"It was because the economists and the learned classes, who alone had a voice, regarded the economic question entirely from the side of the capitalists and ignored the interest of the people. From the point of view of the capitalist it was a case of overproduction when he had charged profits on products which took them beyond the power of the people to buy, and so the economist writing in his interest called it. From the point of view of the capitalist, and consequently of the economist, the only question was the condition of the market, not of the people. They did not concern themselves whether the people were famished or glutted; the only question was the condition of the market. Their maxim that demand governed supply, and supply would always meet demand, referred in no way to the demand representing human need, but wholly to an artificial thing called the market, itself the product of the profit system."
"What was the market?"
"The market was the number of those who had money to buy with. Those who had no money were non-existent so far as the market was concerned, and in proportion as people had little money they were a small part of the market. The needs of the market were the needs of those who had the money to supply their needs with. The rest, who had needs in plenty but no money, were not counted, though they were as a hundred to one of the moneyed. The market was supplied when those who could buy had enough, though the most of the people had little and many had nothing. The market was glutted when the well-to-do were satisfied, though starving and naked mobs might riot in the streets."
"Would such a thing be possible nowadays as full storehouses and a hungry and naked people existing at the same time?"
"Of course not. Until every one was satisfied there could be no such thing as overproduct now. Our system is so arranged that there can be too little nowhere so long as there is too much anywhere. But the old system had no circulation of the blood."
"What name did our ancestors give to the various economic disturbances which they ascribed to overproduction?"
"They called them commercial crises. That is to say, there was a chronic state of glut which might be called a chronic crisis, but every now and then the arrears resulting from the constant discrepancy between consumption and production accumulated to such a degree as to nearly block business. When this happened they called it, in distinction from the chronic glut, a crisis or panic, on account of the blind terror which it caused."
"To what cause did they ascribe the crises?"
"To almost everything besides the perfectly plain reason. An extensive literature seems to have been devoted to the subject. There are shelves of it up at the museum which I have been trying to go through, or at least to skim over, in connection with this study. If the books were not so dull in style they would be very amusing, just on account of the extraordinary ingenuity the writers display in avoiding the natural and obvious explanation of the facts they discuss. They even go into astronomy."
"What do you mean?"
"I suppose the class will think I am romancing, but it is a fact that one of the most famous of the theories by which our ancestors accounted for the periodical breakdowns of business resulting from the profit system was the so-called 'sun-spot theory.' During the first half of the nineteenth century it so happened that there were severe crises at periods about ten or eleven years apart. Now, it happened that sun spots were at a maximum about every ten years, and a certain eminent English economist concluded that these sun spots caused the panics. Later on it seems this theory was found unsatisfactory, and gave place to the lack-of-confidence explanation."
"And what was that?"
"I could not exactly make out, but it seemed reasonable to suppose that there must have developed a considerable lack of confidence in an economic system which turned out such results."
"Marion, I fear you do not bring a spirit of sympathy to the study of the ways of our forefathers, and without sympathy we can not understand others."
"I am afraid they are a little too other, for me to understand."
The class tittered, and Marion was allowed to take her seat.
JOHN TELLS ABOUT COMPETITION.
"Now, John," said the teacher, "we will ask you a few questions. We have seen by what process a chronic glut of goods in the market resulted from the operation of the profit system to put products out of reach of the purchasing power of the people at large. Now, what notable characteristic and main feature of the business system of our forefathers resulted from the glut thus produced?"
"I suppose you refer to competition?" said the boy.
"Yes. What was competition and what caused it, referring especially to the competition between capitalists?"
"It resulted, as you intimate, from the insufficient consuming power of the public at large, which in turn resulted from the profit system. If the wage-earners and first-hand producers had received purchasing power sufficient to enable them to take up their numerical proportion of the total product offered in the market, it would have been cleared of goods without any effort on the part of sellers, for the buyers would have sought the sellers and been enough to buy all. But the purchasing power of the masses, owing to the profits charged on their products, being left wholly inadequate to take those products out of the market, there naturally followed a great struggle between the capitalists engaged in production and distribution to divert the most possible of the all too scanty buying each in his own direction. The total buying could not of course be increased a dollar without relatively, or absolutely increasing the purchasing power in the people's hands, but it was possible by effort to alter the particular directions in which it should be expended, and this was the sole aim and effect of competition. Our forefathers thought it a wonderfully fine thing. They called it the life of trade, but, as we have seen, it was merely a symptom of the effect of the profit system to cripple consumption."
"What were the methods which the capitalists engaged in production and exchange made use of to bring trade their way, as they used to say?"
