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THE 
 
 DEPRESSION IN TRADE 
 
 AND 
 
 THE WAGES OF LABOR. 
 
 By URIEL H. CROCKER. 
 
 I* » '» 
 
 There is that scattereth and yet increaseth; and there is that withholdeth more 
 than is meet, but it tendeth to poverty. — Proverbs xi. 24. 
 
 BOSTON: 
 W. B. CLARKE AND CARRUTH, 
 
 340 Washington Strket. 
 
 1886. 
 
^7 
 
 ^[ni'bcrsftg '^u%s\ 
 
 JOHX WiLSOX AND SON, CAMBRIDGE. 
 
PREFACE. 
 
 npHE following pages have been written for the 
 purpose of giving a full and connected state- 
 ment of certain arguments and conclusions which the 
 undersigned has during the past nine years brought 
 in various ways to the attention of the public. The 
 first presentation of these views was made in a commu- 
 nication printed in the " Boston Daily Advertiser " of 
 August 8, 1877, and that communication was followed 
 from time to time by others in different papers and 
 periodicals. The more important of these articles 
 were collected in a pamphlet entitled " Excessive 
 Saving a Cause of Commercial Distress," published 
 in June, 1884, and in a few pages, supplementary to 
 that pamphlet, printed a year later. 
 
 In those earlier articles attention was directed 
 solely to the cause of the troubles which were the 
 subject of consideration, and the proposal of any 
 remedij was carefully avoided. This course, however, 
 has resulted in a general criticism of the author as 
 one who had proposed to remedy the mischiefs of 
 the times by a general indulgence in ice-cream or 
 fireworks, or by some other expedient equally ab- 
 
 M 9759 
 
surd and equally foreign to his thoughts ; and it has 
 
 therefore seemed to him to be advisable, in the hope 
 
 of avoiding such misconceptions in the future, to add 
 
 in this pamphlet, to the argument concerning the 
 
 cause of the depression in trade, some considerations 
 
 as to the direction in which we ought to look for 
 
 relief from the evils that have resulted from that 
 
 depression. 
 
 URIEL H. CROCKER. 
 April 26, 1886. 
 
THE 
 
 DEPEESSION IN TRADE 
 
 AND 
 
 THE WAGES OF LABOR. 
 
 THE general and widespread depression in trade, which, 
 except for a short interval of business prosperity, has 
 now extended over a period of twelve or thirteen years, has 
 given rise to much discussion both in this country and abroad, 
 and more especially in England, where a " Royal Commission 
 on the Depression of Trade and Industry " has recently been 
 appointed. 
 
 The phenomena which are the evidences of this depression 
 are generally seen and recognized, and people are in the main 
 agreed as to their character. Few persons will deny that more 
 products of almost every description have been created than it 
 has been possible to dispose of at a profit over the cost of pro- 
 duction. Among the so-called raw materials, more iron, coal, 
 cotton, and wheat have been produced than tlie market has 
 seemed to call for, while of most manufactured products greater 
 quantities have been turned out of the factories than could be 
 sold except at a loss to the owners of the factories. It has 
 been the general complaint among tradesmen that business has 
 been dull ; among railroad managers that their roads have been 
 earning but small dividends ; and among capitalists that they 
 could find for their funds no investments which promised 
 favorable returns. 
 
These phenomena, however, might not call for serious atten- 
 tion, except for certain other phenomena by which they have 
 been accompanied. In the midst of all these evidences of plenty, 
 in the midst of an abundance of tlie products of the earth and 
 of labor, lai'ge numbers of the laboring classes, though ready 
 and eager to work, have, by reason of tlie lack of any demand 
 for their services, been compelled to sit in idleness, surrounded 
 by an abundance in which they had no share. This has cer- 
 tainly been a condition of affairs tliat has demanded attention 
 from the student of political science, — a condition in which 
 general abundance has existed only to cause general embarrass- 
 ment, in which the rich have been complaining of the abun- 
 dance, because it prevented them from disposing of their goods 
 at a profit, and the poor have been complaining likewise, not 
 only because the abundance caused their labor to be unsouglit, 
 but also because it spread before them, as before the eyes of 
 Tantalus, the things which they longed for, but were not 
 permitted to touch.^ 
 
 1 The suffering from want of employment has probably not been in recent 
 years so severe in the United States as elsewhere, but in the first annual report 
 of the Bureau of Labor, recently submitted to the Secretary of the Interior, the 
 Commissioner (Hon. Carroll D. Wright) says : " It is undoubtedly true that, out 
 of the total number of establishments, such as factories, mines, etc., existing in 
 the country, about five per cent were absolutely idle during the year ending 
 July 1, 1885, and that perhaps five per cent more were idle a part of the time ; 
 or, for a just estimate, seven and one half per cent of the whole number of 
 such establishments were idle or equivalent to idle during the year named. 
 According to the census of 1880 there were, in round numbers, 255,000 such 
 establishments, employing upwards of 2,250,000 hands. If the percentage 
 stated above is correct, and it is believed to be approximately so, then there 
 were possibly 19,125 establishments idle or equivalent to idle and 168,750 hands 
 out of employment, so far as such establishments were concerned, during the 
 year named. The percentage stated, if erroneous at all, is probably too large, 
 because the idle establishments were to a large extent small and poorly 
 equipped. In some industries the percentage of idle establishments would be 
 much greater than the average given, while in other industries the percentage 
 given is much too large. Applying this percentage, however, to the whole 
 number of people employed in all occupations in the United States, which in 
 1880 was 17,392,099, there might have been 1,304,407 out of employment; but 
 this is a number evidently too large, because it applies to all occupations, — 
 those engaged in agriculture, professional and personal service, trade and trans- 
 
Many theories to account for these unusual phenomena have 
 been proposed. In this country it has been said that the 
 trouble is due to our protective tariff, which, it is claimed, 
 has limited the EQtarket for the sale of our products. But the 
 fact that the depression has been felt even more severely in 
 free-trade England than in the United States, indicates that 
 tliis theory cannot be tlie true one. In England, on the 
 other hand, it has been urged that the trouble is due to the 
 free-trade policy of that country, which floods it with the pro- 
 ducts of other nations. But those who urge this view forget 
 that the United States, whose policy is to exclude foreign 
 products, have been suffering from the same trouble, though 
 perhaps in a less degree. 
 
