Economic crisis

“ A commercial crisis is a disturbance in the harmonious operation of the parts of the industrial organism. During economic health, the system moves smoothly and harmoniously, expanding continually, and its health and vigor are denoted by its growth, that is, by the accumulation of capital, which stimulates in its turn the hope, energy, and enterprise of men. Industrial disease is produced by disproportionate production, a wrong distribution of labor, erroneous judgment in enterprise, or miscalculations of force. ”

“ Over the past four and a half years, we’ve been fighting our way back from an economic crisis and punishing recession that cost millions of Americans their jobs, their homes, and the sense of security they’d worked so hard to build. ”

“ The fall in the value of many stocks and securities held by the banks forces many brokers and speculators to convert their resources into ready money. This is the moment of danger; weak enterprises find their foundations crumbling, and there are many failures. [6] The falling prices, the shattered credit, and the financial losses force many factories to close, and many workmen are thrown out of employment. This moment of widespread loss is the crisis, It is followed by another period of low prices and of small output, and therefore of profits small or negative in many industries. ”

“ The truth of the matter is that we are in the midst of another turn of the wheel in the economic cycle and that production in most instances has outrun consumption. To this domestic crisis has been added a tremendous falling off in our exports. ”

“ It accumulates a heavier supply than is demanded in the home-market. It overwhelms factories with their own goods, and drowns the manufacturer in bankruptcy, unless he stops work. It turns worthy, as well as unworthy, working-men adrift. It brings on all the horrors so piteously complained of. What can avert such consequences? There are, doubtless, factors in this problem unnoticed here, but this to me appears to be the main one. Allow wages to descend steadily, as the market demands, instead of holding them up till a crisis is reached. ”

“ After having increased production to a considerable extent, it failed in its endeavours to regulate it, and struggled hopelessly in the toils of inextricable difficulties.
"'You are not totally ignorant, comrade, of the economic disturbances which filled the twentieth century. During the last hundred years of the capitalistic domination, the disorder of production and the delirium of competition piled up disasters high. The capitalists and the masters vainly attempted, by means of gigantic combinations, to regulate production and to annihilate competition. ”

“ We will continue policies of sound monetary management and containment of public sector deficits to ensure that private sector enterprise will invest, expand production, generate employment and realize fair returns, particularly for exporters. As the power crisis eases, and as we carry out structural reforms, the economy should accelerate. ”

“ A crisis is a jolt to prices which shatters the credit of some banks, brokers, merchants, and manufacturers. Crises are thus peculiar to the money economy and to a developed industry. Not every business misfortune is to be called an industrial crisis, but only those where prices and credit are generally depressed. A long period of hard times is sometimes called a crisis, but it is better to distinguish it by the term industrial depression. ”

“ These problems of job control, of wealth and income distribution, of industrial inter-relations and of the relation between the state and industry are pressing for solution in every important centre of modern economic life. Each constitutes a disturbing element and contributes its mite to the aggregate of social instability and unrest that are racking the economic world. ”

“ 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. ”

“ It is evident that squalls are approaching, which, indeed, under our present Free Trade and Monetary System, are the inevitable results of a brief period of prosperity; and let it be recollected, when another crisis does arrive, as arrive it will, the consequences will be far more disastrous than the last. ”

“ That step, enabling the directors of the Bank of England to issue notes unsecured by bullion, had the effect of gradually restoring confidence. But a grave commercial crisis of this character is often attended with other than financial consequences. The stringency of the money market increases the distress of the industrial classes by diminishing the demand for work; and, when labour suffers, political agitation flourishes. ”

“ When insisting that we needed more currency, they evidently did not consider that during a crisis business contracts itself; that people reduce their expenses; that demand falls off, and thereby production is necessarily discouraged; that capital becomes more than ordinarily timid in its investments; that enterprise grows very circumspect, and confines itself to the safest ventures ”

“ That the continued and increasing depression of the manufacturing, commercial, and agricultural interests of this country, and the wide-spreading distress of the working classes, are most alarming:—manufacturers without a market, and shipping without freight; capital without investment, trade without profit; and farmers struggling under a system of high rents, with prices falling, as the means of consumption by the people fail; a working population rapidly increasing, and a daily decreasing demand for its labour ”

“ But these phenomena, though a conspicuous accompaniment, are no essential part, of the collapse of credit called a commercial crisis; which, as we formerly showed, [2] might happen to as great an extent, and is quite as likely to happen, in a country, if any such there were, altogether destitute of foreign trade. ”

“ A failure to act, and act now, will turn crisis into a catastrophe and guarantee a longer recession, a less robust recovery, and a more uncertain future. Millions more jobs will be lost. More businesses will be shuttered. ”

“ But notwithstanding all these facts I admit there are evils, serious evils, and much distress in the manufacturing districts; many are still out of employment, and in many branches of trade wages are low. We have violent fluctuations in trade, and periods when multitudes endure great suffering and it becomes this House to inquire why do these fluctuations occur, and what is the great cause of their suffering. I attribute much of this [Pg 611] to the mistaken and unjust policy pursued by this House, with respect to the trade and industry of the country. ”

“ Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone. ”

“ In no manner does this phenomenon answer to the description which these celebrated economists have given of the evil of over-production. The permanent decline in the circumstances of producers, for want of markets, which those writers contemplate, is a conception to which the nature of a commercial crisis gives no support. ”

“ The problem of restoring the balance between production and purchasing power is primarily the problem of industry itself. Our Government, as we shall show, cannot be absolved of responsibility; there is, indeed, a heavy burden of responsibility upon it; but it rests with industry to do the things most needful to be done if the disease at the root of the tree is to be cured. Will industry act to save itself? Will it curb the thirst for more profits that in the final analysis is the cause of our depression? ”

“ Such vicissitudes, beginning with irrational speculation and ending with a commercial crisis, have not hitherto become either less frequent or less violent with the growth of capital and extension of industry. ”

“ Everything seems to be going on as usual, commerce and industry vigorous and expanding, when suddenly there comes a shock, as of a thunderbolt out of a clear sky—a bank breaks, a great manufacturer or merchant fails, and, as if a blow had thrilled through the entire industrial organization, failure succeeds failure, and on every side workmen are discharged from employment, and capital shrinks into profitless security. ”

“ As used in economics, the term, however, implies a sudden change of business conditions for the worse, a collapse of prosperity. What precedes has not the appearance of disease, but rather that of exuberant health. Crises in economics may be distinguished as industrial, speculative, and financial, according as one or another influence seems to be more potent, but all are essentially financial. The change that occurs always is connected in some way with the use of money and credit. ”

“ The consequence is, that the market tends to be overstocked even to absolute repletion; goods will not sell, and a commercial crisis is established, in which we have the remarkable phenomenon of widespread panic, misery, and starvation resulting from a superabundance of wealth—a “crise pléthorique,” as Fourier called it, a crisis due to a plethora of wealth. ”

“ Capital having reached the stage in which, were it not for a perpetual succession of improvements in production, any further increase would soon be stopped—and having so strong a tendency even to outrun those improvements, that profits are only kept above the minimum by emigration of capital, or by a periodical sweep called a commercial crisis; to take from capital by taxation what emigration would remove, or a commercial crisis destroy, is only to do what either of those causes would have done, namely, to make a clear space for further saving. ”

“ All we need today is to look upon the fundamental, sound economic conditions to know that this business recession causes more perplexity than fear on the part of most people and to contrast our prevailing mental attitude with the terror and despair of five years ago. ”

“ Such fall of prices has destroyed the profits of legitimate industry, injuring the producer for the benefit of the non-producer, increasing the burden of the debtor, swelling the gains of the creditor, paralyzing the productive energies of the American people, relegating to idleness vast numbers of willing workers, sending the shadows of despair into the home of the honest toiler, filling the land with tramps and paupers, and building up colossal fortunes at the money centres. ”

“ 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. ”

“ Almost every conceivable cause has been assigned, or given as a partial explanation, for the stagnation of trade. A careful analysis of these recurring periods in the history of our country in 1837, 1848, 1857, 1873, 1887 and 1893, shows many partial causes of disaster in exchange, affecting the peculiar nature of each panic, yet one especial cause is evident in them all. That cause is large investment in fixed capital from which no immediate returns can be expected. ”

“ What always happens when scarcity appears is that "the trade," indeed the whole world, insists upon the duty of increased production. As a result, wages and everything necessary in production advance. Costs sink to a second place. People having been frightened inevitably hoard, and finally when the joint effort of the world oversteps the market, there come the collapses called "panics," and thousands of business men are swept to ruin. ”

“ For half a century, therefore, with regularly recurring seasons of surplus production, there came those inevitable commercial crises which emphasized with increasing force the necessity for foreign markets. ”

“ A crisis in its last analysis is the result of a lack of adjustment between production and consumption, due primarily to mistakes in production. It is significant that crises usually occur in periods of business prosperity when credit [Pg 56] is easy, prices high, and employment general. Such a period of business prosperity and rising credit may have been begun by a series of good harvests. The demand for manufactured commodities increases, prices rise, manufacturers enlarge their factories or engage in new enterprises, wages and profits go up. ”

“ Other causes of Economic depression than “slumps” in speculative Land-values there doubtless are. They spring from such superficial maladjustments in the processes of Trade as are connected with defective banking, fluctuations in the values of corporate stocks and variations in Money standards from lack of effective stabilization. ”

“ Commerce is at a standstill, the markets are glutted, products accumulate, as multitudinous as they are unsaleable, hard cash disappears, credit vanishes, factories are closed, the mass of the workers are in want of the means of subsistence; bankruptcy follows upon bankruptcy, execution upon execution. The stagnation lasts for years; productive forces and products are wasted and destroyed wholesale, until the accumulated mass of commodities finally filter off, more or less depreciated in value, until production and exchange gradually begin to move again. ”