r INDUSTRIAL DEPRESSIONS THEIR CAUSES ANALYSED AND CLASSIFIED WITH A PRACTICAL REMEDY FOR SUCH AS RESULT FROM INDUSTRIAL DERANGEMENTS OR IRON THE BAROMETER OF TRADE BY GEO. H. HULL NEW YORK FREDERICK A. STOKES COMPANY 1911 Copyright, 1911, by FREDERICK A. STOKES COMPANY All rights reserved, including that of translation into foreign languages, including the Scandinavian November, 1911 THE'PLIMPTON'PRESS [W D -O] NORWOOD. MASS U'S- A FOEEWOED EACH new occupation of mankind that has brought large increase to his rate of wealth- producing has, in time, developed some malady which has retarded its effectiveness, until he has discovered the nature of the disorder and acquired skill in overcoming or abating its ravages. In the great economic revolution which in a half- century has enabled the iron-producing nations to increase the products of their manufacturing and mechanical industries tenfold, a new malady, known as Industrial Depression, has developed and grown to serious proportions. As the malady of depression has progressed and increased in its direful effects, a great flood of un- tenable reasons have been assigned as its cause. These have so obscured and buried the real cause from sight that the people have not yet realized its nature. They looked for something external and mysterious, whereas the real cause was internal, and so simple and commonplace as not to be sus- pected. They looked for the cause among great and much talked of events or occurrences, the operation of which was in opposition to their own ideas, whereas the real cause was the voluntary action of a silent motive that existed within the breasts of each one of them, and that each unsus- pectingly contributed his share in making effective. They endeavored to solve the mystery by a synthetic method of reasoning, vvhich was useless, instead of 267362 vi FOREWORD by an analytical method which alone is effective in problems of this nature. In this book we have given an account of the analysis of all these alleged causes; we have separated the tenable ones from the untenable ones, have identi- fied and classified the real causes of each one of the serious industrial depressions which have occurred in modern times, whether they resulted from external or internal derangements, and have suggested a practical remedy for those which result from in- ternal derangements. CONTENTS PART FIRST CHAPTER I EVOLUTION IN THE OCCUPATIONS OP MANKIND PAGE Successive steps by which man has attained his present rate of wealth-producing, and the new maladies which have developed with each step 1 Conditions which limited man's growth in wealth up to the middle of the nineteenth century 4 Birth of the Manufacturing Age 7 Wonderful growth in wealth after the middle of the nineteenth century 8 Concerning the new Manufacturing Age 9 The most serious malady developed by the great increase in the manufacturing and mechanical industries 11 CHAPTER II ADVENT OF THE MALADY INDUSTRIAL DEPRESSION AND EFFORTS MADE TO DISCOVER ITS CAUSE Not at first recognized 13 Great diversity of opinion as to the cause when recognized .... 13 Efforts made to discover the cause 15 No recognition of its being a new malady 15 Completeness of the list of alleged causes subjected to analysis ... 16 CHAPTER III FINANCIAL PANICS VS. INDUSTRIAL DEPRESSIONS The respective causes of these two maladies 18 The differences compared 18 A panic need not cause a depression, and vice versa 20 The confusing effect of confounding the causes of these two maladies . 21 CHAPTER IV ANALYSIS OF THE THEORY OF OVERPRODUCTION Introduction and definitions 22 Is it possible for man to produce more than man is able to buy? . . 24 Is it possible for man to produce more than man desires to acquire? . 26 vii viii CONTENTS PAGE Temporary surplus production 30 Lesson to be learned from the facts illustrated 33 Illustrations of the wise method of utilizing temporary surplus pro- duction 35 Conclusions 41 CHAPTER V POOR CROPS PRESIDENTIAL ELECTION REACTION PERIODICITY "Poor crops." (With Table) 43 "Presidential Elections." (With Table) 49 "Reaction" 51 "Periodicity" 54 CHAPTER VI TURNING TOO MUCH CIRCULATING CAPITAL INTO FIXED CAPITAL A MENTAL DISEASE THE WORLD ALREADY PROVIDED WITH ECONOMIC TOOLS "Turning too much circulating capital into fixed capital" .... 58 The harm which comes from this and another false belief ... 58 Analysis of the facts about circulating and fixed capital .... 59 Illustrations 61 "A Mental Disease" 63 Prevalence of this belief in different forms 63 "The World Already Provided with Economic Tools" .... 64 Frequent recurrence of this belief. (M. Georges de Leveleye and M. Piermes quoted) 64 The late Hon. Carroll D. Wright quoted 64 The belief wholly untenable 65 CHAPTER VII MINOR ALLEGED CAUSES OF INDUSTRIAL DEPRESSIONS High and low tariff . 66 Those eliminated because they make business 67 "Large imports of goods and exports of gold" 67 "Large transfers of money" 68 "Influx of Foreign Capital" 69 "Immigration," "Coolie labor," "Convict labor" 69 "Bad laws," "Bad legislation" 70 "Want of confidence in Government" 70 CHAPTER VIII RESULT OF ELIMINATING THE UNTENABLE ALLEGED CAUSES The plan pursued in the process of elimination 71 The letters used in Appendices B and C to indicate for what reason, or reasons, each was eliminated 72 All but twenty-one of the alleged causes eliminated 74 CONTENTS ix PAGE Character of the first twelve 75 The next eight all point to one thing as the cause of these mysterious depressions 76 The remaining one is simply a confirmation of the last eight ... 77 The last nine comprise a complete list of what must be remedied to prevent the first twelve 77 CHAPTER IX IRON THE BAROMETER OF TRADE. CONTEMPORANEOUSNESS AND SEVERITY OP INDUSTRIAL DEPRESSIONS IN THE FIVE CHIEF IRON-PRODUCING NATIONS Introduction and table 79 Clues which point to high prices and particularly to the high price of iron and other construction materials as the cause of all the industrial depressions which are not the result of external causes . 80 Influence of iron production, or the lack of it, in all nations .... 81 Correspondence between the high prices of iron and industrial de- pressions 82 Influence of the price of iron on all business 85 Evidence of the prevalence of iron in all things 88 Iron the Barometer of Trade 89 Why the cause of industrial depressions has so long remained a mystery 90 PART SECOND CHAPTER X ANALYSIS OF THE NATION'S BUSINESS The four systems of business. Their limits. Their growth. Their independent and interdependent qualities 95 Three of the systems are limited in their increases and decreases. The industries are alone unlimited 98 How to search for the cause of these depressions 100 Where to search for the cause of these depressions 101 Construction the main thing which increases and decreases . . . 104 CHAPTER XI ANALYSIS OF CONSTRUCTION Necessity construction vs. investment construction 106 Investment construction increases the capacity of the country . . 107 Table 108 Purchases for immediate delivery vs. contracts for future delivery . 110 Result of delivery coming so long after demand .... . 115 Small benefit of boom prices realized by manufacturers of construc- tion materials 118 Table 119 x CONTENTS PAGE Premiums for immediate and discounts for future delivery materials 121 Cause of the abnormal advance in prices 122 What are the industries of a nation? 125 Where the responsibility rests 125 CHAPTER XII THE MOTIVE WHICH UNDERLIES THE INDUSTRIES, AND THE REAL CAUSE OP INDUSTRIAL DEPRESSIONS The motive which originates and carries on the industries . . . 127 Action of the motive hi stimulating investment construction . . 128 Action of the motive hi retarding investment construction . . . 128 The real cause of booms and depressions 129 Illustration of its practical effect upon individuals 131 Illustration of its effect on nations 132 It stimulates or retards the industries with equal consistency and certainty 134 Deductions which tend to the conclusion that high price of construc- tion is the one and only cause of these mysterious depressions . 134 If this conclusion be true, an analysis of each depression of modern times, in the five industrial nations, must show clearly that it was the result of an external and recognized cause or the result of high prices of construction 137 PART THIRD , CHAPTER XIII ANALYSIS OF THE INDUSTRIAL DEPRESSIONS FROM 1833 TO 1887 These six depressions were each the result of internal industrial derangement 141 The depression of 1836 to 1839 and panic of 1837 142 The depression of 1846 to 1848 144 The depression of 1855 to 1858 and panic of 1857 145 The depression of 1865 to 1870 147 The depression of 1872 to 1876 and panic of 1873 149 The depression of 1882 to 1885 155 Remarks relating to the six depressions described in this chapter . . 156 CHAPTER XIV ANALYSIS OF THE INDUSTRIAL DEPRESSIONS FROM 1887 TO 1897 These five depressions were each the result of external financial derangements 160 The depression caused by the Financial Panic of 1890 .... 160 The depression caused by the Financial Panic of 1893 . . . . 161 The depression caused by the Financial Derangement of April, 1894 162 CONTENTS xi PAGE The depression caused by the Financial disturbance following the Venezuela Proclamation in December, 1895 162 The depression caused by the Financial disturbance following the threatened abolition of the Gold Standard, in July, 1896 . . 162 Remarks relating to the five depressions- described in this chapter . . 163 The struggle between favorable industrial conditions and unfavorable financial conditions, between 1889 and 1898 164 CHAPTER XV ANALYSIS OF THE INDUSTRIAL DEPRESSIONS FROM 1897 TO 1908 REVIVAL, BOOM, AND DECLINE OF 1897 TO 1900 Introduction 166 The revival on low prices from 1898 to 1899 167 The spectacular advance in price of iron in 1899 169 The Boom in 1899 169 The Decline in 1900 170 The Disease breaks out upon the surface in 1900 171 REVIVAL BOOM AND DECLINE OF 1901 TO 1903 The Revival 173 Unquestioned effect of fluctuations in price 174 Sequence of events same as 1897 to 1900 174 Two object lessons in six years 175 REVIVAL BOOM AND DECLINE OF 1904 TO 1907 Introduction 176 The Revival 177 The Boom 180 The Decline 181 A depression would have occurred in 1908 even if there had been no panic 181 Condition of Industries in 1907 as shown by Building Permits . . . 183 Condition of Industries in 1907 as shown by Unfilled Orders of United States Steel Corporation 186 Conclusive Evidence that the industrial depression of 1908 would have taken place irrespective of the financial panic in 1907 . 187 PART FOURTH CHAPTER XVI DEDUCTIONS DRAWN FROM THE RESULTS OF ANALYSIS Can we gauge the probable length of a depression? 191 Nothing in the past indicates how low prices must fall to start a boom 192 xii CONTENTS PAGE Effective Demand 193 The Rock of Industrial Safety 193 Illustration of conditions which decrease prosperity 194 Illustration of conditions which promote prosperity 195 CHAPTER XVII MAGNITUDE OP THESE DEPRESSIONS AND DANGER THAT THE VALUABLE LESSONS THEY SHOULD TEACH WILL BE LOST The United States has experienced eleven of these depressions . . 195 A thorough analysis of any one would have revealed the real cause. . 195 Reasonable to believe they can be eradicated, if cause is located, realized, and a logical remedy applied 196 The twelve years from 1897 to 1908 show three distinct and vivid illustrations of the inexorable effect of high and low prices of construction 196 Unheeded Warnings 201 CHAPTER XVIII ANOTHER DANGER TO BE COUNTERACTED Cyclic Delusion No. 1 "Very High Prices Will Never Come Again " 203 Reasons for the mistaken belief 203 Table of Advances 204 Reason for believing they will continue to come 204 Misleading statistics The Awakening 206 Cyclic Delusion No. 2 "Prices Will Never Go So Low Again" . . 207 Table of Declines 208 Reasons for the mistaken belief 208 Conditions which carry prices down 208 The controlling forces 210 CHAPTER XIX Resume* 212 CHAPTER XX HOW CAN THESE MYSTERIOUS DEPRESSIONS BE PREVENTED ? THE REMEDY The Proposed Remedy 218 Object of the Proposed Remedy 226 Effect of the Proposed Remedy 227 APPENDICES 235-277 INDEX . . 279 DEFINITIONS OF WORDS AND TERMS AS USED IN THIS VOLUME At the outset it is important that the precise meanings of certain words and terms (as they are used in this book) should be clearly and definitely understood. The word Agriculture must be understood in its broad sense, that is, as including not only the cultivation of the soil, such as farming, gardening, floriculture, etc., but all the other occupations practised by a cultivator of the soil in connection with such cultivation, as, for instance, dairying, the breeding and rearing of stock, poultry, etc. The word Commerce must be understood in its broad sense, that is, as including the exchange of goods, products, or property of any kind; the trading or dealings in these, as well as the transportation of them from place to place or from seller to buyer. Also the transportation of persons from place to place. The word Finance must be understood as including everything con- nected with the function or operations of money or the various mediums of exchange used by the civilized peoples of the world, such as coin, bank- notes, checks, drafts, bills of exchange, etc., and the use and management of these by individuals, banks, governments, corporations, etc., in pay- ments, collections, expenditures, revenues, etc. The word Industries must be understood to include all the manufactur- ing and mechanical industries; but as this word has, by common usage in recent years, taken on a more specific meaning than formerly, some further explanation is required to make clear just what is included by industries, and what is excluded. Agriculture, for instance, has always been spoken of as an industry, but modern usage excludes what pertains to agriculture from a place under the term industrials. Under the head of the industrial nations of the world are included only the nations within whose borders the value of the products of the manufacturing and me- chanical industries exceeds the value of the products of agriculture. The agricultural nations are those within whose borders the value of the products of agriculture exceeds the value of the products of the manu- facturing and mechanical industries. Modern usage, therefore, accepts the word industries as something entirely apart and distinct from agri- culture, as it does something apart and distinct from the terms commerce or finance. Hence the word indvstries must be understood as including all the manufacturing industries, but those only, and as excluding every- thing which comes under the heads of agriculture, commerce, and finance. Manufacturing is defined as "forming of products by any process, whether by hand or by machinery," "working on or combining materials," "to form by labor into useful or desirable forms," "to make into some- thing." xiv DEFINITIONS OF WORDS The term Mechanical Industries is defined as, "the industries by which products are formed or manufactured by tools or by machinery into useful or desirable forms and conditions " and "effects produced by mechanical contrivances." The Products of the Industries must therefore be understood as including everything made or formed by any person, whether by hand or by machinery or by tools, as, for example, buildings, furniture, utensils, orna- ments, goods, machinery, highways, public works, railroads, pipe-lines, telegraph-lines, ships and all the other various vehicles, with their equip- ments and furnishings. Depression, in a business sense, is defined as, "a state of dulness or inactivity," "a protracted season when business falls below the normal." Industrial Depression must therefore be understood to mean a state of dulness or inactivity in the manufacturing and mechanical industries of the country; a protracted season during which the production of houses, furniture, stores, goods, factories, machinery, railroads, ships, telegraph- lines, roadways, gas-works, water-works, pipe-lines, etc., has fallen below the normal. It is the custom in iron-producing countries to speak of "stocks of iron" or "stocks of pig iron," meaning, in both cases, stocks of pig iron. When "production of iron" or "production of pig iron" is spoken of, however, it includes the production of both iron and steel, the latter being regarded as a secondary form of iron. These words and terms are used in this book in the above manner. INDUSTRIAL DEPRESSIONS INDUSTRIAL DEPRESSIONS CHAPTER I EVOLUTION IN THE OCCUPATIONS OF MANKIND AS long as man's efforts to provide himself with the necessities of life were confined to the hunting of wild game, he had few possessions. In this pursuit he was compelled to roam over vast territories, which gave him little opportunity to establish a permanent abiding- place, or become possessed of anything of value, except such things as he could carry about his person. The adoption of the pastoral life was man's first im- portant step toward the accumulation of wealth. As he grew skilled in the art of rearing and domesticating game, which he had formerly only hunted, his growth in wealth was accelerated. This new occupation enabled him to establish a home, about which he could gather and increase his flocks and herds. With this new occupation came new conditions, new responsibilities, and new dangers. As his flocks and herds increased, disease made its appearance among them, and he soon learned that the degree of success in this new occupation depended largely upon his being able to discover the nature of the maladies which retarded the increase of his possessions, and to acquire the knowledge and skill necessary to check their ravages. When man added the tilling of the soil to his occupa- tions, another important step toward the accumulation of wealth was taken. As this new occupation grew in magnitude, new conditions, new dangers, and new maladies 1 : e ight> eleven, ten, ten, ten, six, nine, eight, three, one, one, one, four, three, and four years respectively. Four times de- pressions have come one year after elec- tions; five times they have come one year before; six times they have come half-way between, and twice they have come on the same year. This shows neither sequence nor connection. The only noticeable fact revealed by the diagram is, that during this period of ninety-six years they have come on the same year only twice, as against four, five, and six times on the intervening years. When a presidential election affects the industries at all, it is either a short-lived effect, like the case of 1896, when the cause is known to every one, or it is so moderate in effect as to be fully covered by the com- mon remark, that they are "off years. " It seems quite apparent, therefore, that the long-lived and mysterious industrial depressions, which have occurred in the United States, have not been the result of presidential elections, and it must be even more apparent that presidential elections were not the cause of the contemporaneous depressions in the four other industrial nations. KEACTION Reaction is a spontaneous recovery from some forced and unnatural condition. A steel spring if forced out of its natural con- dition will react as soon as the force is removed; but from the natural flow of water downward there is no reaction. If 52 INDUSTRIAL DEPRESSIONS industrial prosperity is unnatural and industrial depres- sion is natural, or if the condition of a maximum number of citizens at work earning and producing wealth is unnat- ural and the maximum number of citizens idle is natural, then reaction might be claimed as a cause of industrial depression; but there is nothing in nature which points to idleness as a natural condition of the citizens of a civ- ilized community. Quite the reverse. Even in a condition of complete savagery, man must do some labor, for the spontaneous products of the soil cannot be enjoyed by him except through some exertion on his part. Wild fruits must at least be gathered, and if one would have clothing to protect him from cold, or shelter to protect him from the elements, he must labor to fit nature's products to his purposes. Barbarism, which is defined as "only one remove from the savage state/ 1 "only a little advance in industry and art,"* is attained only as a consequence of a greater amount of labor; while the highest state of civilization is only attained by the maximum amount of labor. Civilization is defined as the result of "the multiplication of the means of culture and enjoyment or progress and achievement; the lifting up of men mentally, morally and socially." f Every step of this progress and uplifting results from labor. Mental and muscular action and exertion, because they are natural, come with the first hour of the infant's life. Compul- sory idleness is a severe punishment at any age. We permit labor in our prisons, because it is considered inhuman and unnatural to compel human beings to idle- ness. It is natural for even the animals to work for them- selves and those of their kind dependent upon them. Civilization not only results from labor, but it increases the natural desire for labor. The United States is a civilized community, hence the normal and natural condition of an able-bodied American citizen is to be at work. He may not love the particular employment he is engaged in, but he wishes to work that he may be able * Standard Dictionary. REACTION 53 to earn and buy for himself and those dependent upon him. Idleness begets want, poverty, crime, disease, and all their resultant evils. It is natural for the normal man to shun these, and he works to escape them. Work begets plenty, comfort, wealth, honor, happiness, and health. These are what man desires for himself and those he loves, and it is natural for him to work to attain them. The degree of civilization attained by a nation is in exact ratio to the proportion of its citizens who are able to enjoy the natural desire for mental and physical work. In the year 1900, the United States had a popu- lation of about seventy-six millions, of which over twenty- .e millions were engaged in some gainful occupation, although there were at that date only about twenty-three millions of male citizens between the ages of fourteen and sixty. There was no law of man which compelled these people to work; it was the law of their natures. Broadly speaking, if any one of those twenty-nine millions of workers had lost the opportunity to work, his or her greatest anxiety and desire would have been to secure another opportunity. It is a mistake to believe that when all the workers are employed, production is being overdone and reaction must result. Maximum production is natural in a civilized community. There are, of course, " drones in every hive," but keep the industrial machinery free from the retarding influence of all external or internal derange- ments, and all the willing workers will be fully employed. We have had a century of object lessons to demonstrate this truth. We have witnessed a spontaneous recovery from every one of the industrial depressions of the past, after the retarding conditions were removed; but never until they were. A vigorous effort was made to bring back full prosperity in the latter half of 1909, but it was a failure; the retarding influences had not all been removed. You cannot force prosperity, but open the way for it and it will come of itself. The unsuccessful 54 INDUSTRIAL DEPRESSIONS effort made in 1909 to bring back full prosperity should prompt us to find out what retarding influence was block- ing the way. It is time that this false belief, that with all the bread- winners at work we can produce too much permanent wealth, should be exploded forever. This belief seems to be as common to-day as it was a hundred years ago, when the production of permanent wealth was limited to what could be produced by a small part of the 10 per cent, or 15 per cent, of the workers not required in agri- culture. During the last sixty years we have not only increased the percentage of manufacturing and mechan- ical workers probably 600 per cent., but by machinery have added vastly to their individual effectiveness. What would have become of the 14,500,000 breadwinners who were, in effect, released from agriculture during the last sixty years, if there had been any truth in the belief that there is a limit to the production of permanent wealth? The enforced idleness of a vast number of willing workers, with the suffering it brings to them, and the loss it brings to the whole community, is an unnatural condition and is contrary to the first principles of reason. When workers are thrown out of employment and deprived of the opportunity to work and earn, and when maximum production gives place to minimum production, it is not a spontaneous recovery from some forced and unnatural condition; it is an unnatural condition forced by some external or internal derangement. PERIODICITY The theory of periodicity in poor crops, financial crises, industrial depressions, wars, pestilences, earthquakes, and other occurrences in which a noticeable coincidence as to time of repetition has occurred, has for centuries had many advocates. Clement Juglar regarded the periodicity of ups and downs, crises and liquidations as an economic law, the action of which was more certain than the action of the law of supply and demand. PERIODICITY 55 The absurdity of these claims of periodicity as applied to industrial depressions is emphasized by the great diversity in the length of the cycles claimed by different persons for the same things, as well as the great variety of causes assigned for them by the respective advocates. There are ups and downs in many things, hence there is nothing remarkable in the coincidence of an equal interval of time elapsing between the occurrence of two wholly unconnected events, and, taking into consideration the natural desire for mystery, it is not surprising that these coincidences are seized upon and claimed by some one as the cause of a coincident depression. At one period we find seven years claimed as the time that intervenes between poor crop cycles; at another time a fourteen-year period seems to have taken a firm hold. In industrial depressions, ten years seems to be most generally claimed, while others claim the periods to be nine or eleven years. The theory of Mr. John Mills* was that the cycles of ups and downs came in periods of ten years, divided as follows: First. Three years of diminished trade, lack of work and falling prices. Second. Three years of active trade, slowly rising prices, and fair employment. Third. Three years of unduly excited trade and rapidly rising prices. Fourth. One year of crisis. Compare the above description with the length of periods in the table on page 50 and it will be found that although there were three periods in the ninety-three years between 1814 and 1907 when the intervals of time between industrial crises were ten years each, there were also three periods in which the intervals were one year each, three when they were four years each, two when they were three years each, two when they were eight * John Mills "On Credit Cycles and the Origin of Commercial Prices," printed in the Manchester Statistical Society Transactions for 1867-1868. 