Economic decline

“ Regarding men merely then as producing and consuming, (the proportion between which regulates the wealth of a nation,) we find that, in their own persons, there is a rooted tendency to bring on the decline. But we shall farther find that not only do people in wealthy and luxurious nations produce less and consume more than in nations less advanced, but they increase the number of unproductive labourers, all of whom consume without producing. ”

“ The economy’s triumph as an independent power at the same time spells its own doom, because the forces it has unleashed have eliminated the economic necessity that was the unchanging basis of earlier societies. ”

“ So the balance between production and consumption, which in previous ages was more or less adequately maintained by natural conditions, has been entirely destroyed, and a major social-economic problem created. ”

“ Industry, art, and intelligence, are, in the early ages, the spring of commerce; but, as machinery and capital become necessary, a set of persons rise up who engross all the great profits, and amass immense fortunes. {101}
The consequence of great fortunes, and the unequal division of property, are, that the lower ranks, though expensively maintained, become degraded, disorderly, and uncomfortable, while the middling classes disappear by degrees. ”

“ Chapter XIII The primary cause of industrial depressions There is a cause, not yet adverted to, that must be taken into consideration to explain fully the influence of material progress upon the distribution of wealth. That cause is the confident expectation of the future enhancement of land values which arises in all progressive countries from the steady increase of rent and which leads to speculation, or the holding of land for a higher price than it would otherwise bring. ”

“ The necessity that creates industry would be diminished, so that nothing could tend more effectually to bring on the decline of the nation than if all the debt were to be paid off; an operation which, though possible in calculation, never certainly would take place ”

“ It is then that necessity, the spur to industry in new and rising nations, (that spur which taxes and rent continue to excite, for the good of mankind, for a certain period,) begins to crush what it had raised, and to stab where it formerly stimulated. ”

“ It is then that the weight of taxes, the high price of commodities, and the various causes which encumber those who live in wealthy nations, begin to produce a pernicious effect. The tendency of industry is to remove its abode, and the capital of the merchants, who know no country, but understand arithmetic, and the profits of trade, gives the industry the means of doing it with more ease and promptitude. ”

“ 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 prostration of trade has arisen from extravagance, he repeatedly declares. "The commercial depression, so long, so monotonous, so heavy, and so dull, came from the excessive consumption of English capital in unwarranted constructions beyond savings, and unwarranted expenditure in living by all classes, which destroyed wealth without repairing it with new productions." ”

“ Everywhere land values have been steadily increasing with material progress, and everywhere this increase begot a speculative advance. The impulse of the primary cause not only radiated from the newer sections of the Union to the older sections, and from the United States to Europe, but everywhere the primary cause was acting. And, hence, a world-wide depression of industry and commerce, begotten of a world-wide material progress. ”

“ With natural opportunities thus set free to labour, with capital and improvements exempt from tax and exchange released from restrictions, the spectacle of willing men unable to turn their labour into the things they want would become impossible; the recurring paroxysms which paralyse industry would cease; every wheel of production would be set in motion; trade would increase in every direction and wealth augment on every hand. ”

“ 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. ”

“ The other school say that the speculation has produced the depression by leading to over-consumption, and point to full warehouses, rusting steamers, closed mills, and idle workmen as evidences of a cessation of effective demand, which, they say, evidently results from the fact that people, made extravagant by a fictitious prosperity, have lived beyond their means and are now obliged to retrench - that is, to consume less wealth. ”

“ 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 ”

“ The connection between industry and revenue was lost in their ideas. They knew nothing of it, and the remnants of the industrious, who still cultivated the ancient modes of procuring wealth, were considered as an inferior class of persons, depending upon less certain means of existence, and generally greatly straitened for capital, which, as soon as they possessed in sufficient quantity, enabled them to follow the same example, and to retire to the less affluent, but more esteemed and idle practice of living upon interest. ”

“ The industrial disturbances lately felt throughout civilization have consisted in the economic waste, the displacement of occupations, capital, skill, and social habit, due to the rapid and unceasing change in the methods of production and distribution ”

