As the year 1873 marks the outbreak of the crisis, so the year 1S76 serves to mark the lowest point in the subsequent depression. The whole story of the crisis. its antecedents and results, is succinctly told in the statistics of bus.iness fail ures. as reported by R. G. Dun & Co., as follows: Every crisis, panic. and depression is marked by analogous characteristics. Whatever data are appropriate to show expanding conditions and an inflated condition of business at any particular time and place will exhibit a shnilar showing. In the United States, particularly since 1840, railroad construction has been a favorite index of conditions, but before the crisis of 1837 similar activity was shown in canal construction. Before the panic of 1825, in England. there were large investments in manufacturing establishments, while the panic of 1893 was preceded by reckless investments in foreign countries.
A period of depression cuts down the existing stock of goods, and the retrenchment of produc tion, coupled with the constant increase of popu lation. creates a void in the market. To fill this there is a renewed activity; as prices begin to rise. existing plants find it difficult to meet the demand. Plants are remodeled and extended. Preparation for future production on a large scale takes place. Large investments of fixed capital are made in buildings, machinery and the like, and those branches of industry which chiefly serve the purposes of construction, such as the iron industry, make extraordinary advances. Mills and railroads arc built to supply an anticipated demand. This is usually overdone, and the facili ties of production increase more rapidly than the effective demand for products. Credit is unduly expanded, and it is natural that the money markets feel the first shock when the inevitable readjustment takes place.
While the phenomena of a crisis and its at tendant consequences are generally recognized. the widest variety of opinion exists as to the causes of sneh economic disturbances. Writers are prone to lay stress upon local or temporary conditions, and to generalize from them. In truth, the phenomena of a crisis are so complex, and the conditions which may aggravate it so numerous, that it is not surprising to see the latter considered as primary causes. Thus, specu lation, the currency, the tariff, bad harvests, have all been made responsible for crises. These are frequently concomitant forces impelling a crisis, but crises are so numerous that there must he some deeper underlying cause. It has already been noted that panics are most severe in the most advanced and most rapidly developing coun tries. They are apparently an incident of a
changing economic organization. Stationary nations do not feel them. A change in the eco nomic organization of a nation is not the result of plan, hut the resultant of individual initiation in trade and industry. The adoption of new machinery. of new motive power. and new means of communication displaces the old, and renders sonic portions of capital useless. This waste of capital, and its absorption in enterprises not im mediately remunerative, disturbs the normal rela tions of capital to employment and causes crises. We come, in short, to the conclusion that crises are caused by a lack of coincidence in the laws of growth. of production, and consumption. Changes in the former are rapid. those of the latter slow and gradual. Production is always prone to ad vance more rapidly than consumption. This proposition seems at variance with accepted theories of political economy, but in reality it harmonizes with them. The struggle for existence which lies at the root of economic life is a con test between Nature's limitations and potential consumption, which is unlimited. But concrete consumption and potential consumption are two different things. Indeed, we seem to be drawing near the familiar proposition that crises are caused by overproduction. This proposition has been vigorously opposed by those who have taken it in an absolute sense, and have revolted at the idea that production could ever outstrip man's needs. as implying man's incapacity for further development. But if we understand overproduc tion as a false distribution of products over a series of years in comparison with man's actual consumption, and a false choice of objects of pro duction in comparison with man's potential con sumption, we need not revolt at the statement that overproduction—along certain lines—is the cause of crises. Such a statement of the causes of crises seems to lack the precision which charac terizes the attribution of crises to definite phe nomena, but it must be remembered that the more complex the phenomena to be accounted for, the more general must, of necessity, be the cause to which they are ascribed.
BIBLIOGRAPHY. Consult the First Annual ReBibliography. Consult the First Annual Re- port of the United States Commissioner of Labor, on "Industrial Depressions" ]SSG) : Jones, Eco nomic Crises (New York, 1900) ; Burton, Finan cial Crises and Periods of Industrial and Com mercial Depression (New York, )902). The two works last named contain bibliographies of the subject.