Crisis and Competition.
1.--Causes and Effects of the Crises.
The crisis arises because no standard exists whereby the real demand
for a commodity may at any time be measured and ascertained. There
is no power in bourgeois society that is enabled to regulate the
entire production. In the first place, the consumers of a commodity
are scattered over a wide area, and the purchasing ability of
the consumers, who determine the consumption, is influenced by a
number of causes that no individual producer is able to control.
Moreover, every individual producer must compete with a number of
other producers whose productive abilities are unknown to him. Each
one seeks to defeat his competitors by every means at his command:
by a reduction in prices, by advertising, by giving credit for
prolonged periods, by sending out drummers, and even by cunningly
and insidiously disparaging the products of his competitors, the
latter means being especially frequently resorted to during critical
times. The entire realm of production accordingly depends upon the
subjective discretion of the individual. Every manufacturer must
dispose of a certain quantity of goods in order to subsist. But
he seeks to sell a far larger quantity, for this increased sale
determines not only his larger income, but also the probability of
his triumphing over his competitors. For a while sales are insured,
they even increase; this leads to more extensive enterprises and
to increased production. But good times and favorable conditions
tempt not only one but all manufacturers to multiply their efforts.
Production by far exceeds the demand. Suddenly it becomes manifest
that the market is over-stocked with goods. The sales slacken, the
prices fall, production is limited. To limit production in any branch
means to decrease the number of workers employed in this branch, and
a reduction in wages, whereby the workers in turn are compelled to
limit their consumption. The inevitable result is, that production
and consumption in other branches slacken likewise. Small dealers of
all kinds, shopkeepers, bakers, butchers, etc. whose chief customers
are workingmen fail to dispose of their goods and also suffer want.
The effects of such a crisis may be seen from the statistics of the
unemployed that were compiled by the trade-unions of Berlin at the
close of January, 1902. In Berlin and suburban towns there where
over 70,000 persons who were entirely unemployed, and over 60,000
who were partly unemployed. On February 13, 1909, the trade-unions
of Berlin took another census of the unemployed and found that there
were 106,722 unemployed persons (92,655 men and 14,067 women).[204]
In England there were 750,000 unemployed persons during September
1908. These figures represent workingmen and women who were willing
and eager to work but unable to find work. The deplorable social
conditions of these human beings may be easily imagined!
Since one industry furnishes the raw material to another and one
depends upon the other, the ills that befall one must affect the
others. The circle of those affected widens. Many obligations that
had been entered upon in the hope of prolonged favorable conditions
cannot be met, and heighten the crisis that grows worse from month
to month. A heap of accumulated goods, tools and machines becomes
almost worthless. The goods are frequently sold underprice and
this often leads to the ruin of the owners of such goods as well
as to the ruin of dozens of others who in turn are compelled to
sell their goods underprice also. But even during the crisis the
methods of production are constantly improved in order to meet the
increased competition, and this means again forms a cause for new
crises. After a crisis has lasted for years and over-production
has gradually been removed by selling the products underprice, by
limiting production and by the ruin of smaller manufacturers, society
slowly begins to recuperate. The demand increases again, and promptly
the production increases also, slowly and carefully at first, but
more rapidly with the prolonged duration of favorable conditions.
People seek to reimburse themselves for what they have lost and
seek to secure their portions before a new crisis sets in. But as
all manufacturers are guided by the same impulse, as they all seek
to improve the means of production in order to excel the others,
a new catastrophe is ushered in more rapidly and with still more
disastrous results. Countless lives rise and fall like bubbles, and
this constant reciprocal action causes the awful conditions that we
experience during every crisis. The crises become more frequent as
production and competition increase, not only among individuals, but
among entire nations. The small battle for customers, and the great
battle for markets becomes increasingly severe and is bound to end
with enormous losses. Meanwhile goods and supplies are stored away
in masses, but countless human beings who wish to consume but are
unable to buy, suffer hunger and privation.
