Saturday, January 21, 2017
The cause of trade depression is really a simple one to understand. Highly developed Capitalism, while condemning the vast number of workers to a meagre standard of living, causes extraordinarily large incomes to flow into the pockets of a small section of the population (i. e., those who own the factories, the land, the railways, etc.). Most wealthy people have incomes so large that they do not spend anything like the whole amount. After having purchased all they need, often including luxuries of the most extravagant kind, they still have a large surplus that they seek to invest in profitable concerns.
But these concerns are in competition, each trying to sell goods more cheaply than the other. In order to maintain and, if possible, increase his profits, each employer tries to get from his workers a larger output at a smaller cost.
By means of labour-saving machinery and methods the same quantity of goods is produced by fewer and fewer workers, and displaced workers are constantly added to the army of unemployed. The unemployed man or woman, having only unemployment pay to spend, cannot buy as much as formerly. Thus buying is curtailed while all the time efforts are being made to increase production—a contradiction that is bound to result in over-stocked markets and trade depression. During a depression, this situation is worsened by wage reductions.
The depression shows itself, every few years, in the accumulation of stocks of goods in the hands of retail stores, wholesalers and manufacturers, farmers and others. While trade is relatively good each concern tries to produce as much as possible in order to make a large profit. It is nobody's business under Capitalism to find out how much of each article is required, so that industries quickly expand to the point at which their total output is far larger than can be sold at a profit. Quite young industries like artificial silk, soon reach the degree of over-development shown by the older industries. Goods such as farm crops, that are ordinarily not produced to order, but with the expectation of finding a buyer eventually, naturally tend to accumulate to a greater extent than those produced only to order—such as railway engines.
As traders find it more difficult to sell, they reduce their orders to the wholesalers, who in turn stop buying from the manufacturers. Plans for extending production by constructing new buildings, plant, ships, etc., are cancelled and the workers are laid off.
The reduced income of the workers and of the unemployed reduces still further the demand for goods. In desperate need of ready money to pay their bills, retailers, wholesalers and manufacturers are driven to sell their stocks at lower and lower prices—often at a price less than the original cost price. Workers, for the same reason, are forced to offer to work for lower wages. It is not that there is any lack of money, but that the rich who have it can find no profitable field for investment. The economies that are made in a time of depression—whether voluntary ones, or economies enforced on the workers by wage reductions, actually aggravate the crisis instead of relieving it.
The problem of “over-production” that is behind every crisis is always relieved in due course for a time. Employers close down production and thus stop the stocks from being added to. Governments tax the employers and with the money so obtained enable the unemployed to buy a certain amount of the accumulation of articles. Capitalists combine, with or without the assistance of Governments, to destroy stocks. At the beginning of 1932, Brazilian coffee was being burned, thrown into the sea, and used for fuel. Wheat was being burned in Canada and U. S. A., and a resolution was passed by the United States Senate recommending that the U. S. A. Government hand over to the unemployed the 40,000,000 bushels of wheat held by the Farm Board. In addition, in site of every care, great stocks of raw materials deteriorate and spoil. As a last resort there is the colossal destruction of wars to relieve pressure. Sooner or later, these crises of over-production have always given place to a resumption of fairly brisk trade and employment, without, of course, abolishing unemployment. Capitalism cannot do that.
The lesson to be learned is that there is no simple way out of Capitalism by leaving the system to collapse of its own accord. Until a sufficient number of workers are prepared to organise politically for the conscious purpose of ending Capitalism, that system will stagger on indefinitely.
(From our pamphlet 1932 Why Capitalism Will Not Collapse)