56 INDUSTRIAL DEPRESSIONS years each, and periods when they were six years, nine years, and eleven years respectively. Then compare the above description with Appendix Z and Appendix L and note how remarkably the description differs from the facts in all particulars. Instead of there being three three-year and a one-year division, the actual divisions range all the way from one to fifteen years. Then hi the second division of Mr. Mills, instead of being attended by slowly rising prices, the periods in question have, during the last 107 years, been almost invariably attended by slowly falling prices. See years 1870 to 1871, 1876 to 1878, 1888 to 1889, and 1896 to 1898. Then take Mr. Mills' third division. Instead of the period being three years of rapidly rising prices, the periods of rapidly rising prices are only from four to twelve months, and for the whole century average but eight and one half months. After the belief in cycles of uniform length had been so repeatedly discredited that it became unpopular, compound cycles of two or more interims of time came into vogue, the most notable of these being that of Benner,* in which he claimed that from 1834 to 1875 the intervals between the high prices of iron in the United States (which marked booms) had been eight, nine, and ten years, and the intervals between its low prices (which marked depressions) had been nine, seven, and eleven years. He also predicted that this order in its advance and decline would be continued hi the future, as he claimed it had been in the past. Mr. Benner's book made a marked impression at the time, as iron had al- ready experienced a three years' decline, during which it had dropped from $54 to $23 per ton for No. 1 Foundry hi Philadelphia. It was then below the cost of pro- duction, and iron men were confidently predicting an early advance; but iron continued to decline during the next two years, 1876 and 1877, as Benner had pre- dicted. This made a profound impression, and during * Benner's Prophecies, page 45. PERIODICITY 57 those two years it required several editions of his book to satisfy the demand. The following year, 1878, prices moved directly contrary to his prediction, and, although prices since that date have more often moved with his predictions than against them,* they have nevertheless been against them repeatedly, and the theory, like all other theories based upon periodicity, has been discredited. Suffice it to say, the periodicity theory, as a cause, has for three hundred years or more been harnessed to a great variety of phenomena, only to be found totally untenable after a practical time test. There is literally nothing in periodicity, as applied to the industries, except the simple fact that when the industries increase from their lowest point to their highest point, and in turn fall from their highest point to their lowest point, a period of time necessarily elapses. That lapse of time has probably never been exactly the same in two instances and probably never will be. If it should be, it would simply be a phenomenon or a coincidence, not a cause. Lightning and thunder are the phenomena of a storm, not the cause of the storm. * See diagram of Benner's Predictions on Appendix Z. CHAPTER VI TURNING TOO MUCH CIRCULATING CAPITAL INTO FIXED CAPITAL A MENTAL DISEASE THE WORLD ALREADY PROVIDED WITH ECONOMIC TOOLS MANY prominent authorities, particularly among bankers and economists, believe turning too much circulating capital into fixed capital to be one of the chief causes of the mysterious industrial depressions which come in the absence of any apparent cause. The mistaken beliefs upon this subject and the sub- ject of overproduction are probably the most harmful of all the popular delusions. The harm from the former comes chiefly from the banking community, when they look with alarm upon the large amount of money being put into construction of railroads, buildings, and other objects of fixed wealth and draw closer lines on loans for such purposes. By such acts they are unconsciously using the most effective means in their power to dwarf prosperity. The harm from the latter comes chiefly from the trades-unions through their mistaken belief that there is only a certain amount of work to be done, and that, by restricting the amount turned out by each worker, all will be employed for a longer time. How the mistaken theory that too much circulating capital was at times turned into fixed capital ever gained lodgment in the minds of men is hard to imagine. Per- haps it dates back to periods when it required nearly all of the workers to provide the necessities of life, and hi those days there were instances when a portion of those, whose labor was necessary to supply the necessities, gave their time to the production of permanent wealth. In such instances the volume of necessities was not suflfi- 68 CIRCULATING CAPITAL 59 cient for the maintenance of the people, and they were obliged to import food or suffer for the want of it. To say that men do not work for money, but for commodities, simply because they exchange money for commodities, and that therefore these commodities are circulating capital is ignoring important facts. Sometimes they exchange money for a hair-cut or a Turkish bath. Does that make hair-cuts and Turkish baths circulating capital? The persistent efforts of some economists to elucidate this false theory by denominating commodities as the circulating capital of a country, is simply prostituting science and distorting facts. It is going back to bar- barism in an attempt to illustrate civilization. It is even worse, for commodities were not circulating capital even then. They were nothing more than the materials of barter. When barter was the only means of securing something which was desired, it was because there was no circulating capital in existence. When circulating capital was introduced, something new was created. It was a step in civilization. It was a powerful and active something, and the revolution it has brought about in the exchanges of real estate, groceries, dry goods, etc., cannot be elucidated by setting aside actual circulating capital and borrowing groceries, dry goods, etc., as a substitute. When we see a great corporation preparing to build a railroad by collecting a huge quantity of flour, meat, molasses, etc., with which to pay its workers, we shall be ready to entertain the theory that commodities are circulating capital. ANALYSIS OF THE FACTS Real circulating capital (money and credit) performs such a large share of modern business, and its function is so different from that of any other thing, that one cannot illustrate modern business by substituting for it some- thing which has an entirely different function. When the business men of a nation prepare themselves for the 60 INDUSTRIAL DEPRESSIONS creation of great constructive enterprises, they do it by accumulating money or providing credit balances in banks. Part of this may be done by borrowing on their posses- sions. This is done more largely upon their buildings, railroads, ships, etc. (so-called fixed capital), than it is upon their groceries, dry goods, tools, etc. (so-called circulating capital). Commodities are actually no more circulating capital than are buildings and machinery. In order to analyze the theory that turning circulating capital into fixed capital is the cause of industrial depres- sions, we will suppose that Mr. A. has $1,000,000 in real circulating capital. He builds with it a block of residences. At the end of, say, twelve months he has completed and paid for them. Mr. A. has thus turned his circulating capital into so-called fixed capital. Mr. A. has the block of residences, and the circulating capital is in the hands of the people who furnished the labor, the materials, and the skill to erect the block of residences. If, when these workers received their pay, it was their custom to destroy it, there would be some reason for alleging this as a cause, but such a disposition of the cir- culating capital never occurs. Not one dollar of it is destroyed. It is simply transferred into other hands and is being circulated by them and others to whom it is in turn paid. The country at the start had only the capital; at the finish it has the capital plus the buildings. To illustrate further, let us suppose there are ten thousand Mr. A's in one community, not all building residences, but each producing something needed; the result would be business prosperity and growth of wealth in that com- munity. Imagine another community where the ten thousand Mr. A's are holding their circulating capital or paying it out only for the necessities of life, and you have a community suffering from industrial depression. In such a community there is absolutely no increase in wealth. Its inhabitants are simply existing, and at the end of one hundred years they will be no richer. Will any person claim that this action of Mr. A's in CIRCULATING CAPITAL 61 putting up the block of buildings was a drawback to the prosperity of the country, or imperilled its prospects in any way? Was it not better in every way that these workers should be employed and not idle? If they had remained idle, they would probably have continued to live; and to live, they must in some way have procured and consumed the necessities of life. If idle, they would have reduced the wealth of the country. As it was, they added to the wealth of the country. Would the erection of this block of buildings have intensified an existing de- pression, or have tended to create one which did not exist? When real circulating capital is transferred in payment for some fixed product, that capital is not deprived of any of its natural functions. The individuals who parted with it may, for the time, have parted with their individ- ual power to continue production, but the individuals who secured that capital acquired the power which the others lost. The power of the community to produce is as great as before, and it matters little into what class of the breadwinners' hands the capital falls, as in due time substantially all of it finds its way back into the regular channels of business, where it is again just as available as before. When an industrial depression comes, it is not because of any initial check to the production of the commodities which are included under the head of circulating capital. The stocks of vegetables, groceries, dry goods, furnishings, utensils, etc., which come under that head are usually abundant. It is because of the initial check to con- struction which comes under the head of fixed capital. This bugaboo about turning circulating capital into fixed capital is simply a delusion. The people who have turned most circulating capital into fixed capital have simply been most industriously employed producing wealth instead of wasting their time in idleness. Stop turning circulating capital into fixed capital and you stop growth in wealth. Pick out the town or city where there has been the least progress and improvement, and you 62 INDUSTRIAL DEPRESSIONS have the locality where there has been the least " turning of circulating capital into fixed capital." Pittsburg is the greatest iron and steel market in the United States, and one of the greatest centers of circula- ting capital. Why? Because of the large amount of cir- culating capital which in years gone by has been turned into fixed capital in the shape of furnaces, mills, and steel plants. It is the investments in fixed capital which draw business to any locality and hold it there. Wise invest- ments in fixed capital are the surest means of increasing the amount of circulating capital in any community or country. It is not necessary for the public to give one moment's thought to the production of necessary commodities or so-called circulating capital. That is a part of economics which takes care of itself almost automatically. There is, for example, no more intricate system connected with the supply of necessities than the production and placing of fresh, sweet milk upon the breakfast table of four millions of people in the city of New York three hundred and sixty-five mornings in the year, yet not one states- man or economist has been obliged to give an hour's thought to this intricate problem. The business has regularly grown with the demand. Reliable and regular demand prompts reliable and regular supply. But it is necessary that the earnest thoughts of the influential men of the nation should be given to the problem of putting an end to the unnatural and disastrous checks which are allowed to come to the production of fixed capital. Keep the production of fixed capital up to the maximum capacity of the country j and industrial depressions will not exist. Stated in different language, "turning too much cir- culating capital into fixed capital" means simply produ- cing too much permanent wealth and too little perishable wealth, which, as a cause of industral depressions, is wholly untenable. The true theory of the wealth of the nations, as well as of individuals, lies in the art of living upon the smallest amount of so-called circulating capital A MENTAL DISEASE 63 consistent with the well-being of the people, and creating the largest amount of so-called fixed capital. A MENTAL DISEASE Mr. N. C. Fredericksen, late Professor of Economics and Finance in the University of Copenhagen, was an enthusiastic believer in the theory that industrial depres- sions were "due to waves hi the minds of men," that they were the result of " mental process." He said: "I like to compare the movements of prices with the waves of the sea." In speaking of the great ups and downs of prices, he writes: "The total movement is formed from the mental situation of the human world, and it is this that has created sometimes a too high, sometimes a too low level of prices. When there is rather a regular alternation of economic excitement and depression, the real reason is that such an alternation seems to be a necessity for the human community." The same views seem to have been entertained by John Mills, Courcelle Seneuil, the French economist, and by William Langton, the Manchester banker. Vilfredo Pareto thought the mental waves a necessity to man, and compared them with the necessity of alternating temperature to plant life, in which even the daily changes must be kept up in the hothouse, without which the plants would die. When we realize that these are but a few of the many forms in which this aspect of the subject has been presented by intelligent men, we can appreciate the unlimited scope of the vagaries and wild fancies of the human mind. The increase and decrease of the industries are the direct effect of man's will, influenced by his judgment as to what he believes to be for his material interest. While it is true that his will is directed by his mind, that mental decision is no more the result of mysterious mental waves, when he wills to start or wills to stop an industrial opera- tion, than when he buys something he wishes if the price be reasonable, or goes away without buying if he consider the price too high. There is no more mystery in the man's 64 INDUSTRIAL DEPRESSIONS motive and act in connection with the industrial opera- tion, than there is in his motive and act in connection with the wished-for article. One is as natural and simple as the other. Both are purely business decisions governed by business motives. THE WORLD ALREADY PROVIDED WITH ECONOMIC TOOLS After each season of great prosperity in the nations, succeeded by a mysterious industrial depression, there comes a mistaken belief on the part of many that the in- dustrial nations are now so completely supplied with the tools and facilities of civilization that the future must necessarily be confined chiefly to maintenance and repairs. Georges de Laveleye, editor of the "Moniteur des Inte*rets Mat Uriels," of Brussels, in writing of the indus- trial depression which took place in Belgium and other European nations between 1872 and 1876, says, in effect, that the industrial activity of the last half-century has resulted in fully equipping the civilized countries of the world with economic tools, and the work of the future must necessarily be repairs and replacement, rather than new construction. M. Piermez, a prominent Belgian banker, in writing of the same period of depression and of the wonderful prosperity experienced by the civilized nations in the two or three years of prosperity just pre- ceding the period of depression then existing, says: "It is not likely that there will be again an economic progress comparable to that by which this century has changed the face of the whole world." The late Hon. Carroll D. Wright, formerly United States Commissioner of Labor, in his valuable report of 1886 on industrial depressions, calls attention to the fact that the Suez Canal had been built ; Amsterdam had been united to the sea; the Pyrenees and the Alps had been tunneled; the merchant marine had been transformed from wood to iron; harbors and rivers had been suffi- ciently developed; railroads in England, Belgium, France, Italy, Spain, Russia, Germany, Austria, Turkey, and the WORLD FINISHED 65 United States had been built; and he adds: "What is strictly necessary has been done oftentimes to superfluity, but it will not leave room for a marked extension, such as has been witnessed during the last fifty years, or afford a remunerative employment of the vast amount of capital which has been created during that period. The market prices of products will continue low, no matter what the cost of production may be. The day of large profits is past. There may be room for further intensive but not extensive development of industries in the present era of civilization/' * Now, these opinions were written by men who had rare opportunities of knowing their subject men of unusual ability and intelligence. In shrewd insight and correct- ness of conclusions upon industrial subjects, the writer has always placed Mr. Wright second to no man, and yet twenty years' additional experience shows that his and the other opinions upon this subject were utterly ground- less. Yet, how many would have disputed these opinions at the time they were written? When pig iron was $6.50 per ton in Alabama and $9 per ton in Pennsylvania in 1897, if any one had predicted that the same quality and grade of iron would sell for $25 and $27 per ton within five years, how many would have believed it? The theory that any boom will carry a nation to a point of completion in improvements, will be untenable until after that nation has passed its zenith and commenced to decay. "The tools and facilities of civilization" must increase with the growth of civilization in every progress- ing nation. * First Annual Report of the United States Commissioner of Labor, pages 256-257. CHAPTER VII MINOR ALLEGED CAUSES OF INDUSTRIAL DEPRESSIONS IN the United States, as well as in some other countries, public opinion is divided on the question of high and low tariff. Some believe that high tariff is largely or wholly responsible for our periods of business depression, while others believe that it is the chief cause of our periods of great prosperity. There is nothing in history to support either belief. The revivals of business have come when the tariff was high, and when it was low, and the depressions have done likewise. During a good part of the last century, the United States maintained high tariff, and the other four industrial nations low tariff, and yet the seasons of prosperity and of depression came to all of these five nations contemporaneously. In 1889 out of fifteen nations the United States was second in highness of tariff, while France was eleventh, Germany twelfth, Great Britain thirteenth, and Belgium fourteenth, and these are the five nations which have suffered most severely from industrial depressions. In the United States, between 1897 and 1907, the ups and downs of busi- ness were among the largest in history (see Appendix Z), and yet the tariff rates were the same throughout the whole period. The United States with high tariff, and Great Britain with free trade, have been the two nations which have suffered most severely from depressions and have suffered at substantially the same time. The prospect of early tariff change has undoubtedly had violent temporary effects upon imports, but these violent effects come from the ever-present and instinctive desire for gain. When a dealer knows or believes there will be an early advance in the duty on an article that he 66 OTHER ALLEGED CAUSES 67 imports, he will make extraordinary efforts to import a large quantity of that article before the advance goes into effect. A notable example was the increase in the duty on tin-plate. Between the passage of the law and the date on which the advance took effect, the demand from this country was so great that the Welsh mills were run to full capacity night and day, and towards the close of the period heavy premiums were paid for fast steam- ships to land cargoes in this country before the date the larger duty was to take effect. After this, the importa- tions of tin-plate ceased