The years 1901 and 1907–08 have proven the correctness of this
representation. After years of business depression, during which
capitalistic development nevertheless continued to progress
uninterruptedly, the upward course set in, stimulated to no slight
extent by the changes and new equipments that the army and navy
required. During this period a tremendous number of new industrial
enterprises sprang up, and a great many others were increased and
expanded to attain the development made possible by their technical
means and to heighten their productivity. But in the same way the
number of enterprises increased that were transferred from the hands of
individual capitalists to capitalistic associations (stock companies),
a transformation that is always accompanied by an enlargement of the
manufactory. Many thousands of millions of marks represent the newly
formed stock companies. Moreover, the capitalists of all countries
seek to form national and international agreements. Trusts spring
up like mushrooms from the ground. These endeavour to determine the
prices and to regulate production on the basis of exact statistical
research to avoid over-production and reduction in prices. Entire
branches of industry have been monopolized in this way to the advantage
of the manufacturers and to the disadvantage of the workers and the
consumers. Many believed that thereby capital had obtained the means
that would enable it to dominate the market in all directions. But
appearances are deceiving. The laws of capitalistic production prove
stronger than the most cunning representatives of the system, who
believed to have regulated it. The crisis came, nevertheless, and it
was seen again that the wisest calculation proved faulty and that
bourgeois society cannot escape its fate.
But capitalism continues in the same manner since it cannot change
its substance. By the way in which it is bound to act, it upsets all
laws of bourgeois economics. Unrestricted competition--the alpha and
omega of bourgeois society--is supposed to place those most capable
at the helm of all enterprises. But experience shows that as a rule
it places those at the helm who are most shrewd and cunning and least
troubled by a conscience. Moreover, stock companies set aside all
individuality. The trust goes further still. Here not only does the
individual manufacturer cease to be an independent person, the stock
company too becomes a mere link in a chain that is controlled by a
board of capitalists whose main purpose is to plunder the public. A
hand full of monopolists become the masters of society; these dictate
the prices to be paid by the consumers for commodities, and to the
workers their wages and standard of living.
This development shows how superfluous private enterprise has become,
and that production conducted on a national and international scale
is the goal toward which society is bent. The only difference will
ultimately be that organized production and distribution ~will
benefit the entire community instead of benefiting the capitalistic
class only, as is the case to-day~.
The economic revolution above described, which is rapidly driving
bourgeois society to the heights of its development, is constantly
intensified by new, important events. While Europe is being more
threatened each year, both in its foreign and domestic markets, by
the rapidly growing North American competition, new enemies are
arising in the far East who make the economic conditions of the
entire world still more critical.
Competition drives the capitalist around the globe, as the Communist
Manifesto expresses it. He is constantly seeking new markets, that
is, countries and nations where he can dispose of his goods and
create new demands. One side of this endeavour may be seen from the
fact that since a few decades the various states are eagerly engaged
in colonization. Germany was foremost among these and succeeded in
taking possession of large tracts of land, but these possessions are
chiefly occupied by people of a very primitive degree of civilization
who have no demand worth speaking of for European products. The other
side of this endeavour is directed toward carrying capitalistic
civilization to nations who have already attained a higher degree
of civilization, but who until recently were rigorously opposed to
modern development. Such are the East Indians, the Japanese, and
especially the Chinese. These are nations that comprise more than
one third of the entire population of the earth. When once given an
impetus they are well able--as the Japanese have already demonstrated
during the war with Russia--to develop the capitalistic method
of production quite independently, and to do so, moreover, under
conditions that will be accompanied by disastrous results to the more
advanced nations. The ability and skill of these nations is well
known, but it is equally well known that their wants are few--due
to a great extent to the warm climate--and that, when compelled to
do so, they rapidly adapt themselves to changed conditions. Here
the old world, including the United States, is being confronted by
a new competitor who will demonstrate to the whole world that the
capitalistic system is untenable. In the meanwhile, the competing
nations, especially the United States, England and Germany, seek
to outdo one another, and all means are resorted to in order to
obtain the largest possible share in the control of the world’s
market. This leads to international politics, to interference in
all international events of importance, and in order to interfere
successfully, the navies especially are developed and increased as
never before, whereby the danger of great political catastrophes is
heightened anew. Thus the political realm grows with the realm of
economic competition. The contradictions grow on an international
scale, and in all countries that have undergone a capitalistic
development they bring forth similar phenomena and similar struggles.
