CRISIS, ECONOMIC, a term em ployed to denote the succession of phe nomena, recurring at regular intervals in the industrial cycle, arising from disturb ances and general depression in business following a period of prosperity. This alternation of prosperity and depression has become so marked a feature of recent economic history as to wear the appear ance of a natural law, and, though the causes that lie at its foundation have not been fully ascertained, students of eco nomics have begun to look on it as an inevitable accompaniment of the existing industrial order. The course of the crisis has been so pronounced that its characteristics are easily described. There is first of all the current of pros perity with growing business and expan *on in industry and commerce, and then the period of uncertainty arising from the great increase in cost. A diminished volume of operations follows, with less demand for material and labor. So the decline of demand is felt in ever widen ing circles until the whole industrial world becomes sensible of the commer cial depression. A condition of general anxiety supervenes, in the course of which a catastrophe of some kind, the failure of a great mercantile firm, drags the depression to a lower level by bring ing down with it other firms having relations with it.
The repercussion is felt in many direc tions throughout the business world, con fidence undergoes a process of further demoralization, creditors call in their debts, debtors, however solvent, find it harder to get credit, and the whole sys tem of credit shows signs of crumbling. The demoralization may take on huge proportions and business may become almost stagnant. Then follows a period of quiescence, during which the psycho logical influences at work are apt to run their course. Then follows a general sense that the worst has passed, and since a state of quiescence 'becomes in time intolerable, the wheels begin to work again, and out of the depression confidence and credit begin to build their structure again. So the cycle runs its
course, the period of prosperity again being followed by a period of depres sion and disturbance, and this again having run its course, confidence and in creased production return.
Crises of the kind described are of course more rare than the disturbance regularly referred to in the press. There are crises of a less important kind, those leading to and resulting in panics in the money market. These do not always affect the commercial or industrial world in any appreciable degree. Of more import are crises having their intrinsic causes in the commercial and industrial world, for these last affect the actual wealth of a country, while a stock ex change crisis is apt merely to affect the symbols of wealth. A crisis in the in dustrial world generally betokens a period of hard times, which often extends itself, owing to the tightening of inter national relations, to several countries. A succession of bad harvests, for ex ample, would be quite apt to cause enor mous distress and dislocation of trade, with the result of successive periods of crises in different countries. One of the worst crises in the history of United States business was that of 1873. It exhibited in full-blown investiture all the characteristics of crises that have oc curred before or since, the great indus trial activity following the Civil War, the years of prosperity, the period of overconfidence, the sudden failures here and there of conspicuous landmarks in the mercantile world, the increase of other failures, the panic and decline, the stagnant condition, and then the gradual return of confidence and activity after the lowest point had been reached in 1876. The list of business failures in those years tells the tale.