works is repaid. The nation is poorer in things to use. The inevitable consequence is that there is less trade, for there is less to buy with, less to exchange, diminished traffics, fewer and reduced profits-precisely because there are fewer things, fewer goods in the country. This excess of creation of fixed capital-of capital, be it remembered, which is destroyed, and is not, for a long time, practically restored by wealth available for use— commonly follows a season of exceptional prosperity. Men are then hopeful, profits are good and abound, extension of business fascinates, trade is active, and demand for goods ever on the rise. At such times, as happened a few years ago, in the iron and coal trades, new works are commenced in profusion. All this while the consumption of the national wealth proceeds rapidly in maintaining many labourers and in the development of luxurious consumption in the fine weather of large profits; and it is followed by the consequences just described. Amongst these offenders none are so mischievous as railways; promoters, desirers of premium, stock-brokers, and many others, eagerly excite one another. The railway works are begun, and often the revulsion overtakes them before they are completed: the nation is stricken with poverty by their construction.

All these events react on the money market. The depositors of banks are unable to meet their calls; many fail, the others press for loans to save them from ruin. Deposits diminish; on many mercantile accounts, or bad bills, the banks incur heavy losses. Suspicion spreads in every quarter, as to what house is sound, on what bank a run may take place. Failures multiply

often amongst those who were the most favoured chiefs of financing. Then finally comes the crisis, which is in substance the settlement of losses, the discovery who are to be the ultimate losers, whether banks or individuals. When the agony has subsided, a long depression ensues; trade is painfully slack, from the reduced wealth in movement; bills are scarce in the banking world, and I per cent. becomes its king. The suffering reaches its height in those very trades which had been stimulated in the day of sunshine to multiply new works for enlarged production. The means of producing are found to be in painful excess above the power of buying, and shut-up mines and closed factories visit wages and profits with annihilation.

Such are the terrible calamities with which the construction of machines which are amongst the most enriching known to man may visit a people when carried to excess. A man with £50,000 a year who does £100,000 worth of draining in one year, must be poor and in difficulty. A single individual may borrow, but a nation which puts itself in that position has no resources beyond itself, and must suffer. Railways and other fixed capital are to a people what draining is to the landlord-most powerful instruments for obtaining wealth; but they cannot be constructed without great destruction of wealth involved in making them. It is long before they come into action to replace what they have consumed; meanwhile food, clothing, iron, coals, are gone. In this vital matter there is only one way to escape injury: not to make fixed capital beyond the amount of savings. Within that limit there is perfect safety, and such an application of surplus wealth

is excellent. Savings may be thrown into the sea, and no poverty will ensue; if converted into instruments for production they become permanent gains.

It may be asked, how is a people to learn the extent to which they may create fixed capital without loss? how are they to discover how much they are saving? No rule can be given; it is a matter of actual trial; it can never be ascertained accurately. But one influence may exercise immense power in guarding against the danger: a thorough understanding of the principle which governs this vital subject by all who take a lead in commencing new enterprises. If every banker, every trader, and every producer grasped firmly the truth that savings must not be exceeded by the nation, and profoundly felt the disasters which the neglect of this truth must entail, a spirit of caution and observation and prudent reflection would be engendered which would control extravagance in the costly investments on fixed capital. It is the temper of the industrial and commercial community that must be looked to for safety.

The depressions here spoken of have often been ascribed to over-production. That this is not unfrequently a cause of much trouble no one can dispute and it is very desirable to have an accurate conception of what is signified by the term. That it is possible to produce too many goods of a particular and definite kind is undeniable. This was an event which not many years ago was often seen in the Australian trade, and was exceedingly harassing to the merchants engaged in it. The several populations of the Australian States were small, and the markets consequently very limited;

there were no telegraphs to announce prices, and consequently mercantile ventures to those countries involved a large element of speculation. Hence at times the markets were over supplied, at others demand fell far short of being satisfied. Prices varied over the widest range. Beer fetched for a while incredible rates; then it would be almost unsaleable. The tidings of its exaggerated value led brewers to send from England barrels without number. The first to arrive yielded unexampled profits; the last involved the English brewers in the severest losses. Here was plainly over-production, and its cause manifest. The state of the Australian beer market could not be foretold with certainty; and the high prices current attracted brewers without number into brewing out of all proportion to the capacity of the market to carry away the supply. The mischievous force here was the ease with which a brewer in any town of England could make beer for Australia. kind of over-production, this glut of a particular commodity at a given place, has ever been, and ever will be

common.

This

But some writers have advanced further, and proclaimed that a general excess of all products was possible. Dr Chalmers believed that but for the luxurious consumption of the rich, and the destruction carried out by war, too many goods of every kind might be made, and their sale might become impossible. The absurdity of this doctrine has been pointed out by Adam Smith, Mr Mill and many others. It is equivalent to saying that there can be too much wealth; that mankind are rich enough already; that they possess as much as they desire. The limitation of trade

comes not from men having all that they wish for, but from their having nothing to give in exchange to producers for the articles they make. A glut of any single commodity may easily happen, either because only a very small quantity of it can be used, or, which is the ordinary case, because the means of purchasing it are limited. A haunch of venison might be sent into London for every one of its families. There would be a prodigious glut, not because there was a deficiency of desire for it, but because there was a great defect of other things to give in exchange for it. Let those other things be made and provided, and all the venison would be readily sold. The trade of the world might be multiplied a thousandfold, if only there were the means of producing and exchanging. Trade is exchange, and there cannot be general over-production if there are things to be exchanged.

It is contended, however, that an excess of fixed capital, such as has been described, is in substance a case of over-production, and so it is in reality. But it is very desirable that this name should not be diverted from the specific meaning which has hitherto been appropriated to it; only confusion can arise from using the same word needlessly under very different circumstances. Over-production properly denotes a speculative supply of goods, intentionally made, beyond what it is subsequently found the demand in the market can take off. The makers overdo the thing. In the case of a great commercial depression following a period of excited prosperity, the evil result is that a large amount of fixed capital, of machinery for production, passes into the state of over-construction. Too many mills and