"First was direct solicitation of buyers and a shameless vaunting of every one's wares by himself and his hired mouthpieces, coupled with a boundless depreciation of rival sellers and the wares they offered. Unscrupulous and unbounded misrepresentation was so universally the rule in business that even when here and there a dealer told the truth he commanded no credence. History indicates that lying has always been more or less common, but it remained for the competitive system as fully developed in the nineteenth century to make it the means of livelihood of the whole world. According to our grandfathers--and they certainly ought to have known--the only lubricant which was adapted to the machinery of the profit system was falsehood, and the demand for it was unlimited."
"And all this ocean of lying, you say, did not and could not increase the total of goods consumed by a dollar's worth."
"Of course not. Nothing, as I said, could increase that save an increase in the purchasing power of the people. The system of solicitation or advertising, as it was called, far from increasing the total sale, tended powerfully to decrease it."
"How so?"
"Because it was prodigiously expensive and the expense had to be added to the price of the goods and paid by the consumer, who therefore could buy just so much less than if he had been left in peace and the price of the goods had been reduced by the saving in advertising."
"You say that the only way by which consumption could have been increased was by increasing the purchasing power in the hands of the people relatively to the goods to be bought. Now, our forefathers claimed that this was just what competition did. They claimed that it was a potent means of reducing prices and cutting down the rate of profits, thereby relatively increasing the purchasing power of the masses. Was this claim well based?"
"The rivalry of the capitalists among themselves," replied the lad, "to tempt the buyers' custom certainly prompted them to undersell one another by nominal reductions of prices, but it was rarely that these nominal reductions, though often in appearance very large, really represented in th
e long run any economic benefit to the people at large, for they were generally effected by means which nullified their practical value."
"Please make that clear."
"Well, naturally, the capitalist would prefer to reduce the prices of his goods in such a way, if possible, as not to reduce his profits, and that would be his study. There were numerous devices which he employed to this end. The first was that of reducing the quality and real worth of the goods on which the price was nominally cut down. This was done by adulteration and scamped work, and the practice extended in the nineteenth century to every branch of industry and commerce and affected pretty nearly all articles of human consumption. It came to that point, as the histories tell us, that no one could ever depend on anything he purchased being what it appeared or was represented. The whole atmosphere of trade was mephitic with chicane. It became the policy of the capitalists engaged in the most important lines of manufacture to turn out goods expressly made with a view to wearing as short a time as possible, so as to need the speedier renewal. They taught their very machines to be dishonest, and corrupted steel and brass. Even the purblind people of that day recognized the vanity of the pretended reductions in price by the epithet 'cheap and nasty,' with which they characterized cheapened goods. All this class of reductions, it is plain, cost the consumer two dollars for every one it professed to save him. As a single illustration of the utterly deceptive character of reductions in price under the profit system, it may be recalled that toward the close of the nineteenth century in America, after almost magical inventions for reducing the cost of shoemaking, it was a common saying that although the price of shoes was considerably lower than fifty years before, when they were made by hand, yet that later-made shoes were so much poorer in quality as to be really quite as expensive as the earlier."
"Were adulteration and scamped work the only devices by which sham reductions of prices was effected?"
"There were two other ways. The first was where the capitalist saved his profits while reducing the price of goods by taking the reduction out of the wages he had paid his employees. This was the method by which the reductions in price were very generally brought about. Of course, the process was one which crippled the purchasing power of the community by the amount of the lowered wages. By this means the particular group of capitalists cutting down wages might quicken their sales for a time until other capitalists likewise cut wages. In the end nobody was helped, not even the capitalist. Then there was the third of the three main kinds of reductions in price to be credited to competition--namely, that made on account of labor-saving machinery or other inventions which enabled the capitalist to discharge his laborers. The reduction in price on the goods was here based, as in the former case, on the reduced amount of wages paid out, and consequently meant a reduced purchasing power on the part of the community, which, in the total effect, usually nullified the advantage of reduced price, and often more than nullified it."
"You have shown," said the teacher, "that most of the reductions of price effected by competition were reductions at the expense of the original producers or of the final consumers, and not reductions in profits. Do you mean to say that the competition of capitalists for trade never operated to reduce profits?"
"Undoubtedly it did so operate in countries where from the long operation of the profit system surplus capital had accumulated so as to compete under great pressure for investment; but under such circumstances reductions in prices, even though they might come from sacrifices of profits, usually came too late to increase the consumption of the people."
"How too late?"
