The Universal Fear of Depression
Whether or not a limited market -- a failure of consumer demand to keep up with production -- is, indeed, the fundamental cause of our failure to achieve the economic aim of society, the conviction that this cause is operative prevails throughout the world. Here is a point upon which capitalists, laborers, and statesmen fully agree. Indeed, the political as well as the commercial policies of all the leading industrial nations seem to be based on the belief in a limited market, a market which cannot possibly expand rapidly enough to absorb all the enjoyable things which the world is able and eager to produce, a market so deficient in buying capacity that wars have been inevitable.
How different from the primitive community with which we started our discussion! This fear of general overproduction -- we say it again, even at the risk of tiresome repetition -- did not arrest industry, until industry had developed the distinctive features of our modern money and profit economy. Not for a moment was productive activity restrained in our simple pioneer community, for fear that no way could be found of consuming the goods.
Prosperity Always Brings Fear of Depression
Business men are always on the lookout for just such a collapse. Some of them seem to think that periodic depressions, like the movements of the heavenly bodies to which they are sometimes attributed, are foreordained. Indeed, no matter how widespread and indisputable the forward movement may be, no matter how favorable all the conditions may be which are commonly regarded as fundamentals, nevertheless nearly everybody looks for a recession.
The resistance of ultimate consumers to high prices continues an outstanding feature.' 'No one, except the professional optimist,' said Edward Filene at about this time, 'feels very hilarious about the business outlook. And, unfortunately, the optimist's "silver linings" cannot always be minted into coin and credit tokens. But why -- with so many signs of economic soundness all about us -- are we going to have such a difficult time? The answer is plain enough to be read on the run. Most of our trouble grows out of the fact that we are unable to export our surplus goods in anything like an adequate volume.' Here, again, we have an expression. of the settled conviction of business men. It is not merely that they fear relative overproduction of this or of that -- though such maladjustments are always liable to occur -- but that they fear an overproduction of goods in general, an output not merely beyond the buying capacity of consumers at home, but beyond the buying capacity of the world.
Naturally, then, although everybody agrees that the economic aim of society is increased production, yet the very fact that society is beginning to succeed is regarded by everybody as infallible proof that it is about to fail. If the country is producing steel at ninety per cent of capacity, this is considered a sign of impending trouble. One statistician even declares that a rise in the number of blast furnaces in operation above a certain per cent invariably forecasts a recession in business.
Does this mean that the country already has all the bridges and subways and roads that it needs? Does it mean that all the houses are adequately heated and the farmers supplied with all the tractors that they can use to advantage? Evidently not. What, then, do our statesmen mean by a surplus of commodities for export beyond all the commodities we can usefully take in exchange? How can they ascribe all our economic distress to 'a lack of markets'? We must reach out to the ends of the earth, they tell us, in order to find enough consumers to relieve us of our superabundance. Does this mean that everybody at home is adequately fed and clothed and housed? Far from it. Why, then, should we not seek a market among the millions of farmers at home who lack the ordinary comforts of life, and among the hungry hordes in our congested city districts? Here, surely, would be an unfailing market for our 'surplus' goods, provided -here and here only is the crux of the trouble -- provided the process of producing the goods yielded to consumers automatically, as it is supposed to do, the money wherewith to buy the goods. But it does not. And this is cause enough for the persistent complaint of a lack of markets. Our own consumers do not, in fact, receive nearly enough money to buy all the goods which they want and which they are perfectly able to produce.
'Of course not,' somebody is sure to exclaim; 'how can we ever expect every ne'er-do-well and spendthrift to have enough money to buy everything he wants?' But this objection, as most readers see at once, slips by the point. Not until every one has an Aladdin lamp can every wisher have everything he wishes for. That, however, does not worry us. We are not even expressing our concern at this moment because some people can buy far too little and others far too much; though that situation is so unfortunate that, next to the matter before us, there is no more important economic problem. The way to a more equitable distribution of income, however, will be much easier to find, once the way has been found to make the totality of income sufficient. What concerns us here, therefore, is the fact that all the wishers in the world put together have not enough income to continue to buy the wealth which, without the magic of even one fairy lamp, these very wishers could readily produce, or even the wealth which at times they actually do produce. Consequently, wishing is in vain; the vast wealth which might be produced decade after decade is not produced at all, and nobody gets it.
Capital, Labor, and the State Fear Overproduction
Convinced that the markets cannot absorb all that could be turned out, individual employers, as we said at the outset, often have no choice; they must curtail production. Laborers, as well, convinced that the more productive they are, the sooner they will be out of work, contrive by various means to limit output. Other motives, it is true, prompt them to slow down; but the dominant motive is the fear that the markets cannot take all that can be produced at prices which will make it possible for employers to continue to turn out goods. Wherefore, with unemployment looming up before them, laborers resort to rules, intimidation, and various other devices of sabotage or 'ca' canny,' in order to postpone what appears to be the inevitable glutting of the markets. To what extent this reasoning of employers and workers is unsound and their practices folly, we are not for the moment considering. We are merely calling attention to the fact that they agree upon the necessity of taking measures to avoid overproduction.
Not only do labor and capital thus combine in every great industrial nation to declare their belief in a limited market, but the nations themselves, in their commercial rivalries, their protective tariffs, and their struggles for trade concessions, also show their fears that the markets of the world cannot absorb all that the world can produce. This is, at bottom, the meaning of Germany's insistence, at the outbreak of the World War, that she must have 'a place in the sun.' If there were any guarantee in money markets, as there is in barter markets, that world demand would approximately equal world supply, and if each nation accordingly endeavored to send abroad only what it could produce to the greatest advantage, in order that it might receive in return as much as possible of what other nations could similarly produce, there would be no occasion for this bitter, international struggle for markets.
Exchange would take place naturally among nations, to their obvious, common advantage. But when the buying power of the world is far below the world's productive capacity, 'cut-throat' competition, leading again and again to war, is the inevitable result. Thus capital, labor, and the State, each in its own way, and each with only the vaguest ideas concerning the cause of the trouble, expresses its conviction of a limited market.
 More Readings |