almost entirely. On the other hand, when a dealer knows or believes there will be an early reduction in tariff rates, he will put off imports of the goods affected, as far as possible, until the reduction has gone into effect. OTHER ALLEGED CAUSES Then there are a considerable number of causes for depressions alleged, which are untenable because they increase business, whereas depression is a decrease of business. Among this class are: " Large Importations of Goods and Exportations of Gold," " Large Transfers of Money," " Influx of Foreign Capital," "Immigration," "Coolie Labor," "Convict Labor," etc. Let us consider these briefly. If "Large Importations of Goods and Exportations of Gold" were a cause of depression in the United States, then they should have been a cause of prosperity in the foreign countries, such as England and France, both of which undoubtedly profited by the extravagance of our people; but these countries suffered from depression at practically the same time the United States did. Importations of goods and exportations of gold are simply exchanges of values. One person wishes certain goods more than the gold he possesses, the other wishes gold more than certain goods he possesses; each parts with something of value for something he considers of more value. To stop such exchanges would lessen pros- 68 INDUSTRIAL DEPRESSIONS perity or intensify depression. Examine our exports and imports for a hundred years, and it will be seen that the balance of trade was largely against us almost con- stantly during the first three quarters of the nineteenth century, in the most prosperous years, as well as in the most depressed, and almost constantly in our favor during the last quarter, during the most depressed years as well as the most prosperous. No connection can be demon- strated as having existed between this alleged cause and the industrial depressions of the last century in any of the industrial nations. If " Large Transfers of Money" brought industrial depression to the country which suffered the loss of the money, as many have claimed, then the payment of the immense war indemnity by Franca to Germany, in 1871 to 1873, should have brought industrial depression to France; whereas the depression which occurred in all the industrial nations at that period commenced in Ger- many several months before it did in France, and was much more severe in Germany. This transaction was an exceptional case, in that it was a transfer of money without a return of value. The actual result, as revealed by analysis, was perfectly logical, where the real cause of the mysterious industrial depressions is understood. The 5,500,000,000 francs poured into Germany stimulated the building of factories and other permanent improve- ments to a degree never before experienced. The capacity of the country not being sufficient to furnish the materials to supply this extraordinary demand, prices of construc- tion materials advanced enormously. This abnormal advance in prices brought a sudden and unexpected check to contracts for construction and in due time to actual construction; this threw large numbers of workers out of employment, and put the endless chain of depression causes in full motion. The war indemnity hastened and inten- sified the abnormal advance of prices in Germany, hence she was the first and the greater sufferer from the depres- sion which followed. In this case the large transfer of OTHER ALLEGED CAUSES 69 money was a powerful cause of industrial depression; but it did not come in the manner those who advocated this alleged cause imagine, but just the reverse. Large transfers of money are usually made in adjust- ment of large transfers of products. They are natural, they promote, they do not retard the industries. The large transfers of money from the cities to the agricul- tural districts to pay for the crops, and the retransfer of that money to the cities to pay for manufactured products, is a necessity to business; to stop it would almost certainly bring immediate depression. The transfer of money between nations in exchange for values is of the same necessary and healthful nature, and promotes the pros- perity of each. "Influx of Foreign Capital" is another promoter of business and therefore untenable as a cause of depres- sion. The unrestrained flow of capital from one place where there is a surplus, to another place where there is a deficiency, is not only natural but beneficial to both sections. It furnishes needed capital to the pioneers who carry progress to new territories, and yields a revenue to the older countries which supply it.* " Immigration," " Coolie Labor," "Convict Labor," and all like things, which in themselves add to business, a thorough analysis shows, cannot be maintained as causes of an industrial depression, for depression is a lessening of business. Additional laborers, from whatever source, may be detrimental to other laborers, when the supply exceeds the demand, but this condition should never exist. When the industrial system is understood and adequately con- trolled and directed, each additional worker will simply be understood to mean a larger increase in the rate of wealth-producing. * "It is at least evident,that in a country situated like the United States, with an infinite fund of resources yet to be unfolded, every farthing of foreign capital which is laid out in internal melioration and in industrial establishments of a permanent nature, is a precious acquisition." Alexan- der Hamilton, "Report on Manufactures" made to Congress, December 5, 1791. 70 INDUSTRIAL DEPRESSIONS "Bad Laws" and "Bad Legislation," like financial panics, may be a cause of industrial depressions, but when they have this effect it is a blow from the outside and is known. Take the Sherman Silver Coinage Law, for instance, passed in March, 1890; the working of this law was clearly the cause of the financial disturbance in 1893, and the financial disturbance had a disastrous effect upon the industries, but the cause was perfectly apparent, there was no mystery about it. What we are endeavoring to indentify is the mysterious and unknown cause which for generations has brought depressions contemporane- ously in all five of the industrial nations in the absence of any known or apparent cause. (See table, page 80.) It is altogether likely that all these nations have bad laws as well as good ones upon their statute books, and have had them through prosperous times as well as hard times, but we do not find that they have all had epidemics of bad laws contemporaneously to correspond in periodicity with the industrial depressions from which these nations have suffered contemporaneously. "Want of Confidence in Government" may also be a cause of industrial depression, or of financial panics, or even of a political revolution; but if it were of sufficient gravity to cause an industrial depression, it would be known, and therefore it must be eliminated from the list as a cause of the mysterious industrial depressions which are the subject of the present analysis. It is, in other words, not a known cause for which we are searching. CHAPTER VIII RESULT OF ELIMINATING THE UNTENABLE ALLEGED CAUSES IN old times, when one wished to designate a proposed task as impossible, or at least supremely difficult to accomplish, one would be apt to designate it by the homely but expressive adage, "You might as well hunt for a needle in a haystack." Now if a needle were known to be in a haystack, and the finding of it were of as much impor- tance as is the identification of the cause of these depres- sions to the manufacturing nations of the world, it would be possible to find the needle, provided the task could be accomplished in an exhaustive and analytical manner; that is, if in the search each straw composing the stack, from the top down, were carefully examined and analyzed, and, as the examination progressed, each straw found not to have the needle in or about it were removed. Of course, if the straws were allowed to remain after they had been examined, the task would be hopeless, for as long as the mass of straws remained to obstruct the view and distract the attention of the searcher there would be little chance of discovering the needle; hence the removal of the straws, after they are found to be free of the needle, is necessary to success. Just so with the search for the cause of these mysterious depressions. With the hundreds of alleged causes claimed by thousands of people constantly distracting attention, the task of distinguishing the real cause from the great mass has necessarily been almost hopeless; but if each alleged cause is removed after it is found to be untenable, it will then cease to distract the searcher; the view will be unobstructed, and, in the end, the real cause will 71 72 INDUSTRIAL DEPRESSIONS necessarily be identified, simply because it will be the only one remaining. In carrying out the experiment of eliminating from the lists of alleged causes gathered by the various govern- ment commissions and the Bureau of Labor * in the effort to discover and identify the unknown cause, the first and most important step is to eliminate everything connected with known and acknowledged causes, such as wars, earthquakes, floods, famines, financial panics, etc. This is particularly necessary in the case of everything con- nected with finance, not only because financial panics are known to be a cause of industrial depressions, and hence not among the unknown and mysterious causes sought for, but because the admission of financial matters by the searcher has for fifty years or more been the chief reason for the failures to identify the mysterious causes. In fact, financial influences are so numerous and are so fre- quently the known cause of depressions that they comprise a large part of the mass of " straws" which for these many years have obstructed the search and confused the searcher. No man can hope to fathom the mystery who allows his thoughts to stray in such a distracting field. It is the cuttlefish, which simply muddies the water and obscures the vision of the searcher. For these reasons, the prog- ress of elimination will be commenced by placing the letter "F" opposite everything connected with finance in the tables in Appendices B and C. In our analysis of the discoveries of the United States Commissioner of Labor, as to the contemporaneousness of depressions of the past, in the five manufacturing nations of the world, f such strong and persistent evidence was developed as to make it almost certain that these depressions were the result of something which occurred contemporaneously in all of them. When Chapter IX, which contains the analysis of this subject, is read, it will undoubtedly be admitted that all alleged causes which * Appendices B and C. t Chapter IX, commencing on page 79. RESULT OF ELIMINATIONS 73 occurred in one nation only, or were purely local in a natural sense, such as " Presidential Elections," "Na- tional Banking System," "Demonetization of Silver," "Refunding Act," etc., may be tentatively eliminated. To indicate which these are, we have placed the letter "A" opposite each in Appendices B and C. The United States Commissioner of Labor gives "Falling Prices" as one of the chief alleged causes of these depressions.* This is one of the alleged causes which has the strongest appearance of being true, but analysis shows that appearances, in this case, are totally deceptive. Full analysis will be found in Chapter XI, under the heading "Demand for Immediate Delivery vs. Demand for Future Delivery," commencing on page 110. To identify the untenable alleged causes which have received special treatment and are eliminated, either because they were found not to be causes of depression, or, when so, were known and recognized, and therefore are not the unknown and mysterious causes sought for, the letter "G" has been placed opposite each in Appen- dices B and C. As maximum production, maximum creation of buying power is hi itself industrial prosperity; nothing which contributes to the increase of business can be logically rated as a cause or contributory cause of industrial de- pressions, f Everything, therefore, which adds to business, whether great or small, may be eliminated as untenable, and so designated, by placing the letter "D" opposite each in Appendices B and C. We may also eliminate from the lists of alleged causes as untenable everything which exists continuously, in good times as well as in bad times, such as "Destitution Caused by Sickness," "Taxation," "Intemperance," "Tobacco," "Combinations of Capital," "Competition of Products in Market," "Patent Laws," "Educational * First Annual Report, 1886, page 79. t See page 41. 74 INDUSTRIAL DEPRESSIONS System," etc. To identify such as are eliminated on this ground, the letter "B" has been placed opposite each in Appendices B and C. We may also eliminate from the lists of alleged causes as untenable everything which affects individuals, or a collection of individuals only, and which does not affect the business of a nation as a whole; also such things as may be a loss to an individual, or a collection of individ- uals, but at the same time are a corresponding gain to some other person or persons, or to the government, such as " Taxes," "Land Grants to Corporations," "Unequal Division of Profits," "Unjust Taxation," etc. To iden- tify such as are eliminated on this ground, the letter "E" has been placed opposite each such alleged cause in Appendices B and C. Among the alleged causes of industrial depressions referred to at the close of Chapter II, which are too trivial to require any evidence to convince one of their untenable nature, are such as "Adulteration of Food," "Piece- work," "Neglect of Laboring Men by the Aristocracy," "Conspiracy Laws," "Free Passes," etc. These alleged causes may be dismissed as untenable on the ground that they are too unimportant to cause such a great revulsion as a widespread industrial depression. To identify such as are eliminated on this ground, the letter "C" has been placed opposite each in Appendices B and C. By reference now to Appendices B and C, it will be observed that all but twenty-one of the alleged causes have been eliminated for one or more of the six reasons, represented by the identifying letters A, B, C, D, E, and F, or by separate and special treatment identified by letter "G." The twenty-one not eliminated are as follows: 1. Want of Demand, 2. Decrease of Home Demand, 3. Want of Foreign Market, 4. Want of Market for Home Products, 5. Under-consumption, RESULT OF ELIMINATIONS 75 6. Decreased Building of Railroads, 7. Want of Employment, 8. Too many Non-producers, 9. Enforced Idleness, 10. Surplus of Labor, 11. Enforced Economy of the Laboring People, 12. Increased Public and Private Economy, 13. Want of Confidence, 14. Inflation of Prices, 15. Expanding Values, 16. Variation in the Cost of Production, 17. Variation in the Rate of Wages, 18. Reduction of Prices to Cost of Production, 19. Uneven Production, 20. Want of Adjustment between Production and Consumption, 21. Erroneous Industrial System. None of these can be eliminated on any of the tests thus far tried. The first twelve are found on analysis to be conditions of depression, and conditions which do not exist in any of the five industrial nations during a season of industrial prosperity. As long as the boom is at its height and all business is kept up to the maximum rate, there is no "want of demand"; no " decrease of home demand"; no "want of foreign market"; no "want of market for home products " ; no " under-consumption " ; no "decreased building of railroads"; no "want of employment"; no condition of "too many non-producers"; no "enforced idleness"; no "surplus of labor"; no "enforced economy of the laboring people," and no "increased public and private economy." It is only after the microbe of in- dustrial depressions has existed and been at work many months, and finally the malady has broken out upon the surface, that any of these twelve conditions appear in the five industrial nations. Then they appear in all of them, grow rapidly, and continue to exist in these nations, all through a period of industrial depression. When they cease to exist, depression has ceased to exist. In fact, they are the sum and substance of depression. We may, therefore, still further contract the field of our search for the mysterious cause, by eliminating these twelve alleged 76 INDUSTRIAL DEPRESSIONS causes on the ground that they are clearly conditions of depression, and hence not the cause of depression. To identify such as are eliminated on this ground, we will place the letter "H" opposite each in Appendices B and C. Before leaving these twelve conditions of depression, however, we must call special attention to their great importance. They are the links in the endless chain of industrial depression events. This chain is started by the reduction in active business. Then follows, in turn, reduction of production, reduction of employment, reduc- tion of earnings, reduction of expenditures, and reduction of demand; followed by a series of repetitions of this chain of events, each acting upon and intensifying the others, until the depth of depression is reached. What this means to the five nations can be imagined, when we remember that in this one nation the average earnings of each of its twenty-nine millions of workers is estimated at $600 per annum.* If five out of each twenty-nine of these workers are thrown out of employment, it means a loss at the rate of $3,000,000,000 per annum in the earnings of the people of this one nation. A careful examination of the six following alleged causes (13 to 18), which we have not been able to eliminate by any of the tests applied, shows that they can all be summed up in the one term, "High Prices, " which everything thus far points to as the cause of the mysterious industrial depressions under review. "Inflation of Prices" and "Expanded Values" (14 and 15), for example, are simply high prices expressed in different words, and the same may be said of the high, inflated, or expanded elements of "Variation in the Cost of Production" and "Variation in the Rate of Wages" (16 and 17). The reverse elements of 16 and 17, and "Reduction of Prices to Cost of Pro- duction" (18), are simply the natural rebound from high prices. It is these high, inflated, and expanded wages, values, and prices, when they have entered into production, which create the "Want of Confidence" (13), and it is * First Annual Report of the Commissioner of Labor, page 66. RESULT OF ELIMINATIONS 77 the want of confidence which tightens the purse-strings, and this in turn cuts down production, thus bringing on 11 Uneven Production" (19), and "Want of Adjustment between Production and Consumption " (20). While the boom is on, and maximum production is kept up, all materials which can be produced are quickly absorbed, and this is in effect a perfect "adjustment between pro- duction and consumption 77 ; but when production of buildings, ships, railroads, etc., falls off, the materials ordinarily used in these enterprises accumulate, and the perfect "adjustment between production and consump- tion" ceases. No one can deny that we have an "Erroneous Industrial System" (21). There could be no stronger evidence of this than the fact that our industrial system has for a century permitted these enormous fluctuations in the prices of the principal materials which enter into our growth in permanent wealth. First comes the period of abnormally low prices, under the stimulus of which con- tracts for production are made, which later on are found to be far in excess of the country's capacity to execute. Then follows as a natural consequence the, period of abnormally high prices, which checks the contracts for production to a degree which later on is found to reduce actual production far below the country's capacity to exe- cute. In these nine uneliminated alleged causes (13 to 21), we have a complete list of everything which requires to be remedied, to do away with and prevent the twelve condi- tions (1 to 12) which make up industrial depressions, as far as they are the result of internal microbes. If anything be needed to free this conclusion from doubt or uncertainty, it can be found in the fact that every industrial depression which has occurred in the five in- dustrial nations, not recognized as the result of some ex- ternal cause, has been preceded by the nine causes (13 to 21), and attended by the twelve conditions (1 to 12), which are the subject of this chapter, and by the further fact 78 INDUSTRIAL DEPRESSIONS that there has not been, during the century, a single case of an abnormal advance in the price of important com- modities which has not been followed by a depression. From these facts it would appear, that of all the alleged causes gathered by the three commissions appointed by the United States Senate and House of Representatives, and those gathered by the Bureau of Labor during the first year of its existence, together with those gathered from all other available sources, there is but one alleged cause which stands the test of all forms of analysis which can be brought to bear upon it. That one, ' ' High Prices," stands the test, no matter in what manner it appears or in what particular form of words it may be expressed. CHAPTER IX IRON THE BAROMETER OF TRADE CONTEMPORANEOUSNESS AND SEVERITY OF INDUSTRIAL DEPRESSIONS IN THE FIVE CHIEF IRON-PRODUCING NATIONS* IN the previous chapter our analysis of facts has indi- cated that high prices were the cause of industrial depressions in the United States from 1832 to 1884. Turning our attention now to the other great nations, which suffered most severely from industrial depressions during the same period, we are confronted with some remarkable corroborative evidence. The United States Commissioner of Labor, in the sum- mary of his first annual report, gives some data from analy- sis of the information gathered, which is of great value. First in importance is the fact that industrial depressions during the last century were most severe in Great Britain, United States, Germany, France, and Belgium, and were not felt to any comparable extent in other nations. Second, that the degree of severity in these five nations, as related to each other, was in the order above named, that is, most severe in Great Britain, least severe in Bel- gium, etc. Third y that industrial depressions were nearly or quite contemporaneous in these five nations. The following paragraph and table are taken from page 290 of said report : "It has been clearly shown that the depressions of the past in the manufacturing nations of the world have been nearly or quite contemporaneous in their occur- rence. Summarized as to dates, the following table is deduced:" * This is chapter and subject referred to on page 72. 