"Because the capitalist had naturally refrained from sacrificing his profits in order to reduce prices so long as he could take the cost of the reduction out of the wages of his workmen or out of the first-hand producer. That is to say, it was only when the working masses had been reduced to pretty near the minimum subsistence point that the capitalist would decide to sacrifice a portion of his profits. By that time it was too late for the people to take advantage of the reduction. When a population had reached that point, it had no buying power left to be stimulated. Nothing short of giving commodities away freely could help it. Accordingly, we observe that in the nineteenth century it was always in the countries where the populations were most hopelessly poor that the prices were lowest. It was in this sense a bad sign for the economic condition of a community when the capitalist found it necessary to make a real sacrifice of profits, for it was a clear indication that the working masses had been squeezed until they could be squeezed no longer."
"Then, on the whole, competition was not a palliative of the profit system?"
"I think that it has been made apparent that it was a grievous aggravation of it. The desperate rivalry of the capitalists for a share in the scanty market which their own profit taking had beggared drove them to the practice of deception and brutality, and compelled a hard-heartedness such as we are bound to believe human beings would not under a less pressure have been guilty of."
"What was the general economic effect of competition?"
"It operated in all fields of industry, and in the long run for all classes, the capitalists as well as the non-capitalists, as a steady downward pull as irresistible and universal as gravitation. Those felt it first who had least capital, the wage-earners who had none, and the farmer proprietors who, having next to none, were under almost the same pressure to find a prompt market at any sacrifice of their product, as were the wage-earners to find prompt buyers for their labor. These classes were the first victims of the competition to sell in the glutted markets of things and of men. Next came the turn of the smaller capitalists, till finally only the largest were left, and these found it necessary for self-preservation to protect themselves against the process of competitive decimation by the consolidation of their interests. One of the signs of the times in the period preceding the Revolution was this tendency among the great capitalists to seek refuge from the destructive efforts of competition through the pooling of their undertakings in great trusts and syndicates."
"Suppose the Revolution had not come to interrupt that process, would a system under which capital and the control of all business had been consolidated in a few hands have been worse for the public interest than the effect of competition?"
"Such a consolidated system would, of course, have been an intolerable despotism, the yoke of which, once assumed, the race might never have been able to break. In that respect private capitalism under a consolidated plutocracy, such as impended at the time of the Revolution, would have been a worse threat to the world's future than the competitive system; but as to the immediate bearings of the two systems on human welfare, private capital in the consolidated form might have had some points of advantage. Being an autocracy, it would have at least given some chance to a benevolent despot to be better than the system and to ameliorate a little the conditions of the people, and that was something competition did not allow the capitalists to do."
"What do you mean?"
"I mean that under competition there was no free play whatever allowed for the capitalist's better feelings even if he had any. He could not be better than the system. If he tried to be, the system would crush him. He had to follow the pace set by his competitors or fail in business. Whatever rascality or cruelty his rivals might devise, he must imitate or drop out of the struggle. The very wickedest, meanest, and most rascally of the competitors, the one who ground his employees lowest, adulterated his goods most shamefully, and lied about them most skillfully, set the pace for all the rest."
"Evidently, John, if you had lived in the early part of the revolutionary agitation you would have had scant sympathy with those early reformers whose fear was lest the great monopolies would put an end to competition."
"I can't say whether I should have been wiser than my contemporaries in that case," replied the lad, "but I think my gratitude to the monopolists for destroying competition would have been only equaled by my eagerness to destroy the mo
nopolists to make way for public capitalism."
ROBERT TELLS ABOUT THE GLUT OF MEN.
"Now, Robert," said the teacher, "John has told us how the glut of products resulting from the profit system caused a competition among capitalists to sell goods and what its consequences were. There was, however, another sort of glut besides that of goods which resulted from the profit system. What was that?"
"A glut of men," replied the boy Robert. "Lack of buying power on the part of the people, whether from lack of employment or lowered wages, meant less demand for products, and that meant less work for producers. Clogged storehouses meant closed factories and idle populations of workers who could get no work--that is to say, the glut in the goods market caused a corresponding glut in the labor or man market. And as the glut in the goods market stimulated competition among the capitalists to sell their goods, so likewise did the glut in the labor market stimulate an equally desperate competition among the workers to sell their labor. The capitalists who could not find buyers for their goods lost their money indeed, but those who had nothing to sell but their strength and skill, and could find none to buy, must perish. The capitalist, unless his goods were perishable, could wait for a market, but the workingman must find a buyer for his labor at once or die. And in respect to this inability to wait for a market, the farmer, while technically a capitalist, was little better off than the wage-earner, being, on account of the smallness of his capital, almost as unable to withhold his product as the workingman his labor. The pressing necessity of the wage-earner to sell his labor at once on any terms and of the small capitalist to dispose of his product was the means by which the great capitalists were able steadily to force down the rate of wages and the prices paid for their product to the first producers."
"And was it only among the wage-earners and the small producers that this glut of men existed?"
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