 The professors of political economy have told us, in the 
 language of Professor Bonamy Price, in the " Contemporary 
 Review " for April, 1877, that the cause of our trouble " is one 
 and one only, — over-spending, over-consuming, destroying 
 more wealth than is reproduced ; and its necessary consequence, 
 poverty." But if we have been suffering from past extrava- 
 gance, if we have been " destroying more wealth than is repro- 
 duced," surely we ought, as a result, to have found ourselves in 
 the midst of a scarcity rather than an abundance of the products 
 of labor, and, instead of there being any difficulty in giving 
 
 portation, mechanical and mining industries, and manufactures. The per- 
 centage should be applied only to those engaged in agriculture, trade and 
 transportation, mining industries, and manufactures. There were engaged in 
 those four great branches, as shown by the census of 1880, 13,317,861 persons. 
 Applying tlie percentage arrived at (seven and one half per cent), we obtain a 
 total of 998,839 as constituting the best estimate of the possibly unemployed in 
 the United States during the year ending July 1, 1885, — meaning by the 
 unemployed those who under prosperous times would be fully employed, and 
 who, during the time mentioned, were seeking employment, — that it has been 
 possible for the Bureau to make. It is probably true that this total (in round 
 numbers 1,000,000), as representing the unemployed at any one time in the 
 United States, is fairly representative, even if the laborers thrown out of em- 
 ployment through the cessation of railroad building be included, A million of 
 people out of employment, crippling all dependent upon them, means a loss to 
 the consumptive power of the country of at least $1,000,000 per day, or a 
 crippling of the trade of the country of over $300,000,000 per year." 
 
8 
 
 employment to all who wish to labor, every one ought to 
 find plenty to do and to be hard at work in making good the 
 waste of the past. Indeed, this theory is so far at variance 
 with the facts that it seems now to have been abandoned. 
 
 Another favorite theory with the economists has been that 
 the trouble is due to mis-production ; or, in other words, to a 
 foolish over-production of some things, while there has been 
 a corresponding under-production of other things. But this 
 theory also may fairly be set aside as unsatisfactory unless 
 those who advance it are able to point out, as it is evident they 
 cannot do, what the articles are that have not been produced 
 in sufficient quantities to meet the demands of the times ; 
 or at least to explain how it is that, if there is any consider- 
 able amount of under-production (corresponding to the evident 
 over-production of many articles), the scarcity of these under- 
 produced articles, creating — as scarcity of any article of mer- 
 chandise always must — an increase of its price over its cost 
 to the producer, has not in all these years attracted the atten- 
 tion of some of the many shrewd and. watchful capitalists 
 whose money has been lying idle for want of investment, and 
 why employment has not thus been given to some of the many 
 laborers who have been unemployed because there has been 
 no demand for their labor. 
 
 Another theory is that which has been persistently advocated 
 by the New York " Commercial and Financial Chronicle." 
 This paper has traced all the trouble to the disinclination of 
 the business community to engage in new enterprises by reason 
 of a fear that the continued coinage of silver will lead to a 
 shifting of our currency from a gold to a silver basis, whereby 
 the value of the dollar will be diminished by some twenty per 
 cent, and much confusion and disaster will be brought upon all 
 kinds of business. The objections to this theory are numerous. 
 In the first place, the most active business men usually trade 
 on borrowed capital, and the prospect that they would be able 
 to pay their debts in a depreciated currency would naturally 
 
9 
 
 induce tliem to extend rather than to diminish their opera- 
 tions. In the second place, common observation of the talk 
 of business men shows that the prospect of trouble from this 
 cause is to their minds too remote and too theoretical to in- 
 fluence largely their practical conduct. And thirdly, those 
 who are accustomed to loan money, although they are the 
 class who are sure to suffer from a depreciation of the cur- 
 rency, and although they are always on the lookout for any 
 symptoms of a coming depreciation, have not felt and ap- 
 preciated the danger enough to be prevented from loaning 
 their funds at very low rates of interest, or to be led, except in 
 rare instances, to insist, when making a loan, upon an agree- 
 ment from the borrower that he will repay it in gold. 
 
 Finally, a theory, which is in some respects more plausible 
 than any of those before mentioned, has recently been advanced 
 by the economists. This theory represents the depression in 
 trade to be due to the demonetization of silver, which, by 
 increasing the value of gold, has diminished the value, as 
 measured in dollars, pounds sterling, or francs, of all other 
 articles, and thus has discouraged and depressed trade by 
 giving it a continually falling market for all kinds of mer- 
 chandise. With regard to this theory it may be remarked, 
 in the first place, that the improved methods and increased 
 facilities for exchange and for the payment of debts without 
 the actual use of currency, which have been brought about in 
 recent years, must have gone very far to counteract, if they 
 have not more than counterbalanced, any tendency in gold to 
 increase in value ; secondly, the falling market was the natural 
 result of a cause very different from that suggested in this 
 theory. It necessarily arose out of the cheapening of products 
 caused by the great increase that has taken place in the effec- 
 tiveness of the machinery of production and distribution. This 
 increase of effectiveness must have brought about a great fall 
 in the price of every article that is produced by machinery or 
 transported by railroad or steamship, and, instead of seeking 
 