Not only the method of production but also the manner of distribution
is responsible for these unbearable conditions.
[204] Unemployment and Statistics of the Unemployed in the Winter
of 1908 to 1909. Berlin, 1909.
2.--Intermediate Trade and the Increased Cost of Living.
In human society all individuals are linked to one another by a
thousand threads that become more complicated and interwoven with
increasing civilization. When disturbances occur they are felt by all
members. Disturbances in production affect distribution and consumption
and vice versa. A marked characteristic of capitalistic production is
the concentration of the means of production in increasingly large
factories. In distribution the opposite trait becomes manifest.
Whoever has been driven by competition out of the ranks of independent
producers, in nine cases out of ten seeks to win a place as dealer
between producer and consumer to obtain a living.[205] This accounts
for the surprising increase of persons engaged in intermediate
trade, dealers, small shopkeepers, hucksters, agents, jobbers, etc.
as has been statistically proven in a previous chapter. Most of
these persons, among whom we find many women independently engaged
in business, lead a precarious existence. Many, in order to subsist,
must cater to the basest fashions of their fellow-men. This accounts
for the tremendous prevalence of advertising especially in regard
to everything in connection with the gratification of the love of
luxury.
Now it cannot be denied that in modern society the desire for the
enjoyment of life is very noticeable, and viewed from a higher
standard this fact is gratifying. People begin to understand that
in order to be human they must lead lives ~worthy of human beings~,
and they seek to gratify this desire in the manner in which they
conceive the enjoyment of life. In the display of wealth society
has become much more ~aristocratic~ than in any former period. The
contrast between the richest and the poorest is greater than ever.
On the other hand, society has become more democratic in its ideas
and laws.[206] The masses demand greater equality, and since in
their ignorance, they do not yet recognize the means to achieve true
equality, they seek it in trying to ape those in superior social
positions and to obtain every enjoyment within their reach. Various
stimulants serve to gratify this desire and the results are frequently
detrimental. A desire that is justified in itself leads to devious
paths in many cases; it even leads to crimes, and society punishes
the perpetrators without changing matters in the least.
The growing number of persons engaged in intermediate trade has
led to many evils. Though the persons thus engaged work hard and
are frequently burdened with care, most of them form a class of
parasites who are unproductive and live on the products of the labor
of others as well as the employing class. An increased cost of
living is the inevitable result of intermediate trade. The price of
provisions is thereby raised to such extent that they sometimes cost
twice and three times as much as is obtained by the producer.[207]
But if provisions can not be raised in price any more, because a
further raise would limit the consumption, they are diminished in
quantity and quality, adulteration of food and the use of incorrect
weights and measures is resorted to. The chemist Chevalier reports
that among various articles of food he found the following number
of methods of adulteration: coffee, 32; wine, 30; chocolate, 28;
flour, 24; whiskey, 23; bread, 20; milk, 19; butter, 10; olive oil,
9; sugar, 6, etc. A great deal of fraud is practiced in the grocery
stores with goods that have been previously measured or weighed and
packed. Frequently only 12 or 14 ounces are sold for a pound, and
in this way the lower price is made up for. Workingmen and other
persons of small means suffer most from these fraudulent methods,
because they are obliged to buy on credit and must therefore hold
their peace even where the fraud is perfectly evident. In the bakery
trade also incorrect weight is frequently resorted to. Swindle
and fraud are inevitably linked with our social conditions, and
certain institutions of the state, for instance high indirect taxes
and duties, favor swindle and fraud. The laws enacted against the
adultery of food accomplish but little. The struggle for existence
compels the swindlers to resort to more cunning methods, and a
thoroughgoing and severe control rarely exists. Serious control is
also made impossible because it is claimed that in order to detect
every adultery, an expensive and extensive organization would be
required and that legitimate business would also be damaged thereby.