79 80 INDUSTRIAL DEPRESSIONS YEARS OF DEPRESSIONS litotes ~~ ~" 1814 1818 1826 ~" 1837 1847 1857 1867 1873 1882 Britain 1803 181 1815 1818 1826 183 1837 1847 1857 1866 1873 1883 France 1804 1810 1813 1818 1826 1830 1837 1847 1856 1866 1873 1882 Belgium ______ 1837 1848 1855 1864 1873 1882 Germany _ _____ 1837 1847 1855 1873 1882 VALUABLE CLUES The above table of contemporaneousness of depressions in the five industrial nations gives several valuable clues. It indicates that the cause of these mysterious industrial depressions will be found: First. In something which took place in these five nations contemporaneously. Second. In something which did not take place, or did not exist to so great a degree, in other nations. Third. In something which occurred only, or existed only to so great a degree, in Great Britain and France, from 1800 to 1810. Fourth. In something which occurred only, or existed only to so great a degree, in Great Britain, France, and the United States, from 1811 to 1826. Fifth. In something which occurred only, or existed only to so great a degree, in Great Britain, France, the United States, Germany, and Belgium, from 1831 to 1883. Sixth. In something which occurred hi these five nations, as above noted, on or before the times they suf- fered from these various contemporaneous industrial depressions. Seventh. In something which, when it occurred, was always followed or accompanied by an industrial depres- sion in these five nations. Eighth. In something which did not exist, or which disappeared during the periods in which these nations experienced an industrial revival. Ninth. In something powerful enough to affect the volume of business in these nations to the extent that IRON THE BAROMETER 81 they respectively suffered during these industrial depres- sions. Tenth. In something which was not, at the time, recog- nized as a calamity, as would have been an external blow, such as a financial panic, famine, war or pestilence. Eleventh. In something internal, and inherent to the industries themselves. Twelfth. In something so slow, silent, and gradual in its action as to continue for many months without creat- ing alarm, yet so pernicious and powerful in its cumulative force as to produce disastrous industrial depressions in five nations, contemporaneously, and, frequently, during an entire century. Here is a rich and most promising field in which to make an analytical search for the unknown cause of industrial depressions, for in all these twelve conditions we should be able to find something in which these five nations are ranked together, even if we cannot find anything in which they are ranked in the same order in relation to each other. Note the fact that the table of contemporaneousness on page 80 places Belgium in a group with four great nations, while among the nations which are not included are several that outrank her not only in population and area, but in wealth, agriculture, and many other important things. The question that naturally arises is; why should this small nation be ranked with the United States, Great Britain, Germany and France, while Russia, Austria, Italy and Spain, which outrank her, in most of the important things, from 300 to 3000 per cent., are not even admitted to the group? Let us analyze this matter. In the 800 pages of Mulhall's Dictionary of Statistics are found exhaustive data upon all the important affairs which affect nations. In a thorough search through this volume nothing is found which even places these five nations in a group by themselves in anything connected with either agriculture, commerce, finance, population, area, education, wealth, banking, money, labor, wages, cost of food, mining or taxes (see Appendix H) ; while, on 82 INDUSTRIAL DEPRESSIONS the other hand, in the statistics connected with the indus- tries are found four cases in which the five nations are grouped by themselves, namely: Horse Power per Inhabitant. Coal Consumption per Inhabitant. Total Amount of Iron Production in the World from 1800 to 1900. Value of the Total World's Iron Production, from 1800 to 1900.* ADDITIONAL CLUES Here we have a remarkable and valuable clue, for if the mysterious industrial depressions of the last century were so much more severe in these five nations that it placed them in a group by themselves, and if there is nothing in all the affairs of nations which places them in a group by themselves, except conditions connected with the indus- tries, it would seem to be another indication that the cause of these depressions originated from within the industries, and not from anything outside. Pursuing the analysis further, it is found that only two things of the above four place these five nations in the same order as relating to each other which they occupy in relation to each other in the severity of industrial de- pressions. These two are, " Total Amount of Iron Pro- duction in the World, from 1800 to 1900," and "Value of the World's Iron Production, from 1800 to 1900." (See columns 60 and 61, Appendix H.) Here we have a clue which points to something connected with iron production, as in some way responsible for these industrial depressions, Pursuing the analysis further, it is found that for several centuries Great Britain and France were not only the chief manufacturing nations, but the chief producers of the world's iron supply, and that they maintained this position during the early part of the nineteenth century, when, as shown by the foregoing table, they were the only two nations which suffered severely from industrial * See columns 55, 59, 60 and 61, Appendix H. IRON THE BAROMETER 83 depressions. It is found also that, during the War of 1812, the United States was largely thrown upon her own resources for iron, and that by 1820 she was producing 110,000 * tons per annum, against 140,000 tons produced by France, and 400,000 tons produced by Great Britain; and that in 1814 the United States commenced to suffer severely from industrial depressions. It is found also that later on Germany and Belgium became large iron- producers, and that when this took place they, too, com- menced to suffer from industrial depressions. Although Russia, Austria, Sweden, Spain, and Italy are excluded from the list of five nations which suffered most severely from industrial depressions, it is found that most authorities mention Russia, Austria and Sweden as hav- ing suffered to some extent, while some few make casual mention of Spain and Italy as being slight sufferers. By referring to Appendix M it will be found that the five nations included in this second list were also iron-pro- ducers, though to a much smaller per capita amount. Now, by referring to columns 60 and 61, of Appendix H, it is found that the relative amount of iron produced by this second list of five nations, as compared with each other, was in the same order they are named at that time in relative degree of sufferers from depressions. This remarkable correspondence, between the rank of ten nations, in the production of iron, and their rank in the severity of industrial depressions, is of great signifi- cance. Such facts cannot be waived aside by calling them ten coincidences. Nor can the fact that these mysterious industrial depressions were entirely absent in the nations which did not produce iron be waived aside as another set of coincidences. The chain of connection between iron production and these mysterious industrial depres- sions is too persistent and continuous. But the chain of connection does not stop here. Iron is universally acknowledged to be the foundation of the mechanical and manufacturing industries. Where iron is produced, * Mulhall's Dictionary of Statistics, fourth edition, page 332. 84 INDUSTRIAL DEPRESSIONS there it is most largely consumed; where it is most largely consumed, there the industries are greatest, and where the industries are greatest, there the suffering which results from an industrial depression is most severe.* Do these remarkable, corresponding conditions not point unmistakably to the probability that the cause of these mysterious industrial depressions will be found within the industries which iron production created, and possibly in something immediately connected with iron? But still the chain of connection does not stop. In chapters XIII, XIV, and XV, will be found a perfect sequence, from the abnormal advance in the price of iron to all the corresponding industrial depressions which occurred from 1832 to 1908, which were at the time not recognized as the effect of some external cause. Here is something " within the industries/' and something " im- mediately connected with iron/' something, too, which existed in all the five nations immediately preceding each of these ten depressions, and which did not exist in these nations at other times. Furthermore, high price of iron, as will be shown hereafter in this volume, is the condition which is chiefly responsible for high prices of construction, and high prices of construction we claim to be the unknown cause of the " mysterious" industrial depressions from which the five industrial nations have suffered during the last century. To illustrate further the remarkable national and periodic conformity between industrial depressions and pig iron production, and the complete lack of conformity in everything outside of the industries, we give in Appendix H the relative rank of the nations in sixty of the most important matters. The dates used are either the date of the table of contemporaneousness (1886), or the nearest obtainable to that date. To illustrate the remarkable na- *Some pronounced changes have occurred since 1886 in the rank of nations as iron-producers. At the present time (1911) they stand as fol- lows: United States, Germany, Great Britain, France, Russia, Austria- Hungary, Belgium, Canada, Sweden, Spain, Italy. IRON THE BAROMETER 85 tional and periodic conformity between these mysterious industrial depressions and high prices of iron, we give in Appendix G a table showing the persistent sequence between high prices of pig iron and industrial depressions from 1825 to 1908. INFLUENCE OF THE PRICE OF IRON UPON ALL BUSINESS Now the advance in the price of iron which takes place during each boom, while it is but a small portion of the aggregate advance in the general prices of construction, yet it has a remarkable influence in bringing about the advance in labor and general construction costs. This is partly because iron is first to advance, partly because its advance is so great, and partly because the ups and downs in iron are so generally watched by those engaged in all the other industrial interests. Few people keep posted in the ups and downs in the prices of lumber, brick, stone, cement, etc., but nearly every one watches the price of iron. Even as far back as fifty years ago business men watched iron prices as an indication and guide as to what they could look for in the future of their own business. In the dark days of 1862 and 1863, when the United States was in the throes of the great Civil War, when business was confined almost exclusively to dealings in war supplies and the necessities of life, and when prices of all materials that entered into construction or perma- nent improvements were greatly depressed, there came a slow but persistent advance in the price of iron. Several of the important business men called upon a prominent iron firm in one of our large cities to inquire about this advance. They said in substance that they had found from long experience that such an advance, if maintained any length of time, was always followed by a great revival in business and an advance in all important staples, and if the present advance promised to be maintained, they intended to advance the price of their own commodities. These gentlemen were satisfied, from their interview, that the advance would not only be maintained, but that it 86 INDUSTRIAL DEPRESSIONS would probably continue and be very much greater. The result was that an immediate advance was made in the commodities dealt in by these visiting business men, and it was rapidly followed all over the country. If you wish quick action from a business man, show him how he can gain by the act. In all our investigations, we have never interviewed a dealer in the other commodities who did not acknowledge that he had watched the price of iron and been largely influenced in his own business by the pronounced fluctua- tions in this " Barometer of Trade." In an interview, the oldest and largest dealer in lumber frankly admitted to the writer that in his active business days he always kept close watch of the price of iron, and acted promptly and largely on its indications; and in later life, as he expressed it, "I always told my young men to buy heavily and sell sparingly when iron commenced to advance, and to buy sparingly and sell rapidly when iron commenced to go down." During the thirty-eight years in which the writer has observed the course of events attending each boom, iron has been the first important staple to develop a short supply, and the first to experience a large advance in price. This advance has sometimes been as much as 50 to 100 per cent, before any considerable advance has occurred in the other materials of construction. History does not show any instance in which there has been a large advance in the price of the other building materials before, or at the same time, that the advance occurred in iron, unless there was some unusual condition to cause it. The cause of the great advance in the price of iron has always been the same, namely, fear of a famine in its supply; there is never any such fear as to the supply of lumber, brick, stone, cement, etc.; hence these other materials do not advance when iron does. The extra demand for the other materials comes at the same time, and in the same proportion, that the extra demand for iron comes; if the conditions of supply were the same, they IRON THE BAROMETER 87 would undoubtedly advance in price at the same time, and in the same proportion, but this has never been the case. The advance in the price of iron has always been greater and has commenced a long time before the advance in the other materials. Does any one familiar with these staples believe that the prices of lumber, brick, stone and cement would go up 80 to 300 per cent, if the advance in the price of iron was confined to 10 or 15 per cent.? There is no such danger of a famine in the supply of these other materials. It is profitable to carry lumber for seasoning purposes, and the ordinary stock is equal to two or three years ' consumption, while the output of brick and stone can be doubled within a short time by simply doubling the workers in the quarries and brick-yards; but it takes a year to build an iron-furnace, and the stock of iron carried in the United States is rarely more than two or three weeks' product. Under these circumstances, whenever the demand for iron increases largely and quickly, say 100 per cent, within four or five months, it creates a vacuum which it is impossible to fill for many months, and in the ensuing struggle among the many consumers to get what little is produced over and above what is pledged by contracts, these enormous advances take place.* The advance of 100 per cent, in the price of iron is no reason for an advance in the price of the other building materials, it is only an excuse. The dealers in these other materials see the opportunity, and, being human, take advantage of it. The advance in iron is because of the absolute impossibility of supplying the demand; not so with the other materials. After the enormous building of 1899, the year terminated with a stock of iron equal to but three days' production, while the stock of lumber was equal to two years' production. No abnormal advance in the price of lumber, brick, stone, etc. has ever occurred or is likely to occur, without a preceding advance in the * The average stock of pig iron carried in the United States during the last twenty-five years was less than twenty-three days' product. 88 INDUSTRIAL DEPRESSIONS price of pig iron. Keep the price of iron within bounds, and you keep everything within bounds. Think of iron advancing from 80 to 300 per cent. ! Is it any wonder that the producers of lumber, brick, stone, cement, etc., try to realize some of this advance, and that they succeed? The same controlling influence seems to be almost as potent during the dull years, in which prices settle back to the abnormally low basis which stimulates another boom; that is, every one looks to see what iron is doing. Then, too, the large advance in iron at the beginning of a boom soon prompts the laborers engaged in iron- making to demand higher wages, and this movement spreads among all laborers. Thus the cost of production is raised inordinately hi all commodities. Broadly speaking, a boom in this country advances the price of iron from 80 per cent, to 300 per cent, within a few months, and usually advances the cost of producing it from 50 to 100 per cent, before the boom is over. This addition to cost is very serious in many ways, but the most serious feature about it is the long time it takes to effect a cure. It is made up, partly hi the advance of labor and partly in the advance of profits; both of these elements are in the hands of many people, and each one holds on to his extra pay, or extra profit, as long as he can, and so it nearly always takes a long time to get back to a basis low enough to stimulate another boom. It is only hi the iron-producing countries that these enormous advances in prices of building materials during what we call booms reach such proportions; hence it is only in these countries that the great set-backs in con- struction, which we call industrial depressions, reach such severity. PREVALENCE OF IRON IN ALL THINGS It may at first sight seem unreasonable to those not familiar with iron to place so much importance upon the influence of this one article; but think for a moment how IRON THE BAROMETER 89 thoroughly iron pervades everything. Look about you, out of doors or in, and try to find something which was produced by man without the aid of iron. It is used in nearly every stage of the production and preparation of the food we eat, in the manufacture of the clothing we wear, and in the construction of the houses which shelter us. The pipes which conduct gas, water, oil, and other substances under the surface; the ever-increasing network of rails which lie upon the surface, and the vehicles of war and peace, are composed almost entirely of iron. Each year it becomes more and more necessary to every enter- prise of civilized man. Withdraw iron from the manu- facturing and mechanical industries of a nation, and the whole business of that nation would become paralyzed. * When all these things are considered it is not surprising that iron has come to be known as "The Barometer of Trade. " It is not only the foundation of the industries, but the fluctuations in its price are so excessive and abnormal that they have a wonderful influence upon the prices of all construction materials. The excessive and abnormally high price of construc- tion answers every one of the twelve clues given on page 80, which indicate where the cause of these myste- rious depressions will be found. If iron is the foundation of the industries; if the indus- tries could not exist in their present volume without it; if these depressions occur only in the iron-producing na- tions, and hi their relative severity correspond exactly to the relative volume of iron production; if there is something about the production of iron which causes it to advance first, and to an abnormal degree; if these ad- vances have a marked influence in bringing about a corresponding advance in the price of other materials consumed in the industries; if the abnormally high prices thus developed are always followed by a depression even in the absence of other causes, and when all outward appearances indicate a continuance of prosperity; if these high prices have never been reached without one 90 INDUSTRIAL DEPRESSIONS of these depressions; if all the depressions of modern times can be accounted for either as the effect of some external cause, which is generally recognized and acknowl- edged, or is accompanied by this remarkable and persist- ent chain of connections and sequences between iron production, high prices, and severity of industrial depres- sions; and if hi all these years we find no other generally recognized cause for these depressions, then it certainly behooves us to turn our attention to a thorough analysis of the industries of which iron is the foundation, for within them must rest the unknown cause of these myste- rious depressions. How should this be done? WHY THE CAUSE OF INDUSTRIAL DEPRESSIONS HAS SO LONG REMAINED A MYSTERY Sir Conan Doyle has said that the reason many mys- teries remain so long unsolved is that nearly every one " reasons forward," whereas a reliable conclusion can be reached only by " reasoning backward." Most people, he explains, will take a train of events which has. passed under their observation, turn it over in their minds, and decide that these events are the cause of a specific result; this he calls " reasoning forward, or synthetically." He maintains that the only trustworthy and effectual way to solve a mystery is to begin with the result, and follow events back by analysis, in the reverse of the order of their happening. At the start you must give no thought or consideration to any past event, or chain of events, as being responsible for the result. You must start with the bare result, follow each clue back, step by step, to its inception, excluding and rejecting everything which does not stand the test of analysis. By this method you will evolve "a chain of logical sequences without a break or a flaw." This is what he calls " reasoning backward, or analytically." Industrial depression is a known result; what we are searching for is the unknown cause. If a competent chemist were employed to ascertain the ingredients of a IRON THE BAROMETER 91 certain compound, he would procure a sample of the com- pound, and proceed by analysis until he had separated each element from the others, and identified them. What would one think of a chemist, if, instead of proceeding hi this analytical manner, he should proceed in a synthetical manner, that is, procure a few hundred different sub- stances, and proceed to mix them together in several hundred different ways, in hopes of discovering which combination made up the compound? And yet, this is precisely the way the world for fifty years has been en- deavoring to discover the cause of industrial depressions. Synthetic reasoning will guide one in any path one chooses to go. Take, for example, the hundreds of wit- nesses who were called before the various government commissions to give their testimony as an aid in discover- ing the cause of industrial depressions in the United States (See Appendices B and C). Without exception, they apparently all arrived at their opinions by a course of synthetic reasoning. Almost as great a diversity of beliefs was revealed by the witnesses before the Royal (British) Commission, and the Commission appointed by the French Chamber of Deputies. The United States Commissioner of Labor, in his First Annual Report, issued in 1886 (page 76), says: "In search- ing, whether in Europe or America, for the cause of the industrial disease which has affected the manufacturing world since 1882, it is interesting to note how fully trade, profession or calling influence opinions given, " and further states that: "As a rule, one's opinion can be fore- seen by knowing his calling in life." Opinions are not evidence; they prove nothing, and would not solve this question in another fifty years. In reviewing the testimony given by hundreds of wit- nesses before the various government commissions in different countries, as well as the published works of indi- viduals, we do not find a single case in which the analytical method has been pursued. The First Annual Report of the United States Commissioner of Labor is a most valu- 92 INDUSTRIAL DEPRESSIONS able work. It contains many analyses of special things, and is a wonderful collection of valuable tables and in- formation upon the subject of which it treats, but it mentions no effort to solve the cause of these depressions by analysis, and even the summing up of the commissioner, commencing on page 291, under the title of " Causes/' is simply a very skilful effort to solve the mystery by the synthetic method, although it does not claim to have accomplished the purpose. It is, however, an admirable example of valuable knowledge, which required much special research to acquire. The collection of tables of facts and the compilation of opinions are material for the analyst, and to that extent help in the location of the un- known cause. Now the " known result" is Industrial Depressions; not the class of depressions that have been occurring for centuries, and which come to all the nations as a result of war, pestilence, famine, financial panics, or some other great calamity, which is known and recognized at the time to be the cause of the depression; but the new class of depressions which have developed within the last century, and that have occurred so repeatedly in the manufacturing nations in the absence of any recognized cause. This is the bare result. If we would know the cause or causes, we "must start with the bare result, and follow back step by step to its inception, excluding and rejecting everything which does not stand the test of analysis," in the hope that by this method we will evolve, as Sir Conan Doyle declares, "a chain of logical sequences without a break or a flaw," and that by this course we shall find that what has appeared "to be the greatest mystery may be a mat- ter of the most intrinsic simplicity." Let us first determine what relations the manufacturing and mechanical industries bear to the whole business of the nation. PART II ANALYSIS OF THE NATION'S BUSINESS CHAPTER X ANALYSIS OF THE NATION^ BUSINESS SUBJECTING the business affairs of the nation to ^-5 analysis, we find they are made up chiefly of four sys- tems, namely: agriculture, the industries, commerce, and finance. Broadly speaking, the agricultural system pro- duces the necessities of life; the industrial system pro- duces the materials of more permanent wealth; the commercial system transports and distributes the prod- ucts of both; while the financial system furnishes the medium for settling the bills of all. There is a limit to agriculture, and broadly speaking this limit is reached when the existing living beings are provided with food and clothing, or, hi other words, with what we may call the necessities of life. A much larger sum of money may be paid for the necessities at one period than at another, or by one person than by another, but still each being has but one stomach to fill and but one body to clothe. There is a limit to commerce; this limit is reached when it has distributed the products of agri- culture and the industries in accordance with the demands of the owners or purchasers. There is a limit to finance; this limit is reached when it has adjusted the bills and demands of existing business. On the other hand, to the industries, there is no known limit; for, as has been shown elsewhere in this volume, it is impossible to produce of the objects of permanent wealth more than man desires to possess or more than he is able to buy, and the products of the industries may be multiplied indefinitely within the borders of such nations as possess adequate deposits of coal and iron, and have the energy and intelligence to use them with wisdom. 