10 
 
 for a different cause for the fall in prices, we may well wonder 
 that a fall, greater than that which has actually been experi- 
 enced, has not been brought about by our factories, railroads, 
 and steamships. A third objection to this theory is to be 
 found in the fact that the demonetization of silver could have 
 increased the value of gold pnly by increasing the demand for 
 the latter metal ; and tliat, during the time when* this demand 
 was increasing, those who felt the increasing want of gold 
 must have been willing to pay more liberally than before for 
 the use of it ; in other words, must have been ready to agree 
 to pay higher rates of interest when they borrowed it. Under 
 these circumstances the general rate of interest would have 
 tended to be, for the time, higher than it had previously been. 
 But, as a matter of fact, the last ten years have been notable, 
 not for high, but for low, rates of interest. None of the usual 
 symptoms of a scarcity of money have been observed. Specu- 
 lators and the debtor class have not been specially embarrassed. 
 There has been no unusual number of failures, and no general 
 want of confidence in the solvency of the business community. 
 For these reasons, this theory, like the others, fails to meet the 
 conditions of the problem.^ 
 
 it is quite coihmon for those who write concerning the 
 causes of the depression in trade, to begin their essays on 
 the subject with some remark to the effect that many people 
 suppose the trouble to be due to general over-production ; but 
 that any such idea as that could be entertained only by igno- 
 rant persons, who, if they were acquainted with the simplest 
 principles of political economy, would know that general over- 
 production is, in the nature of things, an absolute impossibility.^ 
 When the theories of the learned conflict with popular ideas, 
 
 1 The objections to this theory have been very well stated in an article by 
 Dr. Th. Barth, in the Berlin " Nation " of Dec. 5, 1885, a translation of which 
 article appeared in the New York " Evening Post " of Dec. 30, 1885. 
 
 2 Thus, in an article by Moreton Frewen on " Gold Scarcity and the Depres- 
 sion of Trade," in the " Nineteenth Century " for October, 1885, we read : " People 
 of little education are accounting for low prices on the hypothesis of a general 
 over-production; but it is hardly necessary to point out that, while over- 
 
11 
 
 it sometimes turns out in tlie end that the learned were wrong 
 and the people right, — that the finely drawn arguments^ on 
 which the former built their theories, involved fallacies fatal 
 to the truth of their conclusions, while the rougher reasoning 
 processes of the latter led them by a sort of instinct to true 
 results. With regard to general over-production, — by which 
 is meant, not a production in excess of mankind's readiness to 
 consume if products were to be distributed gratuitously, but a 
 production in excess of the demand which is backed by both 
 the inclination to acquire, and the ability to pay for, the things 
 demanded,^ — those who claim that such over-production is 
 possible, certainly have an appearance of facts in their favor. 
 They say that it is possible, because it actually exists at the 
 present time, and as evidence of the truth of this assertion they 
 point to the fact that the chief producers in every branch 
 of industry (and these men may well be supposed to be ac- 
 quainted each with the state of the market for his own pro- 
 ducts) have long been complaining that in their respective 
 lines of business over-production actually exists. Factory 
 
 production in any particular trade is frequent, and quickly adjusts itself, general 
 over-production is impossible." And Mr. Edward Atkinson, in an address on 
 the " Statistics of Consumption," printed in the Boston " Sunday Herald " for 
 July 5, 1885, says : " I desire to examine the outside of the head of any one who 
 pleads a general over-production, in order to see how his brain is constituted, 
 and what element of common-sense has been omitted in his make-up." 
 
 1 That it may not be supposed that this definition of " general over- 
 production" is an invention of the writer of these pages, the following quota- 
 tion from Mill's " P^lements of Political Economy" is given : — "Because the 
 phenomena of over-supply and consequent inconvenience or loss to the producer 
 or dealer may exist in the case of any one commodity whatever, many persons, 
 including some distinguished political economists, have thought that it may 
 exist with regard to all commodities; that there may be a general over-produc- 
 tion of wealth; a supply of commodities in the aggregate surpassing the 
 demand; and a consequent depressed condition of all classes of producers. . . . 
 There may easily be a greater quantity of any particular commodity than is 
 desired by those who have the ability to purchase, and it is abstractly conceiv- 
 able that this might be the case with all commodities. Tlie error is in not 
 perceiving that, though all who have an equivalent to give might be fully pro- 
 vided with every consumable article which they desire, the fact that they go on 
 adding to the production proves that this is not actually the case." — " Elements 
 of Political Economy," by John Stuart Mill (Laughlin's ed.), book 3, ch. 11. 
 
12 
 
 owners have, for this reason, been working their factories 
 below their full capacity, and have endeavored to reduce the 
 aggregate of production by mutual agreements with others in 
 the same business, whereby the products of each should, dur- 
 ing a certain period, be limited to a prescribed amount. If 
 there is evident over-production in all the more important 
 branches of business, what can be the branches in which there 
 is an amount of under-production sufficient to redress the 
 balance and leave the world with, on the whole, no excess 
 of production over consumption ? Unless such instances of 
 under-production can be pointed out, it is evident that general 
 over-production, as an actual and existing fact, must be 
 admitted. 
 
 If, then, general over-production is apparently an existing 
 fact, it will be well to examine the argument which has been 
 supposed to prove it to be in the nature of things an impossi- 
 bility. The argument, upon which all modern economists 
 rest for this proof, is that which was furnished many years 
 ago by John Stuart Mill, and is in substance as follows: 
 No man produces anything unless he expects either to consume 
 it himself, or to exchange it for something else which he ex- 
 pects to consume ; in other words, production never exists 
 unless an equivalent demand for consumption exists at the 
 same time, and therefore production can never exceed in 
 amount that demand for consumption, — can never be developed 
 into general over-production. According to Mill, those who as- 
 sert the possibility of general over-production are involved in 
 the absurdity of assuming that people will go on producing 
 articles which they do not expect to use themselves, or to 
 exchange for other articles which they do expect to use; and 
 their error lies — to quote his own words — "in not perceiv- 
 ing that, though all who have an equivalent to give might be 
 fully provided with every consumable article which they desire, 
 the fact that they go on adding to the production proves that 
 this is not the case." 
 