But wherever the control does interfere successfully, a considerable
increase in prices ensues, because the low prices were possible only
by means of adulteration.
In order to diminish these evils from which the masses always and
everywhere suffer most, cooperative stores have been established. In
Germany especially army and navy stores and civil service stores have
been developed to such an extent, that many commercial enterprises
were ruined by them. But the workingmen’s cooperative stores have also
developed tremendously during the last decade and have partly even
undertaken the manufacture of certain commodities. The cooperative
stores in Hamburg, Leipsic, Dresden, Stuttgart, Breslau, Vienna, etc.,
have become model establishments and the annual sales of the German
cooperative stores amount to hundreds of millions of marks. Since a
few years the German cooperative stores have central establishments
in Hamburg where the goods are purchased wholesale on the largest
scale; this enables the various branch stores to obtain these goods
at the lowest possible price. These cooperative stores prove that
the scattering methods of intermediate trade are superfluous. That
is their greatest advantage beside the other advantage that they
furnish reliable goods. The material advantages to their members
are not very great nor do they suffice to bring about any marked
improvement in their social status. But the establishment of these
cooperative stores proves the existence of a widespread recognition
that intermediate trade is superfluous. Society will ultimately
achieve an organization that will do away with commerce, since the
products will be turned over to the consumers without the aid of
other intermediate agents than are required by transportation from
one place to another and by distribution. When the common purchase
of food has been achieved, the common preparation of food on a large
scale appears to be the next logical step. This again would lead to
a tremendous saving in labor power, space, material and many other
expenses.
[205] “The decline of ancient handicraft is not the only cause
that accounts for the great increase in the small retail trade.
The growing industrialization and commercialization of the country
notwithstanding its tendency toward manufacture on a large scale
always furnishes new ground for small businesses. Inventions that
create new branches of industry also cause the rise of new small
establishments for the distribution of these products. But the main
cause of the great increase in retail trade is,--as expressed in a
report submitted to the government of Saxony by the Dresden chamber
of commerce,--that trade on a small scale has become the rallying
place of many persons who despair of making their living in any other
way.” Paul Lange--Retail Trade and Middle Class Politics. “New Era.”
[206] In his first adaption of Rau’s “Text Book of Political Economy,”
Professor Adolf Wagner expresses a similar thought. He says: “The
social struggle is the conscious contradiction between the economic
development and the social ideal of freedom and equality as expressed
in political life.”
[207] In his book on “Domestic Industry in Thuringia,” Dr. E. Sax
tells us that in 1869 the production of 244½ million slate pencils had
yielded 122,000 to 200,000 florins in wages to the workingmen, but
their final sale had yielded 1,200,000 florins, at least six times
as much as the producers had received. During the summer of 1888,
5 marks were paid for 5 hundred-weights of haddock by the wholesaler.
But the retailer paid 15 marks to the wholesaler, and the public
paid the latter 125 marks. Large quantities of food moreover are
destroyed because the prices do not make their transportation worth
while. For instance, during years when the catch of herrings has
been an over abundant one, loads of them have been used as manure,
while there were thousands of persons in the interior who could not
afford to buy herrings. The same occurred in California in 1892 when
the crop of potatoes was too abundant. When in 1901 the price of
sugar was very low, a trade paper seriously suggested to destroy a
greater part of the supplies so that the price could be raised. It
is well known that Charles Fourier was inspired to his ideas of a
social system because while he served as apprentice in a commercial
house in Toulon, he had been ordered to throw a load of rice over
board to raise the prices. He reasoned that a society which resorts
to such barbarous and irrational methods must be founded on a false
basis, and so he became a socialist.