95 96 INDUSTRIAL DEPRESSIONS GROWTH OF COMMERCE The growth of commerce during the last century is shown by the facts that there were at its beginning no railroads to carry products from the interior of the coun- try to the seaboard; no steam vessels to carry them from continent to continent, and no telegraph system for inter communication. Even as late as 1840 there were but 5,420 miles of railroads in the world. In 1850 steam vessels had a tonnage of but 1,000,000 tons, of telegraph lines there were but 5,000 miles, and of submarine cables but twenty-five miles; while in 1903 there were 500,000 miles of railroads, a steamship tonnage of 17,000,000 tons, land telegraph lines of 1,200,000 miles, and sub- marine cables of 200,000 miles. The commerce of the world, which was but $1,470,- 000,000 at the end of the eighteenth century, had in- creased to $20,715,000,000 at the end of the nineteenth century. The increase of the international commerce of the world was about: $1,000,000,000 in the eighty years between 1720 and 1800; $2,500,000,000 in the fifty years between 1800 and 1850, and $16,000,000,000 in the fifty years between 1850 and 1900. This wonderful growth in the commerce of the world came partly from the increase in the products of agriculture, but chiefly from the tremendous increase in the products of the manufacturing and mechanical industries. GROWTH OF FINANCE The growth of finance is shown by the commensurate increase in banking capital and facilities of the banking system. The banking capital of the United States 125 years ago was represented by the bank established by Robert Morris in Philadelphia with a capital of $400,000. In 1910 the capital, surplus, and undivided profits of the banking institutions of the United States amounted to $3,832,000,000, and this money only settles a small amount of the business of the country. Ninety-seven per cent, of ANALYSIS OF BUSINESS 97 international commerce is settled by bills of exchange; ninety-two per cent, of domestic trade by checks. This wonderful increase in finance was brought about partly by the increase in the volume of agricultural products, but chiefly by the increase in the products of the indus- tries, and the resultant growth in trade, and the trans- portation facilities necessary to distribute these products. INDEPENDENCE AND INTERDEPENDENCE OP THE FOUR SYSTEMS At the beginning of the century, one giant, agriculture, dominated and controlled all the other business interests of the country. At the close, four giants occupied the arena. It was the large growth of the industries which brought about the large and contemporaneous growth in both commerce and finance. On the other hand, the industries could not have increased as they did without an increase in commerce to distribute their products, nor could the industries and commerce have increased as they did with- out an increase in finance to adjust the bills of both. Yet, notwithstanding the complicated interdependence of the four great systems of business, they are, neverthe- less, four separate and distinct instruments, each propelled or retarded at times by its own independent forces. Each system embodies features which are individual and peculiar to itself. Each is radically different in its nature, purposes, and functions; each requires for its prosecu- tion different kinds of knowledge and skill; different plans, powers, and appliances; different organizations, acts, and operations. Hence any fundamental derange- ment which causes an increase or a decrease in the volume of one system is necessarily different from a fundamental derangement which causes an increase or a decrease in either of the other systems. The independence of these four systems, and their in- terdependence upon each other, may be compared to the alimentary system, nervous system, circulatory system, 98 INDUSTRIAL DEPRESSIONS and respiratory system of the human body. If a human being is suffering in consequence of a diseased condition of the alimentary system, no cure can be expected to result from a treatment of the respiratory system, nor can the whole body be in a healthy condition, unless all its parts are in a healthy condition. When the business of a nation is suffering, to effect a cure it is neces- sary to find out first in what particular system the malady is located. If this is accomplished it may be possible to discover the microbe of the disease, other- wise there is little hope of administering an effective remedy. Three of the business systems, as has been shown, grew from dwarfs to giants simultaneously. They not only attained nine tenths of their growth in one half- century, but in their progress and actions they were so intricately interwoven and dependent upon each other that any cause of disorder in one was not readily dis- tinguished from a cause of disorder in the others. It is extremely difficult to distinguish between causes and effects in one chain of events; how much more difficult to so do in dealing with four chains of events. LIMITS IN INCREASES AND DECREASES There is another feature connected with the limited quality of three of the business mediums, and the un- limited quality of the remaining one, which is also of vital significance. Agriculture, commerce, and finance not only have their maximum limits which cannot be exceeded, but they also have their minimum limits which must necessarily be maintained. The products of agriculture, being chiefly composed of the necessities of life, must be kept up to the standard volume of the people's necessities at any cost. The volume of supply cannot be permitted to shrink below this standard in the smallest degree. If any nation pro- duces a smaller volume of the necessities of life than is required, the deficiency must be made up by procuring a ANALYSIS OF BUSINESS 99 supply from some nation which produced a surplus, else the first-named nation must suffer. Commerce is not only limited to transportation and distribution in accordance with the demands of the people, but its facilities must necessarily be kept up to meet their necessities. It is not permitted to fall below this stand- ard. A like position, limit, and standard control the volume of finance. To the industries, however, there is no maximum limit nor minimum limit which must necessarily be main- tained. Its products are mainly the objects of permanent wealth, and, apart from the necessities, the mainte- nance of its volume is not a matter of life and death; hence it may fall off in volume to almost any degree, just as it may rise in volume to almost any degree. The unlimited possibilities of the industrial system are illustrated by its relative volume at the beginning and at the end of the nineteenth century (see page 9). At the beginning it required one person out of every five to produce clothing for the people. At the close, by the aid of machinery, one person could make enough for 250 persons. In 1888 the United States produced 600,000 sewing machines, which could do the work of 7,200,000 women. In 1880 there were 3,100 shoemaking machines at work, producing 150,000,000 pairs of shoes annu- ally.* And who will say that the maximum limit to the effectiveness of man's productive power by the aid of machinery has been reached? The unlimited character of the industries is vividly illustrated by the fact that the increase of wealth in the United States in the first four years of the present cen- tury was greater in amount ($18,500,000,000) than the entire accumulated wealth of the United States hi 1860 ($16,250,000,000). These facts all point unmistakably to the conclusion * In 1900 the capacity to produce had been increased to 400,000,000 pairs and the quantity actually made to 219,000,000 pairs. See "Boots and Shoes," The Americana. 100 INDUSTRIAL DEPRESSIONS that the cause of booms and depressions must be within the industries, where great increases and decreases in the volume of business can and do take place, and not in the other three business mediums, where increases and de- creases cannot take place to any comparable degree. The search for the cause of the mysterious industrial de- pressions should, therefore, be made within the industries. HOW THE SEARCH SHOULD BE MADE In searching for the cause of a disturbance in one of the business systems by analytic methods, the searcher should not only analyze the system apart from the other three, as a first necessity, but in the entire process of his investigation should carefully exclude from consideration any of the occurrences, functions, instrumentalities, or effects which were known to be permanently united as an element or an original quality of any of the other three. In other words, to detect the hidden internal cause, he must insure himself against complication by rigidly ex- cluding everything connected with known and external causes. Nature and natural laws are very much the same wherever you find them. The analogy between the work- ing of these laws on the human system and on the indus- trial system is very close. The disorders from which the human system suffers may be divided into two classes: those which result from external causes, and those which result from internal causes. If a disorder result from an external cause, as for instance, from a blow, the cause of the disorder is recognized and known at once, there is no mystery about it; but if the disorder result from some internal cause, the malady in some cases may pro- gress for months or even years without its presence being even suspected by the victim. Even after the disorder has revealed its presence, as for instance hi breaking out upon the surface, the initial cause may still be so hidden as to defy detection, even after the most earnest search. It is precisely the same with the disorders of the indus- ANALYSIS OF BUSINESS 101 trial system. If depression in the industries result from an external cause, such as war, pestilence, famine, bad crops, commercial or financial crises, the cause is at once recognized and known. There is no mystery surround- ing it; but if the disorder result from some internal cause, some microbe within the industries themselves, it may go on and reach a condition of gravity before it is even sus- pected, and even after its presence is revealed by a great check to all industrial enterprises, the real cause may not be suspected, simply because the microbe was hidden and did its fatal work before the disease made its presence known by breaking out upon the surface. In searching for the cause of these mysterious indus- trial depressions, therefore, the search must be confined exclusively to the industries and such things as are dis- tinctly a part of them; all things which are distinctly a part of the other three systems must be rigidly excluded from consideration. IN WHAT PART OF THE INDUSTRIES SHOULD THE SEARCH BE MADE? Among the facts discovered by the government com- missions is, that the volume of business in the necessities of life is substantially the same in dull times as it is hi active times. Let us analyze this and determine whether or not the conclusion commends itself to our minds as reasonable and true. The workers of the United States, meaning all persons engaged in any gainful occupation, comprise about one third of the population. If one fifth of the workers were thrown out of employment, it would be an unusually large percentage, and yet would amount to only about one fifteenth of the population, and that one fifteenth and those dependent upon them would not stop eating or go unsheltered or unclothed. In some way they would live and continue to consume the necessities of life. The other four fifths of the workers being still employed, they, as well as those dependent upon them, would make little or 102 INDUSTRIAL DEPRESSIONS no change in their consumption of necessities. Whatever change these people made would be chiefly hi a reduction of their outlay in luxuries, such as ornaments and per- manent improvements. Then, again, we have the large number of people who have accumulated savings to draw upon when out of employment, and the large number of well-to-do people who live upon the income derived from the hundred billions of wealth which has been accumu- lated in this country. Another reason that the fluctua- tion in the production of the necessities of life is small is because the demand is comparatively regular, hence the supply can be, and is, more nearly adjusted to it. It must be admitted, therefore, that this conclusion of the government commissions is not only reasonable but true, and, if true, then the great periodic increase and decrease in production must be outside of the necessities of life. Now what are the chief products of man's labor outside of the necessities of life? In the absence of statistics this question can be answered approximately by ascertaining what is the sum total of the accumulated products of man's industrial labor outside of the necessi- ties of life. The wealth of the United States in 1904, taken from the report of the Bureau of Census, Department of Commerce and Labor, was $107,104,211,917, classified as follows: Real property taxed $55,510,247,564 Real property exempt 6,831,244,570 Steam and street railways and equipment; telegraph and telephone systems; electric light plants; water-works; shipping and canals 16,085,298,909 Manufactured products 7,409,291,668 Agricultural products 1,899,379,652 Mining products 408,066,787 Imported merchandise 495,543,685 Manufacturing machinery, tools, etc 3,297,754,180 Farm implements and machinery 844,989,863 Furniture, carriages, etc 5,750,000,000 Clothing and personal ornaments 2,500,000,000 Livestock 4,073,791,736 Gold and silver coin and bullion 1,998,603,303 Total $107,104,211,917 ANALYSIS OF BUSINESS 103 To answer the question: "What are the chief products of man's labor outside of the necessities of life"? the above items must be reclassified and separated into four divi- sions: first, land, which is not a product of man's labor; second, the necessities of life and the machinery neces- sary for their production; third, construction; fourth, all other property.* The following table gives the re-classi- fication of the one hundred and seven billions of wealth on the basis named: WEALTH OF THE UNITED STATES IN 1904, RECLASSIFIED. Land Necessities Construction All other property Real property. Land 831,170,746,067 Buildings and other improvements . $31,170,746,067 Railroads and other 14,085,298,909 $2,000,000 000 Manufactured prod- ucts 6,009 291 668 1 400 000 000 Agricultural products Mining products $1,899,379,652 108,066,787 100,000,000 200 000 000 Manufactured ma- chinery, tools, etc. 3,297,754 180 Farm implements and machinery 844,989,863 Furniture, carriages, etc 5,750,000,000* Clothing and personal ornaments 2,000,000,000 500,000,000 Imported merchan- dise . . 495 543 685 Live stock 4,073,791,736 Gold and silver . 1,998,603,303 Totals $31,170,746,067 $8,926,228,038 $51,365,336,644 $15,641,901,168 RECAPITULATION Land $31,170,746,067 Necessities 8,926,228,038 $40,096,974,105 Construction $51,365,336,644 All other property .... 15,641,901,168 67,007,237,812 Total $107,104,211,917 * Just what proportion of the above sixty-two billions of real property is land and what proportion is buildings cannot be accurately stated, but the authorities rate buildings and other improvements, in the United States and Great Britain, as more than half of the whole, so that this item has been divided equally between land and construction, which is within bounds. The sixteen billions in public improvements has been divided 104 INDUSTRIAL DEPRESSIONS CONSTRUCTION IS THE MAIN THING WHICH INCREASES AND DECREASES From the above table we see that after deducting land and the necessities of life, construction, in round numbers, is fifty-one billions of the remaining sixty-seven billions, or say 77 per cent, of all industrial products of the nation, the large increases or decreases of which create what we call booms and depressions. Even this does not fully represent the preponderating importance of construction, for, contin- uing the analysis, we find that when an additional resi- dence is occupied it involves the purchase of furniture, carpets, utensils, ornaments, etc. ; that when an additional store is opened it involves the purchase of an additional stock of goods; that when an additional factory is opened it must be equipped with machinery and provided with raw materials for manufacture into other products before it can be operated; that when an additional railroad is put hi operation or a steamship is put in commission, it necessitates the purchase of all the various furnishings and vehicles essential to their operation; in short, that with the large increase or decrease in the volume of con- struction comes a commensurate increase in the demand for nearly all the smaller and more numerous articles of permanent wealth, these being chiefly included in the remaining 23 per cent., which is subject to large increases and decreases in volume. Note, however, the fact that the increases and decreases in the volume of smaller articles not only come after con- struction, but depend chiefly upon new construction. People do not buy furniture, carpets, utensils, goods, machinery, cars, locomotives, etc., and store them in ware- by putting fourteen billions under the head of construction (the estimated value of the plants), and two billions as the estimated value of the equip- ment. Manufactured products have been divided into the proportion that construction bears to all the other industrial products on the suppo- sition that this proportion of the manufactured products comprises con- struction materials. There are no existing statistics from which these divisions can be made exactly accurate, but the divisions made above are sufficiently exact for the purpose. ANALYSIS OF BUSINESS 105 houses or on vacant lots, and then build their houses, stores, factories, ships, and railways into which they may put them, or upon which they may run them. They first construct and then buy the things necessary to furnish or equip the new construction. It follows that construction proper is not only 77 per cent, of the industrial produc- tion from which the increase and decrease chiefly come, but that construction also controls a large share of the increase and decrease in the remaining 23 per cent. From these facts, it is quite obvious that what we call booms result almost entirely from the great peri- odic increase in the volume of construction, and what we call industrial depressions result almost entirely from the great falling off in the volume of construction. CHAPTER XI ANALYSIS OF CONSTRUCTION FOR the purpose of analysis, construction may be divided tentatively into two parts: first, that por- tion which never ceases, but goes on during panics, depres- sions, wars, etc., which for the purpose of illustration will be called necessity construction. This includes repairs, replacements, and such new construction as is made neces- sary by the growth of population, etc. Second, that portion which at times so greatly increases and decreases as to create what we call booms and depressions, which for the purpose of illustration will be called optional or investment construction. This includes additional houses, stores, factories, railroads, terminals, ships, docks, tunnels, etc., which are not put up from necessity as above noted, but as an investment from which the "investors expect to derive additional income. NECESSITY CONSTRUCTION VS. INVESTMENT CONSTRUCTION As an aid to the analysis of construction generally, the diagram (Appendix L) has been prepared. " Necessity" construction is represented on this diagram by the space between the base line B B and the line C C. " Optional" or " hi vestment" construction is represented, tentatively, by the space between the line C C and the line of actual iron consumption F F. Many people in the industrial nations believe that prosperity is overdone when all the breadwinners of a country are fully employed, earning and buying; and most of them believe that twin absurdity, that during a long period of depression the maintenance and repairs to exist- ing property fall so far behind, that the ultimate necessity 106 ANALYSIS OF CONSTRUCTION 107 to replace and repair existing property eventually brings on a boom. Neither of these theories will stand the test of analysis. Necessary construction, repairs and main- tenance, go on all the time, even during a financial panic or any other startling calamity, and their volume even in depressed times is about two thirds as much as the whole volume of construction in the most prosperous times. This is not only made clear by diagram, Appendix L, but it is confirmed by the records of iron consumption for fifty years or more. These periods of great increase in construction come from plain, simple business conditions and motives. When the cost of construction reaches such an abnormally low figure that the bargain-counter instinct is aroused in the minds of a large number of the far-seeing ones who hold the purse-strings of the country, the desire for gain prompts them to take advantage of the conditions while they may. These are the early birds; but gradually the whole community follows, and the boom is soon at its height. That, in a nutshell, is what creates an industrial revival. When the contracts for construction hi five great nations silently and mysteriously increase 50 to 100 per cent, within a few months, it is a great event, and it can- not be called a " mental wave" or an epidemic of repairs, any more than it can be called a cadence in lumber or an anthem in brick. IT IS INVESTMENT CONSTRUCTION WHICH LIFTS THE COUN- TRY TO A NEW LEVEL OF CAPACITY It is not maintenance and repairs to existing property which produce a boom. It is a great volume of new and additional construction, made chiefly for investment, which greatly increases the permanent wealth of the coun- try and lifts its wealth-producing capacity to a new and higher plane. When a depression follows, the