13 
 
 This reasoning of MilPs is very plausible, and seems at first 
 sight to cover the whole case. But on closer examination it 
 will be found that it fails to take into account one element of 
 human nature, and leaves one road open by which, and appar- 
 ently by which alone, general over-production can be reached. 
 Mill in his argument assumes that the sole incentive that leads 
 men to *' go on adding to production " is the desire presently 
 to obtain " consumable articles,'^^ with which they are not at the 
 time " fully provided." But a little consideration will suffice 
 to convince us that this is not true, — that production may be 
 prompted, and that a large portion of it is, in fact, prompted 
 to-day, not by this desire, but by a desire to gain what may be 
 called income-producing investments. Many men labor to-day, 
 not so much that they may consume and enjoy, as that they 
 may grow rich through the accumulation of income-producing 
 investments. The chief opportunity for these investments is, 
 directly or indirectly, afforded by the machinery of production 
 and distribution, by factories, railroads, steamships, warehouses, 
 etc. ; and it is the desire to acquire and own these things for 
 the income to be derived from them that prompts much of the 
 production of the present time. The owner of a cotton factory, 
 for instance, often goes on producing cotton goods, not so much 
 that he may, with the profits of their sale, obtain other con- 
 sumable articles for his own use, but that he may with those 
 profits build new factories wherewith to produce still more 
 cotton goods, and thereby gain further profits. Thus we see 
 that the sole object of production is by no means the imme- 
 diate acquisition of articles for consumption, as Mill assumes 
 it to be, but that production is in large part due to the exist- 
 ence of a desire to increase production itself through an in- 
 crease of the machinery by which it is brought about, and that, 
 so far as production is stimulated in this way, it cuts loose 
 from the present demand for consumption and may readily 
 reach an amount far in excess of that demand, — may, in a 
 word, become general over-production. 
 
14 
 
 The conclusion just 'arrived at may also be reached by a 
 somewhat different line ot argument. Let us suppose that 
 there should come to mankind, through some great religious 
 or social movement, a large and sudden development of the 
 miserly desire to gain income-producing wealth at the cost of 
 present comforts and pleasures ; that the desire to save, and 
 not to spend, should suddenly become a universal passion in 
 the community ; and that all people, the rich and the poor 
 alike, should begin to live in the most economical and meagre 
 manner, should eat only the simplest and cheapest food, should 
 wear their old clothes, should abstain from indulging in aught 
 that was new, and should deny themselves all amusements 
 and recreations ; and that they should do all this with a view 
 to the acquisition of income-producing wealth in the shape of 
 new factories, railroads, ships, and warehouses. Is it not evi- 
 dent that under these circumstances there would be an immense 
 development of the machinery of production and distribution, 
 and at the same time an equally large diminution of the con- 
 sumption of the articles which tliat machinery was intended to 
 create and to distribute ? If, before this movement began, 
 production and consumption had been equal in amount, it is 
 evident that the balance w^ould, as the movement proceeded, 
 be quickly disturbed, and that there would speedily be devel- 
 oped a large degree of general over-production. 
 
 These arguments certainly show that general over-produc- 
 tion is not, as Mill has been supposed to have proved, and as 
 modern economists assert, a thing absolutely impossible so 
 long as men do not labor for the mere pleasure of laboring ; 
 but that, on the contrary, it must necessarily arise in a state 
 of society in which certain passions and motives, which are 
 recognized by all as everywhere active and powerful, should 
 receive an excessive and undue development. 
 
 It may be objected however, that, though it is perhaps con- 
 ceivable that the desire to acquire income-producing wealth 
 might under certain imaginable circumstances reach such a 
 
15 
 
 development as to bring about a general over-production, it 
 is not possible that the action of this desire can have been 
 so powerful in recent years as to have caused any such result 
 at the present time. But if, as we hope is the case, we have 
 satisfied the reader that general over-production actually ex- 
 ists, and that it may under certain circumstances be caused 
 by excessive investment with a view to annual income, and if 
 as it would seem we might fairly do, we rely on Mill's argu- 
 ment to show that over-production cannot be brought about 
 in any other way, we are certainly forced to the conclusion that 
 a present over-production has actually been brought about in 
 the way that has been suggested. 
 
 If, however, further argument be needed, it may be shown 
 that the history of the past and the circumstances of the present 
 are such as might fairly be 'expected to develop a general over- 
 production at the present time. This century has seen an 
 immense development in the power and effectiveness of the 
 machinery of production, whereby each man's labor can to-day 
 produce manifold more than it could have done in the year 
 1800. The macliinery of distribution also, — the railroads, 
 steamships, and canals, — have rendered it possible to bring 
 cheaply from the most remote regions to each man's door all 
 the varied products of nature and of art.^ While the produc- 
 tiveness of each man's labor has thus been largely increased, 
 great numbers of men, who had previously been engaged in 
 
 1 The Hon. Carroll D. Wright, in his report before referred to, says : — 
 ** The mechanical industries of the United States are carried on by steam and 
 water power representing in round numbers 3,500,000 horse power, each horse 
 power equalling tiie muscular labor of six men, — that is to say, if men were 
 employed to furnish the power to carry on the industries of this country it 
 would require 21,000,000 men. . . . The industries are now carried on by 4,000,000 
 persons in round numbers. . . . The present cost of operating the railroads of 
 the country with steam power is, in round numbers, $502,000,000 per annum, 
 but to carry on the same amount of work with men and horses would cost 
 the country $11,308,500,000. Tliese illustrations of course show tlie extreme 
 straits to which a country would be brought if it undertook to perform its work 
 in the old way. Tiie figures are to a certain extent valuable to show tiie enormous 
 benefits gained by the people at large through the application of motive power." 
 
