THE ECONOMIC DISTURBANCES SINCE 1873. 581 



ments, new companies were formed, and so the produce of their manu- 

 facture was extended to such a degree that the prices went down and 

 the profits vanished." 



As prices fall and profits shrink, producers working on insufficient 

 capital, or by imperfect methods, are soon obliged, in order to meet 

 impending obligations, to force sales through a further reduction of 

 prices ; and then stronger competitors, in order to retain their mar- 

 kets and customers, are compelled to follow their example ; and this 

 in turn is followed by new concessions alternately by both parties, 

 until gradually the industrial system becomes depressed and demoral- 

 ized, and the weaker succumb (fail), with a greater or less destruction 

 of capital and waste of product. Affairs now having reached their 

 minimum of depression, recovery slowly commences. Consumption is 

 never arrested, even if production is, for the world must continue to 

 consume in order that life and civilization may exist. The continued 

 increase of population also increases the aggregate of consumption ; 

 and, finally, the industrial and commercial world again suddenly real- 

 izes that the condition of affairs has been reversed, and that now the 

 supply has become unequal to the demand. Then such producers as 

 have " stocks on hand," or the machinery of production ready for im- 

 mediate and effective service, realize large profits ; and the realization 

 of this fact immediately tempts others to rush into production, in 

 many cases with insufficient capital (raised often through stock com- 

 panies), and without that practical knowledge of the detail of their 

 undertaking which is necessary to insure success, and the old experi- 

 ence of inflation and reaction is again and again repeated. Hence, the 

 explanation of the now much-talked-of " periods " or " cycles " of 

 panic and speculation, of trade activity and stagnation. Their peri- 

 odical occurrence has long been recognized, and the economic principles 

 involved in them have long been understood. But a century ago or 

 more, when such a state of affairs occurred in any country, it was 

 mainly confined to such country, as was notably the case in John 

 Law's " Mississippi Scheme," or the English " South-Sea Bubble," in 

 the last century, or the severe industrial and financial crises which 

 occurred in Great Britain in the earlier years of the present century 

 and people of other countries, hearing of it after considerable inter- 

 vals, and then vaguely through mercantile correspondence, were little 

 troubled or interested. During recent years, however, they have be- 

 come less local and more universal, because the railroad, the steam- 

 ship, and the telegraph have broken down the barriers between na- 

 tions, and, by spreading in a brief time the same hopes and fears 

 over the whole civilized world, have made it impossible any longer to 

 confine the speculative spirit to any one country. So that now the 

 announcement of any signal success in any department of production 

 or mercantile venture, at once fires the imagination of the enterpris- 

 ing and reckless in every country, and quickly incites to operations 