capacity of the country does not sink down to the old level. It substantially moves forward on its new level until the 108 INDUSTRIAL DEPRESSIONS next revival in investment construction, when it takes another great step forward and attains a still higher plane. This can be made more obvious by the following table, which gives an analysis of iron production for the last fifty years : GAINS IN IRON PRODUCTION DURING BOOMS AND GAINS OR LOSSES DURING FOLLOWING DEPRESSIONS. Per- centage of in- Year Iron pro- duction Gain Lapse of time Change during depression Lapse of time Percent- age of boom gain lost in crease years Gain Loss years depres- sions 1852 500,000 57 1856 788,000 288,000 4 58,000 7 1863 846,000 100 1869 1,711,000 854,000 6 5,000 2 iSo of 1 1871 1,706,000 49 1872 2,548,000 842,000 1 247,000 6 29 1878 2,301,000 100 1882 4,623,000 2,322,000 4 579,000 3 25 1885 4,044,000 127 1890 9,202,000 5,158,000 5 579,000 6 12 1896 8,623,000 57 1899 13,620,000 4,995,000 3 (Part 169,000 of 1900 13,789,000 1) 30 1903 18,009,000 4,220,000 3 1,512,000 1 36 1904 16,497,000 56 1907 25,781,000 9,284,000 3 If the increased construction which takes place during a boom was for maintenance and repairs, then the volume of construction would fall back to the old plane when the next depression came. The fact that it does not fall back is evidence that the boom is made up of new and additional construction which adds that much to what we call the permanent wealth of the country, and raises its producing capacity to a higher level. REMARKS It was after the boom of 1871 and 1872 that some of the authorities (see page 64) were telling the world that ANALYSIS OF CONSTRUCTION 109 the civilized countries were now fully equipped with eco- nomic tools; that the work of the future must necessarily be repair and replacement rather than new construction, and that it was not likely that there would be again an economic progress comparable to that which had just closed. And yet the United States in 1907 produced nearly 1000 per cent, more new construction than she did in 1872. This cannot be accounted for by the increase in population, for that was only a little more than doubled. It was chiefly the increase in fixed capital in the shape of factories, mills, mechanical appliances, etc., which was responsible for our capacity to produce and consume 25,700,000 tons of iron and other construction material in proportion in 1907. It was due to the several suc- cessive steps by which the country reached a higher plane on each revival of prosperity that it produced in 1907 an amount of wealth which surpassed all previous records in the world's history. As shown by the above table, the country, through periods of industrial depression, has lost twenty-six years of possible increase in wealth in the last fifty-five years. In the last nine years of increase, between 1896 and 1907, the annual production of iron has increased 16,500,000 tons. Figuring on the actual cumulative rate, it is obvious that if all the breadwinners of the land had been fully employed the whole fifty-five years, the country would have passed the twenty-five million-rate of iron produc- tion so many years ago that we would have been well up to the fifty million-rate in 1907. These checks to production, which we call industrial depressions, are simply unnatural and unnecessary checks to the country's possible growth in wealth. The natural and healthful condition of the country, morally, physically, and financially, is for all the breadwinners of the land to be employed, earning, and thus made able to pay for what they and those dependent upon them need for their sus- tenance and enjoyment. If all these gaps in the growth of production illustrated by the above table had been 110 INDUSTRIAL DEPRESSIONS filled by maximum production, the nation would not only have been that much farther advanced in permanent wealth, but the suffering which was caused by the enforced idleness of millions of our people during those twenty-six years of depression would have been avoided. There is nothing so disastrous to a nation 's business as industrial booms and depressions, and the unnatural and abnormal fluctuations in the price of construction are responsible for both. Those who are engaged in business are deceived by the great fictitious and temporary advance in market values during a boom, and harmed by the great declines which necessarily follow during a depression. These violent changes in prices are a prolific source of discontent and consequent strikes. The workers strike when these abnormal advances come, to get their share of the supposed profits, and when prices go down the employers must at times reduce wages to save themselves from manufacturing at a loss, and the workers again strike, in the vain effort to prevent these reductions. Then the country goes through a period of what is termed liquidation and adjustment, during which prices and profits sink to a very low level. When the financial and industrial skies are all clear, comes renewed prosperity, which should be so thoroughly anticipated that its con- tinuance might be possible through adequate preparation without the disastrous boom in prices. Through the lack of this preparedness, the supply of important materials is so hopelessly short of the demand that prices of some articles of even vital importance advance one, two, or three hundred per cent., and all business is again upset for another period of years. DEMAND FOR IMMEDIATE DELIVERY VS. DEMAND FOR FUTURE DELIVERY In the "First Annual Report of the Commissioner of Labor on Industrial Depressions" published by the United States Government in 1886, "Falling Prices "* is specially 'Attention was called to this on page 73. ANALYSIS OF CONSTRUCTION 111 treated as among the chief alleged causes of industrial depressions.* This is a plausible theory, and many high authorities have been deceived by it. The mistaken belief arises from the fact that the fall in prices of con- struction materials is the first occurrence which attracts attention, but analysis shows that it is not the first to occur. First comes the falling off in demand for con- struction materials, after which follows the resultant fall in prices. As long as the demand for anything exceeds the supply, prices are kept up. When the supply exceeds the demand, prices fall. This is a self-evident truth. Any theory based upon the reverse of this truth is a virtual contradiction of the natural and inflexible working of the law of supply and demand. On reference to Diagram L, it will be observed that the price of iron commenced to fall rapidly in February, 1900, while the actual consumption of iron kept up to boom proportions for five months thereafter. Again, the price commenced to fall rapidly in October, 1902, while actual consumption kept on increasing rapidly for eight months thereafter. Again the price commenced to fall in May, 1907, while actual consumption kept up to boom propor- tions for five months thereafter. During all of these periods there was a famine in the iron supply. Here are three cases, so recent as to be fresh in the minds of the people, and each of them apparently seems to be a direct contradiction of the law of supply and demand. Now what were the facts? To analyze this matter properly we will divide the element of demand into two classes, namely, the demand for immediate delivery and the demand for future delivery. Many articles that are bought and sold are carried in stock by the manufacturers or dealers. The people being aware of this do not usually purchase such articles until they need them, consequently the demand for these articles is almost entirely a demand for immediate delivery. For such articles the falling off in demand, the falling off * First Annual Report of the Commissioner of Labor, page 79. INDUSTRIAL DEPRESSIONS in price, and the falling off in delivery, all come at sub- stantially the same time; consequently the public are constantly reminded of how perfectly supply and demand control the prices of all immediate delivery articles. In the case of construction materials, however, it is entirely different. If the contemplated work is of any considerable magnitude, it may be several weeks or months after the price is fixed and a contract for the materials signed before the delivery of materials is even commenced, and several months, or even a year or two, before the delivery of materials is completed. The fixing of prices on construction material must therefore antedate the delivery by several months, or even years, according to the magnitude of the enter- prise and the rapidity of the work done in its execution. To give a practical illustration of how actual contracts for construction materials are frequently negotiated and closed, we have permission to quote from the private telegraph code of the selling agents for a large number of pig iron producers. In doing this we shall give, first, the code words verbatim, followed by their meaning, and the dispatch thus translated will represent the manner in which hundreds of large contracts were closed by this concern. The code words were as follows: "A.B. & Co. Magnet Amends Squal April Saint Taken Malone Name price Maimed Quart Major Making." The translation of the above is as follows: "A. B. & Co. About to bid on some work and wish an offer on 5000 tons number two foundry pig iron de- liverable proportionately during ten months commencing in April deliverable F.O.B. cars at Chicago terms cash on tenth of month following delivery parties will not make an offer, they have asked different parties for bids, and when bids are all in they will accept the most favorable and reject balance name price open until award is made for work which will probably be Thursday of next week they will advise us of the rejection or conditional acceptance of your bid if accepted condi- ANALYSIS OF CONSTRUCTION 113 tionally, it will become a sale if the work is awarded to them, and become void if the work is not awarded to them." Now this manner of buying is not exceptional; all prudent contractors must necessarily protect them- selves during the negotiation for all large constructive work, as well as during its execution. Now if the lapse of time between the naming of the price and the closing of the contract be, for instance, one month; the delivery of materials be commenced in three months after the contract is signed; the delivery extended over ten months as per contract, and the work be completed in two months after the materials are all delivered, we have a total of sixteen months between the making of the price and the completion of the work. Now a constructive work which requires no longer time than sixteen months would not be a very extensive enterprise. If it were a large structure requiring deep excavation through rock for one or more stories below the surface, it might be more than sixteen months before the first construction materials would be needed, and the whole work would probably occupy two or more years to complete. The demand for construction materials, therefore, is almost entirely a demand for future delivery and in large enterprises a very extended delivery. In all such cases, therefore, the determination of the amount of materials to be used and the fixing of the prices to be paid for them, becomes the time of demand. This time must antedate the actual delivery of the materials and the completion of the structure, by at least as much as the signing of the contract antedates these occurrences. This may be several months or perhaps one or more years. Unfortunately there are no statistics gathered or pub- lished, to keep the people advised either of the extent of the contracts being made for construction from time to time, or of the rate at which this contracted construction is being completed. In Appendix L, the line DD, which is drawn to represent the rate of demand for construction, is the result of a careful analysis and is believed to repre- sent fairly the volume of construction contracted for from 114 INDUSTRIAL DEPRESSIONS month to month during the twelve years between 1896 and 1907. The line FF being the exact rate of iron con- sumption, must correctly represent the rate at which this construction was completed. On reference to that diagram, it will be observed that hi the boom period of 1899, the demand for extra construc- tion commenced to fall off in February, 1899. Four months later the extra demand had nearly ceased, and in February, 1900, the price of iron commenced to fall off. Now the amount of actual construction was increasing all this time, and kept on increasing until April, 1900, when the extra volume of construction contracted for in the low-priced period was practically completed. Three months later the volume of actual construction was nearly down to the line CC y which is supposed to represent the necessity basis, though, in effect, it is a depression basis. The following table gives the data of these occurrences during the three like periods between 1898 and 1908: First Event Second Event Third Event Fourth Event Fifth Event Actual con- Demand Demand Extra struction had for extra construc- tion com- menced Lapse of time, mos. for extra construc- tion had about Lapse of time, mos. Prices com- menced to decline Lapse of time, mos. construc- tion about com- Lapse of time, mos. fallen off to a depression basis which attracted to fall off ceased pleted general attention Feb. 1899 4 June 1899 8 Feb. 1900 2 April 1900 3 July 1900 Dec. 1901 7 July 1902 3 Oct. 1902 8 June 1903 5 Nov. 1905 Oct. 1905 10 Aug. 1906 9 May 1907 8 Jan. 1908 Oct. 1907* *Panic. Now, of the five events which occurred in regular sequence in the decline of the three booms illustrated by the above table, the only events of which the public had any knowledge were the third and fifth, that is, the fall in prices, and the falling off in the volume of actual construc- tion. No statistics were either gathered or published to inform them when the contracts for extra construction had commenced to fall off, nor when they had about ANALYSIS OF CONSTRUCTION 115 ceased, nor when the extra construction which created the boom was about completed; consequently, when it was actually completed, and mechanics commenced to be discharged in great numbers all over the country, the people were greatly surprised, and did not know how to account for it. Later, they remembered that prices had commenced to fall off several months before the construc- tion fell off, so they believed that the fall in prices, which was the first occurrence they became aware of, was the cause of the industrial collapse. The sequence of events preceding the six periods of depression between 1837 and 1886 was precisely the same as in the three cases described in this chapter. In all these cases, the natural working of the law of supply and demand was fully demonstrated. In all these cases, the falling off in the demand for construction, as evinced by the falling off in the making of construction contracts, although unnoticed, was the first to occur, while the falling off in prices was the second to occur, although the first to attract attention. The actual sequence of events was therefore in strict accordance with the law of supply and demand instead of being contrary to it. RESULT OF DELIVERY COMING SO LONG AFTER DEMAND When delivery and demand come together, manufac- turers and dealers may know at once should the demand exceed the supply; but in construction materials in which the delivery is made months or perhaps one or more years after the contracts are closed, the amount of materials contracted for may greatly exceed the possible supply. The manufacturers and builders may have no knowledge of this fact until many months after the contracts are made. It is in consequence of these things that the construc- tion builders and the producers of iron, steel, lumber, cement, brick, stone, etc., in boom times, sometimes have their order books filled up with 50 to 100 per cent, more work than they are ultimately able to get out on contract time. None of the parties realize the difficulty they are 116 INDUSTRIAL DEPRESSIONS getting themselves into at the time this excessive contract- ing is done. In dull times, the few who are fortunate enough to be able to contract for 50 to 100 per cent, more constructive work than usual have no difficulty in pro- curing, on time, 50 to 100 per cent, more labor and ma- terials than usual, and thus they are able in dull times to complete their contracts with ordinary promptness ; but when a great number of builders and material producers secure 50 to 100 per cent, more contracts than usual, and all try to secure 50 to 100 per cent, more labor and ma- terials than usual, there comes an unpleasant awakening. If construction contracts involved immediate delivery of the materials involved, the parties interested would know when the capacity of the country to produce these materials was reached, and this blind involvement of the building contractors and material producers of the country would be avoided. But these parties have no means of knowing that con- struction contracts are being made in excess of the capa- city of the country to execute on contract time, until the period arrives when they need the unusual amount of labor and materials. Up to this time of gradual awaken- ing, each calculates upon his being able to get the 50 to 100 per cent, more materials needed. Had they not con- tracts for them? And, as for the extra labor, had it not always been more than easy to secure all they needed? This unpleasant awakening is not confined to the contract- ing builders and manufacturers of material ; it is extended all along the line ; to the raw material producers, the quarry- men, the brickmakers, the miners, and to every one who employed labor in the production of construction materials. Now, the history of the industries all through this re- markable twelve-year period between 1896 to 1907 was a simple illustration of the perfect and inexorable working of the law of supply and demand. As long as the known supply exceeded the known demand, prices kept down. When the known demand exceeded the known supply, prices advanced. During some periods the known demand ANALYSIS OF CONSTRUCTION 117 for quick delivery exceeded the possible supply, and at the same time the known demand for future delivery was far below the possible supply. In such periods quick delivery prices were at a premium, and future delivery prices were at a discount, thus accentuating the truth of the perfect and inexorable working of the law of supply and demand. This explains why, near the end of a boom, prices drop, while the demand appears to be greater than ever. The facts are that contracts for construction which involve only future-delivery demand, have almost ceased, while the pressure to complete old, low-priced contracts has carried the prices of materials which can be delivered immediately to abnormally high figures. ILLUSTRATION Perhaps no better illustration can be given of this last named condition than the situation which developed when the United States Steel Corporation, with the commendable purpose of checking the rapid advance in prices of iron and steel, gave public notice that it would not again advance prices, and that all responsible con- sumers might rely upon its booking and filling all orders, in turn, at the then existing figures. The Steel Corpora- tion lived up manfully to its voluntary proposition. (We think this was about June, 1901, at which time the seven important shapes of iron and steel, used as typical of prices in the annual tables of "The Cleveland Iron Trade Review" averaged about 65 per cent, above the lowest prices of 1897.) The announcement appar- ently had a marked effect upon the market for sev- eral months; but price depends upon the supply, when the consumer needs it. As the Steel Corporation could not produce all that was wanted, and could only deliver as much as it was able to produce, and as the immediate necessities of some of the consumers were such that they could not wait, prices soon commenced to advance rapidly, and by June, 1902, the independent mills, and new mills which had started up, were selling all they were able to 118 INDUSTRIAL DEPRESSIONS furnish, at prices 124 per cent, above the prices of 1897. Here was a broad illustration of a difference of 47 per cent, between quick delivery and future delivery prices. The United States Steel Corporation in its statement of July 1st, 1902, gave its unfilled orders at 4,741,993 tons. This 47 per cent, was the premium which consumers paid to get materials promptly, over and above what they might have purchased these materials for, if they had elected to wait until they could get them, in their turn, from the United States Steel Corporation. THE SMALL BENEFIT OF BOOM PRICES REALIZED BY MANUFACTURERS By reference to Appendix L, it will be observed that the demand for construction commenced to fall off soon after prices made any considerable advance, and that it continued to fall off hi almost exact mathematical pro- portions with the advance in prices. This explains very clearly some of the phenomena attending a boom which without the knowledge of these facts would seem very unaccountable. First among these is the fact that the manufacturers of construction materials in this country realize such a very small benefit from the large advance in prices which takes place during a boom. The fact is that the great bulk of the construction which takes place in all booms is the construction which is contracted for before any considerable advance in prices takes place; consequently, the producers of construction materials, as a rule, have booked contracts for the larger part of everything they are able to turn out during the continuance of a boom, long before there is any considerable advance in prices. Of course, there are exceptions to this rule. We have known of iron-furnaces and steel-works which were not in operation when the boom commenced, and in conse- quence made no contracts during the low-priced period, but after prices had advanced largely these plants were put into operation, consequently made all their contracts ANALYSIS OF CONSTRUCTION 119 at the high prices, and were thus enabled to reap large profits. On the other hand, we have known of other concerns that contracted all they could make for more than a year ahead at the low prices, and, before they were able to fill these orders, the advance in labor and raw materials so enhanced the cost of manufacture that the boom brought them out with a loss. For this reason, the profits of the producers of construction materials during a boom are, as a rule, very disappointing. We might give many illustrations if it would not be a virtual betrayal of what should be considered confidential, but this fact is well known among those who are directly interested in the production of materials used in construction. We will, however, give one illustration, first, because it is public property, having been published in "The Iron Age "of February 27th, 1908, and, second, because it covers the entire period from 1899 to 1907, inclusive. It is taken from the annual report of the President of the Empire Steel & Iron Company, of Catasauqua, Pa., to his stock- holders. This company is a large, prosperous, and well-managed company, having eight blast furnaces in Pennsylvania and New Jersey. We quote from the report as follows: "We submit for comparison the following statement of the result of business year by year since this company was incorporated, the first year covering a period of nine months : Year. Tons pig iron made. Tons ore mined New Jersey mines. Net Earnings. Dividends. 1899 150,481 8,416 $320,666.30 $81,595.31 1900 201,847 40,637 244,523.85 106,395.00 1901 185,990 83,414 85,271.52 71,043.00 1902 186,485 59,179 203,087.37 75,000.00 1903 245,513* 107,905 308,651.02 75,000.00 1904 163,202 111,375 88,154.16 75,000.00 1905 172,763 93,568 91,511.96 75,000.00 1906 205,477 131,740 300,695.07 112,500.00 1907 234,538 146,253 517,256.15 150,000.00 Totals 1,746,296 782,487 $2,159,817.40 $821,533.31 * Two additional furnaces operated under lease. 