16 
 
 creating the immense machinery of production and distribution, 
 have in the later years been set free to employ themselves in 
 using the machinery thus created. While in the earlier part 
 of the century a large proportion of the available labor was 
 employed in building the factories of all kinds which now exist 
 and the great network of railways that now covers the civil- 
 ized world, a comparatively small number of workmen is now 
 required for that kind of labor, and the great mass are free to 
 engage directly in running the factories and the railroads which 
 have thus been built. There have been, since our civil war and 
 the Franco-German war, which followed shortly after it, no 
 great wars to waste and destroy the products of labor, and thus 
 to turn back the march of improvement. Under all these cir- 
 cumstances it might well have been expected that the recent 
 years would show an immense improvement in the material con- 
 dition of all classes of people. Factories, railroads, and ships, 
 equal to an immense amount of production and distribution, 
 had been built and were in full operation, and wars had for 
 the time ceased to divert the results from beneficence to mis- 
 chief. It was clearly a time for a very largely increased 
 enjoyment and consumption of the products of labor by all 
 classes ; by the poor as well as by the rich. But it does not 
 appear that there has been any such increase of consumption. 
 There has without doubt been some increase, but by no means 
 so large an increase as the occasion called for. The poor have 
 indeed, both through greater wages, and through the greater 
 purchasing power of money, been able to a limited extent to 
 increase their consumption ; ^ but while this increase has, in 
 their case, been limited by their want of ability to pay for the 
 things which they desired, in the case of the richer classes the 
 
 1 Colonel Wright, in the report of the Bureau of Labor, says : " If the question 
 should be asked, Has the wage worker received his equitable share of the bene- 
 fits derived from the introduction of machinery, the answer must be, No. In 
 the struggle for industrial supremacy in the great countries devoted to mechani- 
 cal productions it probably has been impossible for him to share equitably in 
 such benefits." 
 
17 
 
 increase has been limited by their disinclination to spend, — 
 by their desire to save that thereby they might become richer 
 than before. In all these recent years the most accepted 
 gospel has been tliat of economy. The chief end of man has 
 been supposed to be to grow rich. Nobody has been thor- 
 oughly respected in the community unless he has, according 
 to his means, been growing richer every year. The well-to-do 
 mechanic has yearly been adding somewhat to liis deposit in 
 the savings bank. The citizen that had accumulated a capital 
 of ten thousand dollars has been endeavoring by a life of econ- 
 omy to increase that capital to a hundred thousand. He that 
 had a hundred thousand was looking forward to the time when 
 he could enroll himself among the millionnaires. He that had 
 a million was hoping and working that he might treble or 
 quadruple his million before he died. And Yanderbilt, with 
 his two hundred millions, was each year saving up many 
 millions that he might therewith acquire new machinery of 
 production and distribution. While there has been no at- 
 tempt to fix a limit to the extent to which the mania for 
 accumulating wealth might be carried, the machinery of the 
 law has been at work to curb any who might be inclined 
 to go too far in the other direction, — he that has been de- 
 sirous of spending more than his income has been put under 
 guardianship as a spendthrift, and the father that has feared 
 that his children would be too free in the use of the funds 
 that he had accumulated, has left his estate in the hands of 
 trustees, that thereby the possibility of encroachment on the 
 principal might be prevented. We have indeed gone on in- 
 creasing tlie machinery of production, unmindful of the fact 
 that that machinery was useful only so far as it created pro- 
 ducts for consumption, and that, if consumption failed to keep 
 pace with production, the machinery of production was, to 
 just the extent by which consumption lagged behind, useless 
 and superfluous. We have increased production by bend- 
 ing all our energies in that direction, aided all the while by 
 
18 
 
 the immense increase in the effective power of the machinery 
 of production and distribution, and by the fact that years of 
 labor spent in the creation of that machinery have brought us 
 to a time when we are prepared fully to enjoy its use. On the 
 other hand we have done comparatively little for the increase 
 of consumption. The jyossiMliti/ for such increase by the poor 
 has been enlarged but little, while the inclination of the rich 
 therefor has been greatly restricted. Under such circum- 
 stances what wonder that production has run ahead of con- 
 sumption, — what wonder that general over-production, as an 
 actual existing fact, has finally been reached ? 
 
 If the considerations already offered are not sufficient to 
 satisfy the reader that the troubles from which the world has 
 suffered in recent years are due to a general over-production 
 caused by an excessive endeavor to accumulate income-pro- 
 ducing investments, we may go still farther, and show tliat the 
 manner in which this cause would, on theoretical grounds, 
 necessarily operate in bringing about a general over-produc- 
 tion, corresponds exactly to tlie plienomena which have actu- 
 ally been observed. If mankind should at any time be more 
 bent on building factories, than on consuming the products 
 of the factories whicli had been built, it is plain that the 
 factory owners must soon find themselves competing with 
 each other in the attempt to dispose of a mass of products 
 larger than the market of the time would call for, and that 
 in this competition they would soon be selling their pro- 
 ducts at a small profit, or even at a loss, compared with the 
 cost of production. Thus, instead of a certain number of 
 factories yielding liberal returns to their owners, there would 
 soon be a larger number of factories yielding little or no 
 returns, — perhaps shutting down, and dismissing their em- 
 ployees, or endeavoring to reduce the wages of those employees, 
 in an attempt to reduce the cost of production below the price 
 which their goods would command in the market. This surely 
 is exactly what has been experienced by the owners of fac- 
 
19 
 
 tories. Tlie result must necessarily be tlie same with regard 
 to any kind of investment that has been fully subject to 
 competition. Steamships might be expected to be, and as 
 a matter of fact have been, so numerous that their owners 
 have found it difficult to obtain profitable employment for 
 them. Hotels and apartment houses have been built in 
 excess of the demands of the public. With regard to rail- 
 roads, the case might be expected to be, and in fact has 
 been, somewhat different. So far as an excessive investment 
 in railroads has led to the building of new roads in new terri- 
 tories, which were not prepared to support them, the only mis- 
 chief has resulted to the persons who have invested in those 
 particular roads, while the railroads previously existing have 
 been benefited through the increased business thereby brought 
 to them, and the people in the newly developed territory have 
 been helped by their new facilities for transportation. If, in- 
 deed, the persons who seek to invest their funds in new rail- 
 roads, build parallel or competing lines, the same results 
 must be developed as in the case of factories, — and the new 
 investor will not only get no profits on his own investment, 
 but will also destroy the profits of investments previously made 
 by others. All this, again, corresponds to what we have seen. 
 Comparatively little mischief to the general prosperity has 
 been caused by the building of such roads as the Northern 
 Pacific, which, though for the time a poor investment for its 
 projectors, brought new business to connecting roads, and gave 
 development and prosperity to an immense territory. On the 
 other hand, the investment of capital in the West Shore 
 Railroad not only proved disastrous to those who built that 
 road, but also destroyed for the time the profits that liad before 
 been derived from the millions invested in the New York Cen- 
 tral. So also the multiplication of trunk lines across the 
 country, in excess of the needs of business, has led to a com- 
 petition between the different lines, which has been disastrous 
 to them all. 
 
