CRISIS, ECONOMIC. A term employed by economic writers somewhat loosely to designate either the acute phase or the whole course of the disturbances in economic life which have charac terized the last century, and which have recurred with such frequency as to make them appear in evitable results of the modern industrial order. The phenomena involved are so complex that they must be described rather than defined.
The salient fact in the economic history of recent times is the alternation of prosperity and depression, of good times and bad. A period of prosperity with expanding business, great activity in production and commerce. is brought suddenly to a close, generally by the failure of a prominent banking house, bringing with it the fall of other financial and mercantile concerns. Business is paralyzed, creditors demand the payment of claims, and debtors find it next to impossible to secure the means of payment. Panic rules, and tor a time the whole mercantile structure threat ens to collapse. From such a shock business recovers hut slowly, its activity is reduced to the lowest ebb, and some time elapses before the restoration of confidence takes place. This period of depression is much more prolonged than the neuter phase which precedes it. After a time business revives and begins to expand. Prices rise and activity becomes greater. A wave of prosperity again appears which seems to carry everything before it until it, in turn, is checked suddenly, and a new crisis is at hand. Lord Overstone, in an oft-quoted passage. describes these successive phases as follows: "State of quiescence, improvement, growing confidence, prosperity, excitement, overtradMg, convulsions, pressure, stagnation, distress ending again in quiescence." In the absence of any general term to designate this related sequence of phenomena, the term crisis has frequently been used to embrace them all. Strictly speaking, it should doubtless be con fined to the acute stage when the collapse which has been slowly preparing actually takes place. In like manner, the term panic applies to the same movement, but expresses it more subject ively, emphasizing how men feel and act rather than the conditions which give birth to those feel ings and actions. But as we cannot well break
the sequence and discuss in isolated fashion one of its members, it will not be deemed inappro priate to discuss in this article crises, their ante cedents, and their consequences.
Crises are designated as financial, commercial, and industrial. These qualifying phrases mark the places in the economic organism where the disturbance is felt. In a purely financial crisis the stock market is the storm-centre. the dis turbance affecting but slightly •commercial or productive enterprises. A commercial crisis is of wider area, and embraces the trading classes, while an industrial crisis extends its baneful in fluence to producers in all lines of agriculture, manufactures, and the like. These expressions do not designate so much different classes of crises as crises of different degrees of intensity. inasmuch as an industrial disturbance will al ways imply disturbance in trade and the money market, while trade upheavals imply commotion in the money market, though a financial panic does not necessarily imply the others.
\\line crisis and depression are usually asso ciated, this is not always the case. Panic and crises may occur, and after a brief interval affairs may prosper as before. This is particu larly true of the purely financial crises. which are not deep-rooted enough to affect wider areas. The crisis in its larger sense, however, is invari ably followed by hard times. On the other hand, depression may occur without a panic. It is hardly correct to say that it is ushered in with out a crisis, for the phenomena, of such a period can usually be observed even if they lack the spectacular elements which so frequently accom pany them. It should be observed. moreover, that crises may be local or general. and while they have many points in common, it is particu larly the latter with which we have to deal.