120 INDUSTRIAL DEPRESSIONS "From this it will be seen that in all important respects the results during the past year have surpassed all previous records, and it might be interesting to note that our profits from all sources have amounted to $2.20 per ton of iron produced." As will be observed from the above quotations, the average profit for the nine years was but about SI. 23 per ton on their entire output of 1,746,296 tons of pig iron. This, it must be borne in mind, was during a period hi which there were three great advances in prices, viz., from $11.25 per ton for No. 1 Foundry in Philadelphia in July, 1898, to $25.00 per ton in November; from $15.50 in October, 1901, to $24.87 in November, 1902, and from $15.00 in September, 1904, to $27.00 per ton in December, 1906. Here we have, on the three advances named within the nine years, an average advance of $12.70 per ton, while the best year's profit was $2.20 per ton, and the average profit for the whole nine years less than $1.24 per ton; although this concern, not being in existence in 1896, 1897, and 1898, escaped filling up their order books with low-priced contracts in these early years. This is not an exceptional case. If the balance sheets of all the furnace companies in the country could be con- solidated for this period of twelve years, or any other boom period, they would in all probability not show any better average result. We think this case may be taken as a fair indication of the average proportion of boom-price advances actually realized by the whole body of producers of construction materials during any of the booms of the last century. Of course many individual cases can be cited where much larger proportions of the advance have been realized; but that does not change the facts. Now if this illustration (which shows a net profit of about $1.24 per ton during the nine years in which the average of the three great advances in price was $12.70 per ton) is a fair average of the proportion of boom advances realized by the producers of construction material in the United States during a boom, then it is perfectly clear ANALYSIS OF CONSTRUCTION 121 that the great majority of all the constructive work of the country, executed during a boom, must be contracted for before the advance has reached one tenth of its maximum. In other words, there must have been enough contracted, under 10 per cent, advance, to offset all taken above 10 per cent., because the average advance obtained was less than 10 per cent. In the writer's experience of forty years hi the iron business, he has never known a boom period in which the furnace companies of the country, as a rule, had not con- tracted their anticipated product for six, nine, or twelve months in advance before the abnormal advance in prices occurred. For additional evidence see Appendix Q, and note that the United States Steel Corporation, dur- ing the low-priced period from September 30th, 1904, to December 31st, 1905, increased their unfilled orders from 3,027,436 tons to 7,605,086 tons, while after the great advance in prices which followed, the increase was small in comparison. Analyze this matter from any standpoint you choose and the result always points in one direction, namely, that the contracts for the extra constructive work which make up what we call a boom are almost entirely at or near the low prices current during the one, two, or three years just before the boom manifests itself, and if this is true, then an industrial boom is chiefly the execution of the abnormally large amount of construction contracted for in the low-priced periods which precede a boom. PREMIUMS PAID FOR IMMEDIATE-DELIVERY MATERIALS, WHILE DISCOUNTS ARE OFFERED ON FUTURE-DELIVERY MATERIALS Another peculiar feature which develops in prices of con- struction materials towards the latter part of a boom is that large reductions in prices are offered on materials for future delivery, with few sales; while there is at the same time a famine in materials for immediate delivery, and everything which can be so delivered commands quick sale 122 INDUSTRIAL DEPRESSIONS at large premiums. This is because the volume of future- delivery orders on the books of manufacturers, which at the commencement of a boom probably amount to an average of nine to twelve months' product, have gradually dwindled down to probably four or five months' product, and this condition has commenced to alarm individual manufacturers; and well they may be alarmed, for a large part of construction materials, such as steel, stone, etc., must be made to fit exactly the places they are to fill in the structures of which they are to become a part, and for such work four or five months may be a short time in which to complete all the detail connected with their preparation. Now, although individual manufac- turers always know when this is their own condition, they have no means of knowing the fact that it is also the condi- tion of other manufacturers all over the country. The premium paid for materials which can be delivered im- mediately is usually for small lots, the lack of which is holding back the completion of large contracts, which have already been delayed long beyond the time specified in contracts, and which were made many months or per- haps a year or more before. There is no time when the demand for labor and materials for prompt delivery is so intense as just before the general slump in actual construction which ushers in a depression. CAUSE OF THE ABNORMAL ADVANCE IN PRICES When prices get so low that the desire for gain stimu- lates investment construction to such an extent that it, and necessity construction combined, ultimately carry prices to abnormally high figures, it is because the amount of construction to be executed and construction materials contracted to be delivered within a given time is in excess of the country 1 s capacity to supply within that time. The whole volume of construction contracted for in the fifteen years from 1896 to 1910, and the years and months when these contracts were closed, is supposed to be represented on diagram, Appendix L, by the whole space ANALYSIS OF CONSTRUCTION 123 included within the base line BB, the line DD, and the side lines K and Z. The years and months when the above volume of con- struction was executed, are supposed to be represented by the whole space included within the base line BB, the line FF, and the side lines K and Z. In each case, both the necessity construction and invest- ment construction are included. The percentage of construction which was contracted for during the three low priced periods, in excess of the capacity of the country to execute on contract time, is sup- posed to be represented by the three spaces marked G, G, G (between the lines D and A). The time when these excesses over current capacity were actually executed, is supposed to be represented by the three spaces marked H (between the lines F and D). As will be observed, the volume of excessive con- struction represented by the three spaces G, G, G, is absurdly small, when compared with the whole volume of construction of the fifteen years, represented by the space between the lines D, B, K, and Z, and yet it is this small excess of construction, over and above the capacity of the country to supply the labor and mate- rials to execute within contract time, which carries the prices of labor and materials to such abnormally high figures. Is it not perfectly obvious that, if the labor and materials had been known to be sufficient to meet the demand for them all through the fifteen years, the abnormally high prices for such important staples as iron, lumber, etc., would not have occurred? Whether the three spaces marked G, G, G, are too large to correspond to actual conditions, or too small, in no way affects the argument. We know full well that it is the excess of demand over supply which carries prices up, and, as the prices did go up, the excess of demand must have existed, and had it not existed to a very pronounced 124 INDUSTRIAL DEPRESSIONS degree, there would have been no such pronounced ad- vance in all the materials of construction in the five great industrial nations. REMARKS Adam Smith told the world more than a hundred years ago, in that magnificent work, entitled "The Wealth of Nations, " that low prices stimulated consumption, and that high prices retarded consumption, and the world has believed it, theoretically, ever since; but the people have not believed it practically, except to the extent they have seen and realized its verification, and that has been con- fined to such things as were sold for immediate delivery. In these the advance in prices, and the falling off in demand and in delivery, were seen and recognized, because they all came at the same time. Now, in construction, it is very different. In all the industrial booms which have taken place, the people have seen the volume of actual construc- tion and delivery of materials not only increase as prices advanced, but have seen it keep on increasing for many months, even after prices had advanced from 50 to 100 per cent., and so they have believed that high prices did not retard construction. The people have simply taken appearances for facts, and have failed to realize that high prices have their retarding effect on each thing at the time the high price is fixed on that thing, whether it is fixed by a verbal purchase of an article for immediate delivery, or by a written contract of purchase for an article for future delivery; and so they have not believed that high prices retarded the consumption of iron, lumber, brick, stone, cement, and all the other great staples which are consumed in the construction of buildings, railroads, ships, and the other great construction projects which make up the bulk of all the manufacturing and mechanical industries of a nation. But what are the industries of a nation? What is this powerful force which raised the manufactured products of the United States to the value of thirteen thousand millions of dollars in 1900? ANALYSIS OF CONSTRUCTION WHAT ARE THE INDUSTRIES OF A NATION? There seems to be an undefined impression that the industries of a nation are the result of some gigantic force that nothing but a great external calamity, such as war, pestilence, or a financial panic can check, and so, when depressions come without a recognized cause, the public looks for some great or mysterious thing to account for them. A careful analysis shows that the industries of a nation are nothing more than an aggregation of the acts of individuals. An individual's act may be of as little importance to the whole industries of a nation as a drop of water to the ocean, but the ocean is made up of nothing but drops of water. When an individual acting for him- self, or for the business which he directs, contemplates an expenditure for a permanent improvement, he first secures plans and specifications, and on these asks for bids on the work. When the bids are received, and he has deter- mined upon what he considers for his best interest, or the best interest of the company he directs, he acts, and if that action is the acceptance of one of the bids, then the ocean of industrial prosperity has received one more drop to swell its volume. If that action is to curtail or abandon some existing business, then the ocean of industrial depression has received one more drop to add to its gloom. This individual act may not be known outside of a few people, and may attract no more notice at the time than the drop of water which falls into the ocean, but it is the aggregation of just such acts that makes up the mighty force which turns the tide of prosperity. No one seems to realize at the time that tens of thousands, aye, hundreds of thousands, of others, all over the land, are acting hi the same manner and from the same motive. WHERE THE RESPONSIBILITY RESTS Let there be no mistake as to exactly where the real responsibility for the postponement or abandonment of these construction enterprises rests. It is not with the manufacturer: it matters not to him whether he pays 126 INDUSTRIAL DEPRESSIONS high prices for labor and materials, or low prices. As long as he can continue to sell his products at a satisfactory profit, he will push his output to the limit of his factory. It is not with the architect, designer, laborer, or mechanic : they work, not because they love labor necessarily, but in order that they may earn, and thus be able to buy. It is not with the constructor or contractor: they are stimu- lated by the profits which they hope to realize. All these individuals, as a rule, are as anxious to do their part in construction at high prices as they are to do it at low prices. The actual responsibility for each of the checks to the indus- tries, which come from high prices, rests solely with the individual who "holds the purse-strings^ the individual who is to pay for and own the contemplated improvement. He it is who decides to go ahead when prices are low, and he thinks they will go higher; he it is who holds on to his money, and decides to postpone or abandon the contemplated im- provement when prices are high and he thinks they will go lower. This individual, when he makes his decision, is not impelled by "an organic defect of human nature," nor by "celestial influences," nor by "mental waves," nor by "sun spots." He is governed solely by plain, simple, unadorned business considerations, and on these he acts. Probably not one individual in the land, as he makes his decisions to postpone his expected construction, realizes that the motive which impels his decision is rife in the whole land, and that his decision is but one of the hundreds of thousands of similar acts, the aggregation of which will, within a few months, culminate in an industrial depression. In searching for the cause of these mysterious industrial depressions, therefore, it is only necessary to discover the motive and conditions which control the acts of one class of individuals "the purse-string holders." When this is determined, we shall have, in a nutshell, the solution of the cause of both booms and depressions. CHAPTER XII THE MOTIVE WHICH UNDERLIES THE INDUSTRIES, AND THE REAL CAUSE OF INDUSTRIAL DEPRESSIONS IF the motive which gives origin to any system can be identified, it will most likely be found to embody the cause of the prominent features which attend that system. Now, what is the motive which gives origin to the indus- tries? What is the stimulus which is responsible for the great constructive enterprises which are the chief indus- tries of the five nations which have suffered most severely from industrial depressions? Analyze this question from whatever point one may, and in each case one is led to the same conclusion, namely, that the predominating motive which stimulates man's acts in originating, oper- ating, and enlarging the constructive enterprises is the instinctive desire for gain. It is this motive which prompts the erection of the great blocks of residences and the apartment and tenement houses in the large cities; the stores, factories, furnaces, and mills in the cities, towns, and villages; the railroads, pipe-lines, telegraph-lines, ships, and submarine cables wherever they are constructed. There are some other motives which contribute to these industrial productions, it is true. Charity, public spirit, love of home or some- thing of like nature, are usually the motives which prompt the erection of churches, libraries, hospitals, and a portion of the private residences, but these exceptions are only a minor portion of the products of construction; moreover, official statistics show that of the 16,187,715 families in the United States in 1900, but 7,259,362 had houses owned by them. Then again, a large percentage of the residences in cities, which are occupied by their owners, were orig- 127 128 INDUSTRIAL DEPRESSIONS inally planned and built in large blocks and in great numbers by capitalists or professional builders for the purpose of renting, or selling them at a profit; but even hi the cases of the houses built by their owners, and of the churches, hospitals, etc., it is the instinctive desire for gain which stimulates the production of the iron, lumber, brick, stone, cement, etc., which enter into their construction. It is this motive, also, which prompts the manufacture of all the various furnishings, fixtures, conven- iences, and luxuries purchased to equip stock and operate these things. In fact, a thorough analysis shows that this motive is present and in active operation throughout the entire chain of events attending the great increase in the volume of industries which constitutes a boom, and, being a natural and unceasing motive, it must be just as certainly present and equally active and in full operation throughout the entire chain of events which decrease the volume of the industries and thus bring on an industrial depression. Furthermore, there is nothing mysterious or hidden in its action; on the contrary, it manifests its presence in a perfectly simple and open manner. For instance, in the low-priced period, the far-seeing investors of the country, as soon as they become satisfied that prices are at as low a level as they will reach, and that an advance in prices is imminent (each wishing to acquire as large an amount of revenue-yielding wealth as possible with the money he has to command), hasten to contract for a large amount of revenue-yielding con- struction. This is a great and important movement; it grows with cumulative force, and is checked only by some equally powerful force. On the other hand, in the high-priced period, the far- seeing investors, as soon as they become satisfied that prices of construction have advanced to a plane which makes such investments less desirable than some other investment might be (each wishing to acquire as large an amount of revenue-yielding wealth as possible with the money he has to command), decide to stop making THE MOTIVE OP BUSINESS contracts for construction, and to invest their money in other ways, until prices shall drop back to low figures again. As the industries of a nation are nothing more than an aggregation of the acts of individuals (page 125), and as individual acts are controlled by the instinctive desire for gain, it follows that the entire business of the nation is controlled by this ever-present motive. THE REAL CAUSE The instinctive desire to get all one can for the money one has to invest is no more active in the crowd which surrounds the bargain-counter in a retail store than it is hi the mind of the multimillionaire, who sits at his desk and quietly decides whether to accept or reject bids which involve millions in expenditures for construction. Either the motive, which is so strong and effective in little things, becomes less strong and less effective in big things, or else this motive is the germ which stimulates the great increases in construction, generated when prices are low, and the great decreases in construction, generated when prices are high. What Adam Smith told the world more than a hundred years ago about the effects of high and low prices upon the volume of consumption is as true of great enterprises as it is of small things; and it is even more pronounced in investment construction than it is in the necessities of life. Prosperity does not depend upon the producer's ability to manufacture and his desire to sell, but upon his ability and willingness to sell at a price that will induce the purse-string holders to purchase. The whole experience of the past shows that as long as prices are low, and the people who have money believe they are gaining by purchasing, they will continue to purchase, and prosperity will continue; but just to the extent that prices go so high that people believe they will lose by buying, just to that extent they will stop buying. 130 INDUSTRIAL DEPRESSIONS // these things are true, then High Price of Construction is the real, original, and underlying cause of the mysterious industrial depressions which have occurred in the industrial nations when these depressions have come in the absence of external and recognized causes. It is recognized that there are thousands of more or less influential contributory causes of both depression and prosperity at work at all times, and that all these things must have then* due effect. If anything adds but the smallest particle to the volume of business, it is a drop added to the ocean of prosperity, or if anything reduces the volume of business by the least amount, it is a drop added to the ocean of depression, and if either one of these contending forces predominate, it will move the industries more or less in that direction. But no flood of drops has ever swelled into a boom except when prices were low enough to stimulate the making of contracts for a large amount of new construction; that is the founda- tion and stimulant on which every boom develops. Low prices, however, are not everything, and may not at once bring a boom. The industries are an aggregation of individual business acts, performed by men who have in view the problem of adding to their wealth. They move cautiously as long as the future looks uncertain, but when the business outlook is clear, and they see pros- pects of making construction investments which promise steady profits as well as security to their capital, they act promptly and with vigor.