20 
 
 One more instance of the correspondence of observed facts 
 with results to be anticipated theoretically remains to be men- 
 tioned. If the recent depression in trade has resulted from 
 OTcr-investment and consequent over-production, any particular 
 country, the circumstances of which had given exceptionally 
 large opportunities for investment and for consumption, might 
 be expected to have been, in comparison with other countries, 
 relatively exempt from the evil symptoms of the depression. 
 Fortunately for our argument, the history of recent years fur- 
 nishes a striking example of exactly this phenomenon. At the 
 conclusion of the war between France and Germany, the former 
 country was left with its territory devastated by the armies 
 which had fought within its borders, — its factories, its ware- 
 houses, its dwellings, and its railroads had, to an immense ex- 
 tent, been destroyed. Germany, however, had suffered com- 
 paratively little ; the war had not been fought on its soil, and 
 the expenses, which it had incurred, had been in large part re- 
 paid to it by the millions of the indemnity which it had extorted 
 from its fallen foe. But, notwithstanding all these facts, which, 
 according to all accepted principles of political economy, ought 
 to have caused the war to be followed by prosperity in Ger- 
 many and by distress in France, any one who will study the 
 history of those times will find that it was Germany that suf- 
 fered, while France prospered, — the general depression in 
 trade at that time having been felt more severely in Germany 
 than in England or in the United States, while France was 
 wholly exempt from it, all her people being able to find work 
 and employment in repairing and making good the waste of 
 the war. We believe that this fact, though easily explained 
 upon the theory which is here advanced, is wholly inexplicable 
 upon any other theory that has ever been suggested. 
 
 Before leaving this branch of our subject it may be well to 
 suggest that the views here presented involve no denial of the 
 fact that the desire to acquire income-producing investments is 
 an element of the greatest importance for the development of 
 
21 
 
 human progress. Substantially all the advance that has thus 
 far been made in civilization has been built on tliis foundation. 
 The only claim here presented is that this element may, like 
 almost everything else in human affairs, be so excessive in 
 amount as to be mischievous rather than beneficial in its 
 effects. One need not be supposed to deny or to decry the 
 benefit or the necessity of food for the human body, because 
 he endeavors to show that the gratification of an inordinate 
 desire for food may result in injury to health or even in the 
 destruction of life itself. 
 
 If the arguments and conclusions set forth in the preceding 
 pages are sound, many questions arise as to the future work- 
 ings of the natural laws, the existence of which we have sought 
 to establish, and as to the possible remedies, if any there are, 
 for the present troubles. The doctrine of the impossibility of 
 general over-production is one that lies at the basis of the 
 whole of the accepted system of political economy. Mill him- 
 self says : " The point is fundamental ; any difference of opin- 
 ion on it involves radically different conceptions of political 
 economy, especially in its practical aspect. On th6 one view, 
 we have only to consider how a sufficient production may be 
 combined with the best possible distribution, but, on the other, 
 there is a third thing to be considered, — how a market can be 
 created for produce, or how production can be limited to the 
 capabilities of the market." If, as we have endeavored to 
 prove, it is possible that tliere should exist a production which 
 should be, in its general aggregate, in excess of the capabilities 
 of the market, it is evident that, as Mill asserts, many new 
 questions, which have heretofore been ignored by the econo- 
 mists, come to the front and demand an answer ; and if, as we 
 have claimed is the fact, production has in recent years got 
 ahead of consumption, whereby much embarrassment to busi- 
 ness and suffering for the laboring classes have resulted, it is 
 evident that the even balance, that should be kept between pro- 
 
22 
 
 duction and consumption, cannot be restored unless either the 
 latter element is increased or the former one diminished. 
 
 There are evidently many ways of reaching either of these 
 results. On the one hand, consumption may be increased by 
 the action of government, through engaging in costly and de- 
 structive wars, through the maintenance of large armies and 
 navies, or through the erection of costly public buildings and 
 public works. It may be increased by the richer classes through 
 a more liberal expenditure on luxuries, or through a more gen- 
 erous use of their wealth in the distribution of charities among 
 the poor. It may be increased by the poorer classes through a 
 fuller enjoyment of the comforts of life ; but this mode of increase 
 is not directly dependent on the simple volition of the persons 
 composing those classes, for, before they can increase their con- 
 sumption, it is necessary that they should receive larger wages 
 than at present, or at least wages which, if not larger as 
 measured in dollars, will be larger in purchasing power. 
 Finally, consumption may be increased through the opening 
 of new fields for the investment of capital, as, for example, if 
 a new mode of transportation should be invented, which should 
 serve as a substitute for railroads. 
 
 On the other hand, production may be diminished, and this 
 also may be accomplished in various ways. Production may 
 be diminished through the destruction of the machinery of 
 production and distribution by war, riots, floods, or conflagra- 
 tions. It may be diminished through the refusal of mankind to 
 avail itself of the assistance of labor-saving machinery. It may 
 be diminished by the enforced idleness of large classes of people, 
 as by preventing convicts in prisons from performing any 
 useful labor, or by the temporary closing of factories and the 
 temporary stoppage of machinery. This closing of factories, 
 however, though it has been practically tried more than any 
 other supposed remedy, is liable to the objection that, while 
 diminisliing production, it reacts upon and at the same time 
 diminishes consumption ; for, by throwing large numbers 
 
23 
 
 of working people out of employment, and thereby depriving 
 them of the means of purchasing the articles which they desire, 
 consumption is diminished, and the total result of the process 
 may well be to increase the disproportion between production 
 and consumption, rather than to lessen it. Finally, produc- 
 tion may be diminished by reducing the hours of labor through 
 the adoption of eight-hour laws or otherwise. 
 
