track ahead. ”

“ 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. ”

“ The gradual introduction of an improvement is important, since it affords time for an increase in the social demand for the product which is thus cheapened and for introducing at many other points improvements which neutralize, in a large degree, the labor-expelling effect of the first improvement.
(4) Technical gains are the largest source of additions to the total amount of the social capital. The constant influx of new capital facilitates the placing of laborers at the points where they are needed. ”

“ The increase of capital, the introduction of machinery, the diversion of labour from other less profitable pursuits, the acquisition of skill, and, above all, the confidence of the people in the protection of the government, have vastly augmented the means of production. It now promises an ample supply for the consumption of the country, and a steady but moderate profit. They are in a course of experiment, that will in a short period establish this great interest upon a scale adequate to the wants of the people. ”

“ This increase of profits, combined with the prevalence of business optimism, leads to a marked expansion of investments. Of course the heavy orders for machinery, the large contracts for new construction, etc., which result, swell still further the physical volume of business, and render yet stronger the forces which are driving prices upward.
Indeed, the salient characteristic of this phase of the business cycle is the cumulative working of the various processes which are converting a revival of trade into intense prosperity. ”

“ Inasmuch as our transportation system and our manufacturing industries have now attained a high degree of development, our public domain has been nearly exhausted, and land values and the cost of living are rapidly rising, the needs of agriculture are pushing themselves into the foreground, and we are beginning to look to European experience for suggestions regarding the best methods of diverting to that industry a larger part of our rapidly accumulating capital resources. ”

“ The capital remains unemployed for a time, during which the labour market is overstocked, and wages fall. Afterwards the demand revives, and perhaps becomes unusually brisk, enabling the manufacturer to sell his commodity even faster than he can produce it: his whole capital is then brought into complete efficiency, and if he is able, he borrows capital in addition, which would otherwise have gone into some other employment. At such times wages, in his particular occupation, rise. ”

“ Saving up and borrowing were both more practicable. More capital was now in existence and more persons could obtain the use of it. As a result, manufacturing, trade, and even agriculture could now be conducted on a more extensive scale, changes could be introduced, and production was apt to be profitable, as prices were increasing and returns would be greater even than those calculated upon. ”

“ As the demand for agricultural produce was diminished, the price of such produce would fall, food would become cheaper, and the cheapening of food would benefit partly the labouring class and partly the capitalists, the one obtaining higher real wages, and the other higher profits; this increase in real wages and in profits, would effect a great encouragement to manufacturing industry, and would necessarily lead to an increase in the manufacturing population, and to the amount of capital employed in manufactures. ”

“ But excessive profits secured in this way bring reaction and a period of business depression which check the production of wealth even more than the period of prosperity has stimulated production. Consider the extreme vacillations of prosperity and depression which characterize American industry. In a period of prosperity the prices of commodities rise rapidly, but the wages of labor, especially unorganized labor, follow slowly, and do not rise proportionately as high as prices. This means an enormous increase in profits and production of commodities. ”