“ While then the last sixteen years of the century, of which the political history still lies before us, were, except at certain crises to be noted hereafter, marked by a rapid expansion of commerce and trade, and an increase in the wealth of the richer landowners, manufacturers, and merchants, they were, as we have seen, a period of change in the conditions of labour and, as such, brought much distress on the working class, which was aggravated by the high prices consequent on bad seasons and the risks of war. ”

“ Frequently, and with much justification, the view is taken of this transition period, particularly of the last decade of the eighteenth and the first decades of the nineteenth centuries, that it was a time of great distress and of social retrogression for a large part of the population, and considerable stress is laid upon the economic movement as a cause. ”

“ My plan would rectify the fundamental inequalities of our present economic system, in which we follow a hit-or-miss method, one getting much more than he needs or can use, and another less or nothing. We should learn to use our material resources so that all can partake of them, yet so that none will be any poorer or worse off than today. ”

“ On the other hand, one of the most important facts in our present economical condition is that an extraordinary and almost unparalleled development of industrial prosperity has been accompanied by extreme and long-continued agricultural depression and by a great fall in the rate of interest. ”

“ 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. ”

“ And in the insatiable thirst of enjoyment, the ordinary revenues no longer sufficing, they were augmented; the cultivator, seeing his labors increase without compensation, lost all courage; the merchant, despoiled, was disgusted with industry; the multitude, condemned to perpetual poverty, restrained their labor to simple necessaries; and all productive industry vanished. ”

“ Upon high economic authority we have been told that the prevailing depression is due to overconsumption; upon equally high authority, that it is due to overproduction; while the wastes of war, the extension of rail11roads, the attempts of workmen to keep up wages, the demonetization of silver, the issues of paper money, the increase of labor-saving machinery, the opening of shorter avenues to trade, etc., are separately pointed out as the cause, by writers of reputation. ”

“ Our commerce, which at one time successfully rivaled that of the great maritime powers, has, rapidly diminished, and our industrial interests are in a depressed and languishing condition. The development of our inexhaustible resources is checked, and the fertile fields of the South are becoming waste for want of means to till them. With the release of capital, new life would be infused into the paralyzed energies of our people and activity and vigor imparted to every branch of industry. ”

“ 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. ”

“ 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. ”

“ 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. ”

“ Has the progress of wealth and industry no effect in regard to cost of production, but to diminish it? Are no causes of an opposite character brought into operation by the same progress, sufficient in some cases not only to neutralize, but to overcome the former, and convert the descending movement of cost of production into an ascending movement? ”

“ 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. ”

“ And the times of crash are succeeded by protracted periods of stagnation, which for all concerned are scarcely better than the crises which caused it.
3. The phenomena of waste, which are always more or less a feature of the competitive system, are particularly manifest during the great industrial and commercial crises. Not only are the products of industry intended for consumption wasted in vast masses, but the productive forces themselves, such as machinery and shipping, are sacrificed enormously, whilst great numbers of people are idle and starving. ”

“ And that this latter effect is so necessary, in order to create a continued stimulus to productive industry, and keep up an abundant supply of commodities, that in the cases in which it does not take place, a stagnation in the demand for labour is immediately perceptible, and the progress of wealth is checked. ”

“ As commercial wealth increases the evil augments, not in simple proportion, but in a far more rapid progression; first, in proportion to the wealth and gain to be obtained, and, secondly, according to the opportunities which augment with the business done. ”

“ The primary and fundamental occupations, which create a demand for all others, are evidently those that extract wealth from nature; and hence, if from one exchange point to another and from one occupation to another we trace this check to production, which shows itself in decreased purchasing power, we must ultimately find it in some obstacle that checks labour in expending itself on land. And that obstacle, it is clear, is the speculative advance in rent, or the value of land, which produces the same effects as (in fact, it is) a lock-out of labour and capital by landowners. ”

“ When this has 212been accomplished, and before activity has slackened its speed, the nation has reached the culminating point, and then it enters upon the period of decline. The restraints imposed by economy and active occupation being removed, the beastly traits find in accumulated power only increased means of gratification, and industry and prosperity sink together. ”