 Most of these methods for increasing consumption or di- 
 minishing production, are liable to evident objections that 
 prove them remedies to be avoided, rather than sought for, 
 — remedies which are in fact worse than the disease by which 
 we have been afflicted. There are, however, two of these sug- 
 gested modes of relief which may well engage our attention. 
 If we can hope to relieve the depression in trade by increasing 
 the consumption of the good things of life by the poor, or 
 by reducing their daily hours of labor ; or by a combination 
 of these two remedies, whereby the poor shall both enjoy 
 more and work less, — have more to enjoy, and more time 
 to enjoy it in, — we surely shall have reached a consumma- 
 tion much to be desired. But all these results are within the 
 reach of mankind, provided it has intelligence sufficient to en- 
 able it to grasp them without contention and without violence. 
 The determination of the amount of the daily wages of the 
 poor, and of the hours of their daily labor, has hitherto been 
 largely in the control of the rich, whose aim has been chiefly 
 to prevent increase of the former or reduction of the latter. 
 Recently, however, the poor have endeavored, by strikes and 
 boycottings, to control these matters in accordance with their 
 own interests, and to bring about results the reverse of those 
 sought by the rich. In this struggle it may with reason be 
 hoped that the poor will attain to some large measure of suc- 
 cess. The success of the rich in their efforts to reduce wages 
 can lead only to an indefinite continuance of the present dis- 
 proportion between production and consumption, and to riot- 
 ing and violence by those who suffer from want in the midst 
 
24 
 
 of abundance. The success of the poor, on the other liand, 
 must mean increased consumption of the products of labor ; 
 increased demand for the use of the macliinery by which 
 those products are created ; increased income for the owners 
 of that machinery ; and increased activity in every branch 
 of business and of labor. In the interest, then, not only of 
 the poor, but of the rich, our sympathies ought to be with 
 the former, rather than with the latter, in the labor troubles 
 which are now attracting general attention. 
 
 The fact that the mischievous consequences of general over- 
 production are being developed at a time when the laboring 
 classes (who are the chief sufferers from it) are beginning to 
 find that the actual control of the world is in their hands, if 
 they only have the inclination and the intelligence to grasp 
 that control, is an important element not to be lost siglit of in 
 any consideration of the subject. The laboring classes are every- 
 where struggling in a blind way to right the wrongs from which 
 they suffer ; or, as some may prefer to put it, to bring about 
 some amelioration of their social condition. As in the recent 
 labor riots in London and in Belgium, so there will always 
 be leaders ready to turn the honest struggles of the unem- 
 ployed to the work of murder, rapine, and anarchy. Tliose 
 who would keep the masses back from following these leaders 
 must be prepared to hold out to them some hope of relief from 
 their troubles. If all that the educated classes, if all that po- 
 litical science can say to the poor and the ignorant is, that they 
 must, by reason of some past errors of legislation concerning 
 the currency, or the tariff, or free trade, submit to starve in the 
 midst of abundance, we may well fear that there will be shortly 
 a sudden upheaval and outburst of terrible forces. There is 
 no subject calling more urgently for immediate and careful 
 study to-day, than this of the causes of the present labor troub- 
 les ; but the subject is a difficult one, and there is a very gen- 
 eral disinclination to discuss it except in the most superficial 
 manner. Educated people suppose that the professors of 
 
25 
 
 political economy have a thorough knowledge of the whole mat- 
 ter, and that tliis knowledge is so deep and so abstruse that it 
 cannot be easily acquired by those who have not made a spe- 
 cial study of political science. The professors, on the other 
 hand, go blindly ahead, working out their old regulation theo- 
 ries, unwilling to re-examine the foundations of those theories, 
 and turning aside with silent contempt from any one who sug- 
 gests that there are truths in political science of which they 
 are as yet ignorant. 
 
 There is much in the present condition of affairs that 
 suggests a comparison with the condition of France prior to 
 the great Revolution of .1789. Then, as now, social inequali- 
 ties had become strongly marked and exceedingly offensive. 
 The masses, in their blind struggle to overthrow the " divine 
 rights " of kings and the privileges of the nobility, burst all 
 barriers, and created for a time a reign of terror. The result 
 was, however, in the end a large recognition of the equal rights 
 of men throughout the civilized world. Since that time, and 
 until recently, men have had fair opportunities to create their 
 own position in the world, — to rise by their own exertions 
 from the lowest to the highest ranks. But latterly a new bar- 
 rier has been growing, and the distance between the rich and 
 the poor lias been widening. Yanderbilt, Gould, and a few 
 others, have seemed to be in a fair w^ay to absorb into their 
 own possession all the income-producing wealth of the country, 
 
 — at least all that large part of it which takes the form of the 
 ownership of railroads, — while great numbers of the poor have 
 been so situated that, though anxious to earn their living, and 
 though surrounded by abundance, they have been forced to 
 starve in idleness. Can it be expected that now, any more 
 than in 1789, the masses will submit quietly to a lot of suffer- 
 ing and privation which they feel is due to no fault of their 
 own, while wealth, and the comforts and luxuries which 
 wealth gives, concentrate themselves in the hands of a few, 
 
 — and- those few apparently not the most deserving ? It is 
 
 4 
 
26 
 
 to be hoped that the vis medicatrix naturae will soon cure our 
 pres.ent troubles, — that an improved condition of the masses 
 will come without active interference from any man or body 
 of men ; but if relief does not come in this way, if an appli- 
 cation of the heartless laissez faire principles of tlie economists 
 does not promptly work out relief, we may expect soon to 
 hear of vigorous efforts on the part of the sufferers to ob- 
 tain that relief by violent measures. The riots in London and 
 in Belgium, the strikes and boycottings in England and in this 
 country, the threatenings of murder and rapine by socialists 
 and anarchists, may be but the mutterings before a storm 
 that is to break upon us as unexpectedly as, to the great 
 l3ody of our people, the fierce storm of our civil war broke 
 upon and swept over the length and breadth of a country 
 to which such horrors had been so long unknown that they 
 seemed an impossibility within its borders. 
 
