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those equalizations.”
Unfortunately for practically all
of the exponents of the under-con
sumption theory of business crises,
none of their theories—unless it be
that of Hobson—will stand the test
of careful analysis. They are usual
ly shot through with economic con
tradictions. To point to only a few
of them: It never seems to occur to
Foster and Catchings that producers
and consumers are the same people.
The assumption of a sharp dividing
line between them is highly confus
ing. Sismondi, who is at best not
considered much of a scientist, avoids
that error when he says that un
balanced production concentrates the
demand on more refined articles in
place of ordinary things of life. The
glut thus caused by displacing
the demand for ordinary things by
the demand for refined articles being
the moving cause of crises. Accord
ing to Sismondi, therefore, the cri
sis is not the result of the failure of
consumer demand to keep pace with
production but rather the shrift in
consumer demand which causes wide
spread unemployment, and this in
turn causes a shortage of funds with
which to buy even the ordinary com
modities until there has been a new
price alignment. As is readily seen,
the Sismondi proposition is much less
subject to criticism.
Again, Foster and Catchings, al-
thougjh they comprehend fully the
function of money as a medium of
exchange—in fact they are intoxi
cated with that concept—yet they
lose sight of the other functions of
money. Especially is that so with
regard to money as a standard of
deferred payment and as a store of
value. Practically no recognition is
apparent of the distinction between
money and capital. The distinction
between the individual and social
concept of money is never clearly
indicated.
In their emphasis on the fallacy
of saving or “the delemma of thrift,”
Foster and Catchings are, however,
on different ground from that of
other exponents of ^he under-con
sumption theory of crises. Yet it
would appear that a better pre
sentation /hi the real delemma of
thrift is found in the works of Laud-
erdale., tl^e early 19th. century
Scotch economist. Lauderdale ex
plained that wealth is the result of
abundance whereas value is the re
sult of scarcity. Wealth and value
are therefore antagonistic to
each other If wealth should
reach infinity value would be at zero.
These contentions are irrefutable.
Now it is of interest to the producer
to have goods valuable, whereas it
is to the interest of the consumer to
have an abundance of wealth. As
long as our productive effort is
prompted by self interest we strive
for the creation of value, which
means that we are frequently in
clined to limit the production in
stead of striving for its increase.
Thriftyness, therefore, all too fre
quently means retardation of produc
tion rather than its acceleration. We
as consumers are hence invariably
held up by ourselves as producers.
The real problem of the road to plen
ty is to break through this impasse.
Lauderdale though't that the solu
tion could be found in the expansion
of public expenditures. The most
suggestive solution has been pro
vided by the anarchist, Kropotkin.
According to Kropotkin if mutual
aid could substitute for self interest
as a motive for human behavior, then
society would free itself of the de
lemma. If that could be done, of
course the problem would be solved.
Whether another way can be found
—one that will not involve the re
constitution of human nature—re
mains to be seen. The real delemma
of thrif is certainly to be found in
the contradiction that exists between
wealth and value. The road to plen
ty is certainly in the direction indi
cated by Lauderdale rather than in
that developed by Foster and Catch
ings. But it is a straight and nar
row road.
The attack made by Foster and
Catchings on saving offends our
common sense. The inaccuracy of
the fallacy of savings concept can
wf jC
tori
IV1 | LI-ION
A DAY
y
Delicious and Refreshing
PAmt Am
XCMUilRSlE ILF
THE FELLOW THAT SHOUTS,
"KILL THE UMPIRE’,’LOUDEST,
USUALLY WOULDN'T HURT
A FLEA. ORDINARILY HE’S
JUST GOTTEN ALL HOT AND
BOTHERED AND NEEDS
NOTHING SO MUCH AS AN
ICE-COLD COCA-COLA AND
THE PAUSE THAT REFRESHES.
Millions have lound
that this pure drink of
natural flavors, with its
delicious taste and cool
after-sense of refreshment,
makes a little minute long
enough for a big rest.
The one who pauses to
refresh himself laughs at
the overheated fellow.
The Coca-Cola Co., Atlanta, Ga.
YOU CAN’T BEAT THE
PAUSE THAT REFRESHES
I T
HAD
T O
B E
GOOD
T O
WHERE
best be seen by considering the func
tion of saving in the light of the dis
tinction between value and wealth.
Saving ig an impelling motive to
ward the creation of wealth. The re
sulting effect is to force the accu
mulation of wealth even though that
accumulation does at times conflict
with self interest. Each additional
increment of capital, whether cre
ated by individual or corporate sav
ings has to find investment. It the
supply of saving is increasing faster
than the demand for liquid capital,
the new capital has to find invest
ment at a reduced rate of interest.
This fact can mean only one thing,
namely, productive processes which
are less profitable—possibly could
not be brought into being at all—can
now be brought into existence. As
this happens values tend to fall and
wealth increases. If human judge
ment were infallible,, and if capital
could continue to increase, no other
result could possibly accure except
that every conceivable interest-bear
ing investment would finally be ex
ploited, and the fund of wealth
would reach a princely sum. This
tendency might be neutralized by the
growth of population po that the
amount per man might not be any
more. That is, the average wealth
might not increase. Furthermore, the
mere increase in wealth does not
necessarily mean that each individual
will necessarily automatically receive
a pro rata share. The problem of
assuring an equitable distribution of
the increase of wealth which comes
into existence through the increase
of capital is a baffling one. It can
not be done by any magician’s trick.
But be that as it may, fortunately,
or unfortunately human judgement
is not infallible, and population does
not increase and tends to neutralize
wealth accumulation. Yet these facts
are not the most significant obsta
cles to wealth increase. There is
an interest rate—the marginal rate
—below which the capital fund
ceases to grow larger. Man simply
will not save to any great extent
without reward.
,Were it not for complications
growing out of such forces as the
fallibility of human judgement, the
law of diminishing returns, and in
dustrial progress, there would come
into being—under the automatic sys
tem of control—an exact adjustment
of capital increase to the demand for
capital at the marginal rate. Con
ceivably at that state there would
be ah even flow of money from con
sumers to producers. Except for
differences in ability and personal
preferences wages would every
where be the same. Under those
conditions business crises would be
impossible. The problem of the
elimination of business crises is evi
dently, therefore, a composite one.
Although much can be done in the
direction jof eliminating the worst
features, it is hard to see how, as
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