The ruinous consequences of gluts, in particular staples of trade and manu facture, are too well known, especially in this country, to require any further illustration ; but their causes are not always agreed upon. Such gluts are often attributed to the facility with which manufactures are produced by machinery, but we have shown that over production in all branches of industry is impossible, and if that be true, it is evi dent that when partial gluts are produced by the aid of machinery, that powerful agent must have been misapplied. It is not contended that nothing can be pro duced in too great abundance. Whether machinery be used or not, production must be governed by the same laws of demand and supply. Those things only must he produced for which there is a demand, and they must not be produced in greater abundance than the demand warrants. But the more generally ma chinery is used, the more abundant will be the products which men will have to exchange with each other, and therefore the better will be the market. It follows that machinery can only cause a glut when applied excessively to particular objects, precisely in the same manner as an excessive quantity of labour would cause one if applied where it was not needed by the demands of commerce.
The supply of markets is a very specu lative business, and is often conducted with more zeal than discretion. When a particular trade is supposed to be more prosperous than others, capitalists rush into it in order to secure high profits ; and in this country the abundance of capital, the perfection of our machinery, and the skill of our workmen, enable them to produce with extraordinary facility. Over-production in that particular trade is the consequence, and all engaged in it suffer from the depreciation in the value of their goods ; but if, instead of rushing into the favourite trade, they had distri buted their enterprises more widely, their own interest and that of the community would have been promoted. When a
ship is wrecked, if all the crew precipi tate themselves into one boat, they swamp it ; but if they wait till all the boats are lowered, and apportion their numbers to the size of each, they may all reach the shore in safety. And so it is in trade : one trade may easily be glutted, while there is room in other trades for all the capital and industry that need employ ment.
In proportion to the extent of the mar ket and the variety and abundance of commodities to be exchanged, will be the facility of disposing of the products of capital and labour ; and this considera tion points out as the most probable anti dote to gluts a universal freedom of commerce. When the free interchange of commodities is restricted, not only is a glut caused more easily, but its causes are more uncertain, and dependent upon unforeseen events. With the whole world for a market, the operation of the laws of demand and supply would be more equable, and the universality of the objects of exchange would make gluts of rare occurrence. The market would still be liable to disturbance by bad harvests, by errors in the monetary system, by shocks to public credit, and by war; but apart from these causes of derangement, de mand and supply would be adjusted, and the productive energies of all nations called into full activity.
(Adam Smith, Wealth of Nations, book i. ; M'Culloch, Principles of Po litical Economy, part i. ch. 7, and part ii. ch. 1, 2; Malthus, Principles of Political Economy ; Ricardo, ch. 30; Mill, Essays on Unsettled Questions of Political Lconomy, Essay ii.)