Chapter LXXIV: Section CCXVI

COMMERCIAL CRISES IN GENERAL.--A GENERAL GLUT.

The greater number of such crises are doubtless special; that is, it is only in some branches of trade that supply outweighs demand. Most theorists deny the possibility of a general glut, although many practitioners stubbornly maintain it.[216-1] J. B. Say relies upon the principle that in the sale of products, as contradistinguished from gifts, inheritances, etc., payment can always be made only in other products. If, therefore, in one branch there be so much supplied that the price declines; as a matter of course, the commodity wanted in exchange will command all the more, and, therefore, have a better vent. In the years 1812 and 1813, for instance, it was almost impossible to find a market for dry goods and other similar products. Merchants everywhere complained that nothing could be sold. At the same time, however, corn, meat and colonial products were very dear, and, therefore, paid a large profit to those who supplied them.[216-2] Every producer who wants to sell anything brings a demand into the market exactly corresponding to his supply. (_J. Mill._) Every seller is _ex vi termini_ also a buyer; if, therefore production is doubled, purchasing power is also doubled. (_J. S. Mill._) Supply and demand are in the last analysis, really, only two different sides of one and the same transaction. And as long as we see men badly fed, badly clothed, etc., so long, strictly speaking, shall we be scarcely able to say that too much food or too much clothing has been produced.[216-3]

[Footnote 216-1: When those engaged in industrial pursuits
speak of a lasting and ever-growing over-production, they
have generally no other reason for their complaints than the
declining of the rate of interest and of the undertaker's
profit which always accompany an advance in civilization.
Compare _J. S. Mill_, Principles, III, ch. 14, 4. However,
the same author, I, 403, admits the possibility of something
similar to a general over-production.]

[Footnote 216-2: _Say's_ celebrated Théorie des Débouchés,
called by McCulloch his chief merit, Traité, I, ch. 15. At
about the same time the same theory was developed by _J.
Mill_, Commerce defended, 1808. _Ricardo's_ express
adhesion, Principles, ch. 21. Important germs of the theory
may be traced much farther back: _Mélon_, Essai politique
sur le Commerce, 1734, ch. 2; _Tucker_, On the
Naturalization Bill, 13; Sketch of the Advance and Decline
of Nations, 1795, 182.]

[Footnote 216-3: Precisely the same commercial crisis, that
of 1817 seq., which more than anything else led _Sismondi_
to the conclusion that too much had been produced in all
branches of trade, may most readily be reduced to _Say's_
theory.

There was then a complaint, not only in Europe but also in
America, Hindoostan, South Africa and Australia, of the
unsaleableness of goods, overfull stores, etc.; but this,
when more closely examined, was found to be true only of
manufactured articles and raw material, of clothing and
objects of luxury; while the coarser means of subsistence
found an excellent market, and were sold even at the highest
prices. Hence, in this case, there was by no means any such
thing as over-production. The trouble was that in the
cultivation of corn and other similar products, too little
was produced. There was a bad harvest even in 1816.

The most important authorities in favor of the possibility
of a general glut are _Sismondi_, N. Principes, IV, ch. 4,
and in the Revue encyclopédique, Mai, 1824: Sur la Balance
des Consommations avec les Productions. Opposed by Say in
the same periodical (Juilliet, 1824); where the controversy
was afterwards reopened in June and July, 1827, by
_Sismondi_ and _Dunoyer_. Compare Etudes, vol. I; _Ganilh_,
Théorie, II, 348 ff.; _Malthus_, Principles, II, ch. 1, 8.
Compare _Rau_, _Malthus_ and Say, über die Ursachen der
jetzigen Handelsstockung, 1821. _Malthus'_ views were
surpassed by _Chalmers_, On Political Economy in Connexion
with the moral State of Society, 1832. But even _Malthus_
himself in his Definitions, ch. 10, No. 55, later, so
defined a "general glut" that there could be no longer
question of his holding to its universality. For an
impartial criticism, see especially _Hermann_, Staatsw.
Untersuchungen, 251, and _M. Chevalier_, Cours, 1, Leçon,
3.]