 The unexpected success which has followed the strikes that 
 have recently taken place has offered a hope of relief from the 
 dangers of our social situation. The effort had previously been 
 to cure the evils of the times by the old-fashioned remedy of an 
 increased practice of economy. The trouble being that pro- 
 duction had run ahead of consumption, we had tried to relieve 
 the situation by an enforced reduction of consumption, and, 
 necessarily, a corresponding lessening of production. Any 
 -considerable lessening of production necessarily involved the 
 enforced idleness of large numbers of men, whose labor thus 
 became superfluous, and for whom such enforced idleness 
 meant loss of wages and consequent want and suffering. 
 This tended only to intensify the mischief, and to lead the 
 sufferers finally to violent struggles after relief. Recently, 
 however, there has been opened a way of securing a genuine 
 relief. In spite of all the outcries of the economists at the 
 folly of attempting to get better wages for labor, when busi- 
 ness is dull and labor not greatly in demand, the attempt 
 has met with much success, and with that success, if con- 
 
27 
 
 tiimed, must come a great increase of consumption that will 
 set the machinery of production and distribution in full action, 
 and give employment to all ready and willing hands. It ap- 
 pears, however, that the Knights of Labor, intoxicated by the 
 success of their strikes, will attempt to carry their movement 
 too far ; that, having succeeded in effecting a large increase of 
 wages, they will endeavor to effect larger and still larger in- 
 creases, until they attempt that which is, in the nature of things, 
 impossible. Wliat is to put a practical limit to the progress of 
 the movement for higher wages, it is not easy to see ; but 
 while we may hope that natural laws will finally check that 
 progress in some peaceful manner before it has gone too far, 
 it is much to be feared that excessive demands on the part of 
 the laboring classes, especially if accompanied by acts of vio- 
 lence, will tend to check enterprise and to frighten capital, 
 and will thus, by reducing the demand for labor, cause the 
 movement for higher wages to result in an actual reduction 
 of wages. If this result shall be brought about, the time when 
 the equilibrium between production and consumption is to be 
 restored will be indefinitely postponed, and we may well fear 
 that the intervening period will be one of great confusion and 
 great suffering throughout the civilized world. 
 
APPENDIX. 
 
 THERE are several collateral results of the views devel- 
 oped in tliis pamphlet, to which it may be well briefly 
 to refer. 
 
 First. It may be remarked that although an increase in the 
 wages of labor may in the future lead to a largely increased 
 demand for the machinery of production and distribution, the 
 desire to obtain income-producing investments is so powerful 
 and so general among all classes of people that it is probable 
 that the field of investment will hereafter remain permanently 
 overcrowded except when it may be cleared for a time by the 
 destruction due to a great war, or by a new invention which 
 shall supersede an old one and call for a large investment 
 of capital in a new kind of machinery. Such overcrowding 
 must mean great competition within the field, wherever com- 
 petition is possible, and great competition must mean small 
 profits for the competitors. Manufacturing business, there- 
 fore, in the future, when it has no .monopoly, but is open 
 to the competition of all comers, may be expected to return 
 only small profits. Railroads, however, when free from com- 
 petition, as they must often be, and when free also from legis- 
 lative interference, may be expected to pay large dividends, 
 for their business must continue to increase in volume. For 
 real estate, advantageously located, a large increase in value 
 may be anticipated, unless too great a portion of the rents is 
 
30 
 
 taken by taxation to be wasted or squandered by incompetent 
 or corrupt governments. Under these circumstances money 
 can of course command only low rates of interest. Periods 
 of relief from this general condition of affairs may, however, 
 be expected to occur, whenever people are led (as they were in 
 1881 and 1882) to make a sudden and general move in the 
 direction of accumulating stores of manufactured products in 
 preparation for an anticipated rise in their value. But any 
 such period must always be followed by a reaction, when the 
 general desire to dispose of the accumulations has glutted the 
 markets with tlie products that have been accumulated, and 
 has thus interfered with the regular disposal of the usual 
 products of the year. 
 
 Second. Another consideration resulting from the views set 
 forth in this pamphlet is this : If the closing of factories and 
 the throwing of laborers out of employment finds its original 
 cause in an excessive desire on the part of the general public 
 to acquire income-producing investments, it would seem that 
 the sufferers from the results thus brought about might fairly 
 have some claim on that public, as represented in and by the 
 government of the state or nation, for relief from the sufTer- 
 ing thus created. If the action of the community as a whole, 
 through the general excess of the desire to accumulate, is 
 such as to leave labor unemployed and starving in the midst 
 of abundance, may not the idle and starving laborers fairly 
 claim that the government, which represents the community 
 at large, shall find and supply them with that labor, that 
 means of earning a livelihood, which individuals have failed 
 to furnish ? A new light is thus thrown on the question of 
 the propriety of public workshops and public improvements 
 carried on mainly for the purpose of giving employment to 
 the idle. The objections to such measures on grounds not here 
 noticed may be insuperable, but these considerations afford 
 a strong argument in support of the view that under certain 
 
31 
 
 circumstances it may be the duty of a government to attempt 
 to relieve public distress in this way. 
 
 Third. It may be remarked that the theory here advanced 
 suggests a way in which a protective tariff may benefit the 
 country which imposes it. If, on account of its undeveloped 
 condition or for any other reason, one country affords greater 
 opportunities and a larger field than others for the profitable 
 investment of capital, such country may, by limiting as far as 
 possible, through tariffs or otherwise, its communication with 
 countries where the field of investment has been crowded, 
 postpone the evil day when the effects of the competition 
 among investors will cause depression in trade and general 
 distress within its own borders. Perhaps, however, this 
 merely shows that a country may by a protective tariff delay 
 the march of its own progress in civilization, and thereby 
 postpone the time when it must suffer from some of the 
 necessary, though unpleasant, incidents of that progress. 
 
M 9753 C7 
 
 THE UNIVERSITY OF CALIFORNIA LIBRARY