Chapter 22

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"Apart from the waste of labor and capital by misdirected industry, and that from the constant bloodletting of your industrial warfare, your system was liable to periodical convulsions, overwhelming alike the wise and unwise, the successful cut-throat as well as his victim. I refer to the business crises at intervals of five to ten years, which wrecked the industries of the nation, prostrating all weak enterprises and crippling the strongest, and were followed by long periods, often of many years, of so-called dull times, during which the capitalists slowly regathered their dissipated strength while the laboring classes starved and rioted. Then would ensue another brief season of prosperity, followed in turn by another crisis and the ensuing years of exhaustion. As commerce developed, making the nations mutually dependent, these crises became world-wide, while the obstinacy of the ensuing state of collapse increased with the area affected by the convulsions, and the consequent lack of rallying centres. In proportion as the industries of the world multiplied and became complex, and the volume of capital involved was increased, these business cataclysms became more frequent, till, in the latter part of the nineteenth century, there were two years of bad times to one of good, and the system of industry, never before so extended or so imposing, seemed in danger of collapsing by its own weight. After endless discussions, your economists appear by that time to have settled down to the despairing conclusion that there was no more possibility of preventing or controlling these crises than if they had been drouths or hurricanes. It only remained to endure them as necessary evils, and when they had passed over to build up again the shattered structure of industry, as dwellers in an earthquake country keep on rebuilding their cities on the same site.

"So far as considering the causes of the trouble inherent in their industrial system, your contemporaries were certainly correct. They were in its very basis, and must needs become more and more maleficent as the business fabric grew in size and complexity. One of these causes was the lack of any common control of the different industries, and the consequent impossibility of their orderly and coordinate development. It inevitably resulted from this lack that they were continually getting out of step with one another and out of relation with the demand.

"Of the latter there was no criterion such as organized distribution gives us, and the first notice that it had been exceeded in any group of industries was a crash of prices, bankruptcy of producers, stoppage of production, reduction of wages, or discharge of workmen. This process was constantly going on in many industries, even in what were called good times, but a crisis took place only when the industries affected were extensive. The markets then were glutted with goods, of which nobody wanted beyond a sufficiency at any price. The wages and profits of those making the glutted classes of goods being reduced or wholly stopped, their purchasing power as consumers of other classes of goods, of which there were no natural glut, was taken away, and, as a consequence, goods of which there was no natural glut became artificially glutted, till their prices also were broken down, and their makers thrown out of work and deprived of income. The crisis was by this time fairly under way, and nothing could check it till a nation's ransom had been wasted.