Economic fluctuation

“ 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. ”

“ 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. ”

“ Wages will rise and fall in accordance with the proportion between demand and supply; that is, in accordance with the conditions of the competition between capitalists as buyers and laborers as sellers of labor. The fluctuations of wages correspond in general with the fluctuation in the price of commodities. Within these fluctuations the price of labor is regulated by its cost of production; that is, by the duration of labor which is required in order to produce this commodity, labor power. ”

“ Thus the difference between the period of production and the period of exchange of the commodities, and the difference between the period of economic redintegration and the period of technical redintegration of the productive machinery, give rise to the formation of monetary or capitalistic reserves, which become in their turn the source of intricate developments and interesting complications. ”

“ 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. ”

“ Since increase in trade tends to decrease the general level of prices, anything which tends to increase trade likewise tends to decrease the general level of prices. We conclude, therefore, that among the causes tending to decrease prices are increasing geographical or personal specialization, improved productive technique, and the accumulation of capital. ”

“ If, therefore, an attempt be made to increase industry, not by increase of population, and thus of demand, the cause of industry—not by industrial freedom, its encouragement, but simply by increase of the rate of the dollar—the attempt will be a failure. It is obviously absurd to suppose industry can be increased by decrease of rate. Increase, while in progress, acts as a stimulus, and thus appears to be successful for a time ”

“ 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. ”

“ Our average annual production of movable goods before the depression was about $50,000,000,000. We exported yearly about five billions, or 10 per cent. The world disruption has temporarily reduced our exports to about three and one-half billions. ”

“ The testimony of the whole financial and commercial world now is, that the exploiting of capital in trade and speculation, which eventually brought about the recent panic, and the abnormal enhancement of cost of living, which lifted the average price of commodities as much in two years as it had risen in the eight preceding years, began in the middle of 1905. ”

“ Given favorable circumstances, the price decline soon leads to a search for new methods of economy in production. Raw materials are likely to fall in price. Supplementary costs are rapidly reduced. The price of labor tends to fall. Even though prices continue to fall slowly, profits may rise to a level encouraging to business activity. ”

“ The man who has a dollar in his pocket knows that speculators and gold-gamblers cannot, by some juggle, take five cents or ten cents from its value, in twenty-four hours, as they could a few years ago. The public burdens have been largely reduced. Our exports far exceed our imports, and our balance-sheet with the world shows an immense sum in our favor. The boom of business is heard in the land. The preachers of calamity are out of date. Commerce, industry, enterprise, capital, labor, all feel the impulse of substantial prosperity running through every artery of public and private activities. ”

“ Manufacturing, still in its early stages, employs 9% of the labor force, accounts for 15% of GDP, and generates 20% of exports. The service sectors, including public administration, account for 50% of GDP and employ 20% of the labor force. Many basic problems face the economy, including rapid population growth, high unemployment, inflation, a lack of basic services, a large and inefficient public sector, and the dependence of the export sector mostly on coffee and bananas, which are subject to sharp price fluctuations. ”

“ But the cyclical fluctuations of trade, with the consequent waxing and waning of the aggregate demand of productive industry, must always be counted on; and these cyclical fluctuations in demand for labour, as we have shown, can be counteracted, and the volume of wage-earning employment in the country as a whole maintained at something like a constant level, by a mere rearrangement over each decade, of the Government works and orders that must in any case be executed within the decade, though not necessarily, as at present, in equal instalments year by year. ”

“ If trade unions seek to raise prices of labor while trusts raise prices of commodities, the general level of everything may rise or fall; but it can rise only by a general decrease in the quantities of commodities, labor, etc., sold, or by an increase of currency, or by an increase in velocities of circulation. If there is neither an increase nor decrease in volume of business, and if the quantity and velocity of circulation of money and its substitutes remain unchanged, the price level cannot change. ”

“ 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. ”

“ That the great depression of business, the stagnation of trade, the ‘hard times’ which have prevailed during the past year, and which still prevail, have not been caused by an insufficient amount of currency, but mainly by the great falling off of the demand for all the products of labor, compared with the increased supply since the return from war to peace. ”

“ 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. ”

“ There is a brisk demand and a rapid circulation, when goods, generally speaking, are sold as fast as they can be produced. There is slackness, on the contrary, and stagnation, when goods, which have been produced, remain for a long time unsold. In the former case, the capital which has been locked up in production is disengaged as soon as the production is completed; and can be immediately employed in further production. ”

“ 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. ”

“ These intervals of advancing prices, when not succeeded by retrograde movements, most powerfully contribute to the progress of national wealth. And practically I should say, that when once a character of industry and economy has been established, temporary high profits are a more frequent and powerful source of accumulation, than either an increased spirit of saving, or any other cause that can be named. ”

“ When, on the contrary, the overturnings are alternate, sometimes the scale of demand overturning the balance, sometimes the scale of work, the last period is more distant. Trade and industry subsist longer, but they remain in a state of perpetual convulsion. On the other hand, when the balance gently vibrates, then work and demand, that is, trade and industry, like agriculture and population, prove mutually assisting to each other, in promoting their reciprocal augmentation. ”

“ If, instead of growing our own corn, or manufacturing the clothing and other necessaries of the labourer, we discover a new market from which we can supply ourselves with these commodities at a cheaper price, wages will fall and profits rise; but if the commodities obtained at a cheaper rate, by the extension of foreign commerce, or by the improvement of machinery, be exclusively the commodities consumed by the rich, no alteration will take place in the rate of profits. ”

“ We're seeing record numbers of new businesses being created and nearly 11.7 million jobs created in the last 46 months. Sure there are ups and downs, and some sectors of the economy are not yet sharing fully in the expansion. But the indications are that our economy is gathering momentum for even more growth, more job creation, a narrowing trade deficit, and continued low inflation in the months ahead. ”

“ 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. ”

“ The demand increasing as the population increases, while the supply either does not increase at all or increases in a degree incommensurate with the demand, the money volume shrinks and the purchasing power of the unit becomes greater by reason of the increased keenness of competition to get it. This is but another mode of stating that the prices of all products of human labor decline. Prices falling, business ceases to be profitable, stores and work-shops close, and men are relegated to idleness. ”

“ 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. ”

“ For in each case the uncertainty arises only when we are dealing with one of the factors of production, land, labor or capital, regarded as a whole. If we are dealing with the capital available for a particular industry, a rise in the rate of profit in that industry will certainly increase the supply of capital available there ”

“ He will also without difficulty understand that the more limited the market is, the more easily will it be glutted, and the more subject will industry be to periodical stagnation; and that, on the other hand, the wider the market is for the products of labor, the more constant will be its employment. ”

“ The anomalous state of the Money Market proceeds, we believe, from a redundancy, not of mere paper, but of capital which cannot find investment, superinduced by stagnation of trade, and the want of commercial enterprise, occasioned by the restrictive nature of our duties on imports.—Morning Chronicle.
The accounts from the United States mention that the greatest activity prevails among the manufacturers in their purchases of the raw material for the year's consumption. ”