Economic stagnation

“ 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. ”

“ By stagnation we do not necessarily understand a complete cessation of movement. That is impossible in such a wildly agitated society as ours. There may be, however, such a slow rate of advance, that it amounts to a complete cessation, or even to a backward movement in comparison with the rate of technical and economic transformation and the increase in exploitation. ”

“ However, like all monopoly, this capitalist monopoly infallibly gives rise to a tendency to stagnation and decay. In proportion as the monopoly prices become fixed, even though it be temporarily, so the stimulus to all progress tends to disappear: and so also arises the economic possibility of slowing down technical progress. ”

“ 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. ”

“ 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. ”

“ 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. ”

“ I do not think that stagnation is a proper term to apply to a state of things, in which for a time there is no motive to a further increase of production. When in the course of things profits shall be so low from a great accumulation of capital and a want of means of providing food for an increasing population, all motive for further savings will cease ”

“ The author states that there is a tendency for the industrial class to drift into bankruptcy, and for money to accumulate in the hands of the financial class, thus depriving the channels of commerce of the needed medium of exchange, and causing stagnation of business and dearth of employment. ”

“ Wealth, like food, must be digested for human beings to be able to live, function and create—in other words, to produce more wealth. If we want to acquire new wealth, the supply lines must be drained so that fresh commodities can come in. If there are stale goods left in the lines, the fresh supply must force them out.
The cause of our present stagnation is that the supply line or arteries furnishing the needs of the country are clogged with obsolete, outworn and outmoded machinery, buildings and commodities of all kinds. ”

“ 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. ”

“ These recurring spasms of business stagnation; these long-drawn periods of industrial depression, common to the civilized world, do not come from our treatment of money; are not caused and are not to be cured by changes of tariffs. ”

“ If the grower of grain at present prices has no remuneration for his toil, or return for his capital, he cannot buy from you, any more than could the farmer whose crop perished by the potato disease. What caused the stagnation? The failure of the power to purchase, because there was no return for produce. What causes the stagnation? Precisely the same thing perpetrated by Act of Parliament.
Do not, we beseech you, allow yourselves to be fooled any longer by the jesuitry of these political economists, but apply your own reason to discover the cause of the present depression. ”

“ In the absence of money, the economy stagnates, degenerates and, finally, collapses because of massive mismatches of supply and demand aggregates and of the types of goods and services on offer and demanded. Still, this system has the advantages of keeping the economic patient alive even following a massive liquidity haemorrhage. In the absence of barter economy, the economy might have ground to a complete halt and deteriorated to subsistence agriculture. ”

“ 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. ”

“ 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. ”

“ The markets of the world are actually glutted with articles produced by machine labor, but there are no purchasers with the means to buy, to consume the additional production caused by machinery and the consequent cheapening of processes of producing the articles of consumption, ornamentation, etc. When men have work they have money; and when men have money they spend it. Hence, when the toilers of a land have steady employment trade is brisk; when business stagnation forces them into idleness vice and crime afflict the country. ”

“ 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 ”

“ 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. ”

“ 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. ”

“ 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 external characteristics of the phenomena before us are everywhere pretty much the same, namely, — a prosperous trade gradually slackening, an increasing demand for money, depreciation and sacrifice of securities, numerous failures, disappearance of gold, panic, and the complete stagnation of every branch of labor ”

“ 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." ”

“ 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 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. ”

“ But even were the dispatches true, what must be said of a "business revival" that reduces wages, that adds enormously to the wealth of the plutocrats while making economic conditions harder for the great mass of the American people? The general trend of wages is downward, while the cost of living is enhanced by the Dingley tariff and the advance in flour caused by foreign crop failures. ”

“ But that deficiency, serious as it would be in itself, will, I am compelled to say, rather be increased than diminished without the adoption of measures adequate to correct the evil at once. The stagnation of trade and business, in some degree incident to the derangement of the national finances and the state of the revenue laws, holds out but little prospect of relief, in the ordinary course of things, for some time to come. ”

“ The other phenomenon from which the notion of a general excess of wealth and superfluity of accumulation seems to derive countenance, is one of a more permanent nature, namely, the fall of profits and interest which naturally takes place with the progress of population and production. The cause of this decline of profit is the increased cost of maintaining labour, which results from an increase of population and of the demand for food, outstripping the advance of agricultural improvement. ”

“ 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. ”

“ 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. ”

“ 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. ”

“ 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. ”

“ When the reconversion of machinery to civil ends has been completed, the immediate arrears of demand supplied, shipping and rolling-stock replaced, houses built, repairs made good, and so forth, this slow shrinkage of purchasing power in every country will go hand in hand with shrinkage of demand, decline of trade and wages, and unemployment, in a slow process, till they culminate in what one fears may be the worst "times" we have ever known. ”

“ 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. ”