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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. This kind of over-production, this glut of a particular commodity at a given place, has ever been, and ever will be common.

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 factories are practically found to have been built, too many coal mines opened, too many iron works erected. The demand is found to fall away from special causes —such as overspending, over-destroying, and the poverty ensuingfrom consuming more than is reproduced. Hence there is for a while real over-production, because the new works go on producing till they find themselves involved in ruinous loss. In true over-production the fault lies in the supply; eager producers have carried their operations too far. In over-construction, the fault rests with the demand which sinks below its previous level. These are phenomena of different kinds; they had better not be indicated by the same word.



CAPITAL leads us to Profit. Profit is the reward of the capitalist, whether in the shape of interest, or in the stricter sense, of that portion of the produce which accrues to the man who owns the business. Either with his own means entirely, or with the assistance of a lender, whom he must compensate for the service afforded by the loan, he supplies buildings, tools, machinery, materials, and the necessary maintenance of the labourers. Whether he does the work himself or whether he engages men to work under his direction, wages and profit must be provided. If he is workman and capitalist at the same time, the business must yield him reward for his labour, and further additional reward for the capital used.

The conditions under which continuous industry maintains itself are,

I. The capital engaged in the business must be replaced in full by the products; for no business goes on permanently at a loss. We have seen that capital is consumed in producing; capital is wealth; and there must be restoration of such wealth as is destroyed, not by enjoyment, but in creating other wealth. If that new wealth were not forthcoming, there could be no motive to apply any wealth to capital. Profit, which is reward, cannot begin till the replacement of the things con

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