* Then, too, a boom with its abnormal demand stimulates many to enlarge their facil- ities and producing capacity, even at high cost, believing that high prices have come to stay, and that the capital they thus invested will be secure and their profits large. Some of these venturesome ones, through some fortunate circumstance, may be justified by the results, but that a * In Chapter XIV will be found a remarkable illustration of how an in- dustrial boorn was repeatedly delayed by financial derangements, and how promptly and vigorously the far-seeing investors repeatedly took hold again, as soon as financial derangement was removed or alleviated. THEREALCAUSE 131 great number of them are not, we may know by the large number that meet disaster when the depressed period comes. Perhaps these disasters account for the oft-heard remark, that " fools build houses and wise men live in them." Perhaps the wise ones are those who hold on to their money when prices of construction are abnormally high, and buy these unwisely built structures when they are sold from necessity. There are many ways, besides those named, in which contributory causes may delay or hasten a boom or a depression, but sooner or later the effect of high or low prices brings its logical result. All these conditions and results only show more conclusively how entirely these business revolutions are finally swayed by this one silent but powerful business force the desire for gain. In the hundreds of cases we have investigated, we have found the motive just as ever-present and active when bids for great enterprises were rejected, as it was when they were accepted. We have in mind two illustrations. The first is of two gentlemen who, during a period of low prices, had each contracted for the erection of two or three hundred residences. When most of the residences were completed by one party, and the majority of them sold or rented at profitable prices, new bids were asked, on old plans and specifications, for a block of twenty addi- tional houses, and, when received, he found them to be nearly 100 per cent, above the bids made in the low- priced period. Sometime afterwards, in giving his reason for not going on with this building operation, he remarked that he stopped because he thought it would be better business to loan his surplus money on other people's real estate until prices fell back to old figures, as he could then build forty residences for the same amount of money that was now asked for twenty. The reason given by the other gentleman for stopping construction was equally sound, if not so forcible. It was that it would be as hard to get 3 per cent, revenue out of double-cost houses as it was to get 6 per cent, out of low-cost houses, and 132 INDUSTRIAL DEPRESSIONS he did not "hanker after 3 per cent, real estate invest- ments. " The building of these hundreds of residences involved the purchase of furniture, carpets, curtains, ornaments, etc., to equip them. The construction and equipment were so many drops in the ocean of prosperity. When these two gentlemen stopped building, it was typical of what tens of thousands of the far-seeing ones were doing all over the country, but no one seemed to suspect it, and when, a few months later, industrial depression de- veloped, the great mass of the people seemed to be greatly surprised. But these instances only illustrate how high and low prices affect individuals. We will give one which illustrates how they affect a whole nation of indi- viduals. In the spring of 1900, two gentlemen sat at lunch in one of the New York clubs. One of them, whom we will call Mr. A., was president of one of the large steel combi- nations, which was afterwards merged into the United States Steel Corporation. The other, whom we will call Mr. B., was a firm believer in the theory that it was high prices which checked industrial prosperity. Mr. A. had stated that his company produced nine tenths of the country's steel product hi its particular line; that the amount of product it had been asked to bid on was more than enough to keep his mills and the mills of his com- petitors full of work for more than a year; that he in- tended to hold prices up, and, when the capacity outside of his mills was filled, the people would be obliged to come to him and pay the prices he had decided to exact. Mr. B. said: "Yes, you certainly have wonderful power. You can without doubt put your prices as high as you please, and the people must pay your prices or forego then* contemplated construction ; but there is one power before which all your power and calculations will go down like a house of cards, that is, the decisions of the individ- uals who hold the purse-strings and are to own and pay for these contemplated enterprises. You cannot compel THE REAL CAUSE 133 these people to build, and, if they decide not to build, you will not sell them your goods. Your product is not one of the necessities of life. A man cannot stop eating, but he can stop building. Your prices are more than 100 per cent, above the prices of 1897 and 1898. Every similar advance in the cost of construction materials which has occurred in the last seventy years has checked construc- tion, and, if you and the other manufacturers persist in holding your prices at present figures, it will do so now." Mr. A. had laid down his knife and fork during this reply, and, after it was finished, sat so long in silence that Mr. B., to break the spell, was compelled to ask him what he was thinking of so intently. Bringing his fist down upon the table with great force, he said: "By George, I am thinking that you are right ! The fact is, that most of the bids we made as far back as November and December have not been answered; and when they have been an- swered and declined, if the parties have given any reason for their action, it has almost invariably been, in sub- stance, that they have decided to wait until prices come down to more reasonable figures." Before the lunch was finished, Mr. A. said he was going to his office to instruct his people to win back busirjess at any price, within reason, which they might be obliged to make to accom- plish it. At the time this conversation occurred, the price of construction materials had been abnormally high for many months, and the orders for future delivery material on the books of manufacturers were getting very low. These gentlemen did not meet again for several months. When they did, prices had gone down tremendously. Mr. A. followed his hand-shake by saying, "I wish to tell you that I carried out the plan of putting down prices which I told you I had decided upon, and it has been a success. I was obliged to put them down enormously, but am getting all my plants filled with work for a long time ahead." In this last illustration, we have an indication of what 134 INDUSTRIAL DEPRESSIONS apparently influenced nine tenths of the trade of a great nation in one important product. The motive which underlies the industries of a nation is a plain, simple, uncomplicated business consideration. It is natural, and hi its cumulative force is all-powerful. It stimulates production at one period and retards pro- duction at another, with equal consistency. It is just as certainly in existence and in full action when it quietly and relentlessly reduces industrial production below the normal, as it is when all the power, money, and energy of the country are driving it above the normal. Why should there be any mystery hi a large falling off in contracts for construction after a large advance in the price of construction? When the Bank of England makes a large advance in its rate of interest, the large falling off in borrowing is not regarded as a mystery. In each case it is simply the natural effect of an inexorable law. Is it not unreasonable to believe that an advance of 1 per cent, per annum in the interest rate will cause a falling off of millions in volume of borrowings, and that an advance of 10 to 100 per cent, in the cost of construc- tion will not cause a falling off of millions in the volume of construction? If it were not for the deceptive appear- ance of a large increase in actual construction, contempo- raneously with a large increase in cost of construction, no such absurdity would ever have gained lodgment hi the human mind. REMARKS When we reflect that construction is 77 per cent, of the product of man's industrial work outside of what we have grown to consider the necessities of life, and that this construction involves and carries with it a large share of the remaining 23 per cent, of the products of the indus- tries, is there anjCgoom to doubt that it is the instinctive desire forgain that causes"indUstrlai booms ancTTndustrial ctepressionjf In all the affairs of civilized nations, can any one name anything affecting the volume of the THE REAL CAUSE 135 industries which compares to this? Do not all the other alleged causes pale into insignificance or vanish, hi com- parison with this one alleged cause? Does the reader believe that any one ever paid out his money to build a factory, or ship, or railroad because of "sun spots," " mental waves," or any other mysterious influence which he did not understand? Does the reader not believe that when people pay out their savings in such things, they do it after careful consideration and because they wish to get a revenue from it; and when prices of construction get so high that they think such an in vestment will not pay a fair revenue or a fair profit, does he not believe that the making of contracts for such investments then experiences a check? It must be remembered that we have been searching for a solution of something which nine government com- missions in seven different countries have for twenty years or more been endeavoring to solve, and which they still declare to be a mystery. Does this not indicate that they have not searched in the right places? Is it not reasonable to suspect that we may find the real cause in something these commissions have not suspected, some- thing which does not attract general attention and inquiry? Now in all these government investigations we have failed to find any real effort to analyze the industries, or any real effort to find out what was the chief thing which increased during a boom and decreased during a depres- sion, or what was the motive which stimulated those events. In brief, we find no effort to trace the matter from the bare result back step by step hi an analytical manner to the cause. In all these government investigations, no one has touched upon the simple fact that the great constructive interest of the country is not only the branch of industry of the greatest volume and importance, but that it is the only branch in which the great expansion and contraction in volume can possibly occur, and that construction in- 136 INDUSTRIAL DEPRESSIONS vestments are chiefly entered into for revenue and profit, and that the revenue and profit from them must be re- duced one half, if they are created at double price; hence that their enlargement or curtailment, naturally and rationally, depends upon prices. Every one admits that it was the production of iron in Great Britain, the United States, Germany, France, and Belgium, which made these nations the industrial nations of the world. If iron made these the industrial nations, what is more likely than that any great upheaval in iron should influence an upheaval in the things which go with it and are dependent upon it? And when the advance has influenced all the elements of construction to such an extent as to advance its general cost 100 per cent., is it not reasonable to expect the far-seeing invest- ors of the country to be influenced by it? There is a large amount of construction which is a current necessity, and must go on whether prices are high or low; but the great bulk of the wonderful increase in construction, which makes up a boom, is not a current necessity. It is entered into for the sole purpose of gain, and when the prospect of gain in such construction ceases, man ceases to will preparations for its contin- uance and in due time that portion of construction ceases. Then production of the thousands of smaller things, which go with and depend upon it, ceases, and industrial depression becomes an existing fact. For half a century, the world has been trying to iden- tify the mysterious cause of the great increases and the great decreases which come to the industries of the man- ufacturing nations. In this effort they have held up to view everything from the plausible to the absurd, on the earth and in the heavens, and yet only one of these hun- dreds of alleged causes will stand the test of analysis. That one is the natural effect of a universally recognized law, the working of which responds with unerring cer- tainty to a universally recognized motive. That motive is ever present, in every nation, whether it be of white THE REAL CAUSE 137 men, yellow men, or black men. It has been present in every country, and on every day; it is present in the smallest business transaction, and in the greatest; it is the instinctive desire for gain. Of all the influences which sway men, it is the one which is always active. Of the thousands of alleged causes of the ups and downs of busi- ness, it is, broadly speaking, the one motive which con- trols all men, at all times and in all places. What man doubts that it is this motive which controls each individ- ual business transaction? How can it control each indi- vidual business transaction, and not be the controlling force of the aggregation of all business transactions? But if the high price of construction is the cause of 1 these mysterious industrial depressions, then an analysis of the history of each depression which has taken place in the industrial nations should show clearly, that it was either the direct result of an external and recognized cause, or that it was preceded by an abnormal advance in the cost of con- struction; and it should also show clearly, that no such advance in prices has ever taken place in these nations which was net followed by an industrial depression. To test these requirements, an analysis has been made of all the industrial depressions, and of all the abnormal advances in the prices of construction materials, that have occurred since 1832. Some of these depressions were caused by financial derangement, and some by industrial derangement, but the time and conditions of each are so well marked, that analysis leaves no doubt as to which kind of derangement was the cause of each depression. PART III ANALYSIS OF ALL THE INDUSTRIAL DEPRESSIONS OF MODERN TIMES, WITH THE EVIDENCE SHOWING FROM WHAT CAUSE THEY EACH RESULTED CHAPTER XIII ANALYSIS OF THE INDUSTRIAL DEPRESSIONS FROM 1833 TO 1887 THE six depressions which occurred during this period were each the result of an internal malady. They were brought about by a derangement within the indus- tries themselves. Each of them prostrated the industries of the country for several years. Some of them were attended by financial panics, and some were not. Those depressions which were attended by panics commenced one or two years before the panics occurred, and continued from one to three years after the panic conditions had ceased to exist ; and yet these depressions have gone down to history as having been caused by the financial panics which occurred during their continuance, although the panics commenced long after the industrial depressions were in full force, and the depressions had in each case been recognized as an existing condition by the entire community.* THE FOUR YEARS' DEPRESSION FROM 1836 TO 1839 AND THE ACCOMPANYING PANIC OF 1837 The years 1834 and 1835 constituted a period of low prices in the United States. f The period was character- ized by an abundance of money and credit, and a rapid increase in construction and all other branches of busi- ness. This was particularly the case in Great Britain,! the United States, and in France, || the countries which * Evidence establishing these facts will be given with the separate treatment of each period, t Appendix Z. J First Annual Report of the Commissioner of Labor, page 16. Ibid., page 55. || Ibid., page 35. 141 142 INDUSTRIAL DEPRESSIONS suffered most severely from the industrial depression. The increase in railroad building, which took place in these years, accurately reflects the general prosperity which obtained.* From a construction of 151 miles in 1833, there was an increase to 253 miles in 1834, and to 465 miles in 1835,f thus more than trebling the rate of construction within two years and exceeding in amount anything ever experienced up to that time. The indus- trial revival reached its apex in the high-water mark of prosperity, in 1835. Towards the end of that year, the demand for delivery of materials so greatly exceeded the possible supply, that prices commenced to advance rapidly. During 1836 the price of No. 1 Foundry iron advanced, in Philadelphia, from $32.00 to $50.25 per ton, and Scotch pig iron, in New York, advanced from $38.00 to $65.00 (see Appendix A). The blighting effect of the advance commenced to reveal itself early hi 1836, before it had advanced as much as 10 per cent. Railroad building fell from 465 miles in 1835 to 175 miles in 1836,t which was a year before the panic. As manufacturing and construc- tion fell off in volume, the materials ordinarily consumed in these industries commenced to accumulate. During the latter part of 1836, the accumulation of unsold goods became alarming, and in the spring and summer of 1837 prices of all commodities dropped enormously, spreading loss and disaster on all sides. Iron fell off in price during the first seven months of 1837 nearly the full amount of the gain it had made in price the year before (see Appen- dices A & Z). The industries fell to their lowest point in the latter part of 1836, which was a year before the financial panic occurred. The panic must of necessity have intensified the gloom and added to the losses which the depressions had caused, but it does not appear to have lessened the volume of the industries, which had already been reduced to their lowest ebb. This is well * Appendix O. t Statistical Abstract of the United States, 1908, page 248. J Ibid. DEPRESSIONS 1833 TO 1887 143 illustrated by railroad building, which dropped from 465 miles in 1835 to 175 miles hi 1836, increased to 224 miles hi 1837, and to 416 miles hi 1838.* As the actual construction of this period commenced to fall off early hi 1836 (see Appendix O), it is plain that the contracts for it must have commenced to fall off as long before this time as the time of contracting antedated the time of completion of the construction. This would have undoubtedly thrown the contracting period for large enterprises back into 1834 and 1835, at which time, as will be seen by referring to Appendix Z, the advance in prices of iron had not amounted to as much as 10 per cent. Thus it is seen that the instinctive desire for gain was as much hi evidence early in the century as at the present time. Mark also the significant fact, that the depression was at its worst hi 1836, a year before the financial panic. Even as high an authority as the late Hon. Carroll D. Wright claims that this depression was caused by financial trouble,! but he gave no evidence to support this claim. Without doubt he simply accepted the same error that the rest of the world had accepted. Had the Commissioner proceeded by analysis, and through that method realized the opposite character of the causes of panics and depressions, he would undoubtedly have excluded all financial measures from the search, and thus have been led to discover the truth. Industrial conditions in Great Britain, France, and Belgium, from 1832 to 1835, bore a marked resemblance to those in the United States, t Each experienced great increase in the volume of the industries, easy money, great prosperity, and great advance hi the price of labor and construction materials. Germany at that tune was not a united empire, but Prussia and some of the other German states had made considerable progress in manu- facturing. The depression in the industries appears to * Statistical Abstract of the United States, 1908, page 248. t First Annual Report of the Commissioner of Labor, page 55. J Ibid., pp. 15-35-44. 144 INDUSTRIAL DEPRESSIONS have commenced much earlier, and to have been most severe in Great Britain and France and least so hi the German States. This was entirely logical. England and France were the leading manufacturing nations, and had been the largest iron-producers of the world for cen- turies, while Germany was far behind them in the extent of her manufacturing industries. History shows that where iron is most largely produced it is most largely consumed, and where iron is most largely consumed, there the use of machinery and product of manufacturing is greatest. Of the two countries, Great Britain was threefold the largest producer of iron, and much the greatest in the manufacturing and mechanical industries. She commenced to experience the revival of her industries one or two years before it came to the other countries; she experienced the effect of high prices first, and hi consequence her industries were on the down grade one or two years in advance of the other countries. Compared with to-day, the industries in these nations were small at the period under discussion; but such as they were, the great advance hi price of construction materials seems to have had a disastrous effect upon them, and with a degree of severity directly proportioned to its magnitude. All five of the countries named experienced a finan- cial panic, Great Britain near the close of 1836 and the United States near the close of 1837. THE THREE YEARS* DEPRESSION FROM 1846 TO 1848 The years 1843 and 1844 constituted another period of low prices.* The industries commenced to revive in 1844, but did not gain full headway, as they were checked by a sudden and enormous advance in prices in the spring of 1845 (see Appendix Z). The volume of con- tracts made during the low-priced period helped business moderately for a time. During the next eighteen months, * See Appendix Z. DEPRESSIONS 1833 TO 1887 145 prices declined steadily. By August, 1846, they had settled back nearly to the low level of two years before, after which contracts for construction revived rapidly, and the latter part of that year and the year 1847 was a period of marked prosperity, surpassing anything ever before experienced. In the latter part of 1847, prices again advanced, contracting for construction was again checked, actual construction fell off in 1849, and did not again revive until stimulated by the low-priced period of 1850 to 1852. This depression was one of great severity. No finan- cial disturbance of sufficient severity to be designated as a panic occurred during its continuance, yet the depres- sion was much more severe upon the industries than the depression of 1857, which was attended by a panic. The public to-day hardly remembers this depression, simply because it was not accentuated by a panic. THE THREE TO FOUR YEARS* DEPRESSION FROM 1855 TO 1858 AND THE PANIC OF 1857 The years 1850, 1851, and part of 1852 constituted a third period of low prices,* during which all the industries revived. The volume of actual construction during the latter half of 1852 carried the demand for construction materials beyond the capacity of the country to supply, and prices advanced rapidly. Between the summers of 1852 and 1854, No. 1 Foundry pig iron advanced 87 per cent, in Philadelphia, and 163 per cent, in Cincinnati. Scotch pig iron advanced 123 per cent, in New York.f This period of two years was a remarkable demonstra- tion of how perfectly prices regulated the volume of con- tracts for construction, and how perfectly the supply of materials regulated prices.t As far as the United States was concerned, the famine in the iron supply was most severe in the west. Prices there advanced more rapidly and to a greater degree than in the east, and the check to * See Appendix Z. f See Appendices A and Z. J See Appendix Z. 146 INDUSTRIAL DEPRESSIONS construction with its resultant depression was much more severe. In Great Britain, the supply of iron was so ample in 1853 that prices declined enormously. The apex of prosperity in the industries was reached in some sections of the United States in 1853, and in others hi 1854. The decline in the price of Scotch iron helped business hi Great Britain and the eastern States, and in these places the height of prosperity came in 1854. The severity of the depression which followed was, in some places, greatest in 1854, and in others in 1855, which was from two to three years before the panic. Business revived somewhat in 1856, following the great decline hi prices in 1855,* but this revival occurred when stocks of iron and other construction materials were almost exhausted, and prices advanced again almost immediately. This again brought a check to construc- tion. The panic of 1857 occurred while the industries were already down to a depression basis. In fact they were at a much lower ebb hi 1855 than during or after the panic. This period of depression has gone down to history as one of the most severe on record. On the contrary, the facts show that it was simply the short-lived panic and its financial results which were so severe. The industries were not as much affected as they were in the two periods of depression, in and about 1847 and in and about 1867, which were not attended by any financial disturbance of sufficient severity to be called a panic. All of the pronounced features of a typical period of boom and depression, namely, the revival in the volume of business on low prices, the abnormal advance in prices, the decline in the volume of the industries, fol- lowed by an accumulation of unsold goods and a fall in prices, had taken place at least two years before the financial panic, f This was conclusive evidence that the depression was entirely independent of the panic. This period is particularly interesting, as it illustrates * See Appendix Z. t See Appendices and Z. DEPRESSIONS 1833 TO 1887 147 the hopeless jumble of cause and effect, arrived at and accepted by the public mind, through synthetic reason- ing. No matter how separate and distinct may be the conditions of depressions from the conditions of panics, and no matter how much earlier the depression may occur than the panic, yet, in after years, the panic will invariably be accepted as having been the cause of the depression, simply because a panic, being vivid and startling, is the only thing remembered after a few years have elapsed. This mistake is not peculiar to the United States. It is the same in the other four industrial nations. The depression occurred in England in the latter part of 1854 and in 1855, in Germany and Belgium in 1855, and in France in 1856. In England the panic occurred in 1857, which was two years after the depression commenced, and yet there, as well as here, the public now believe the panic to have been the cause. In France they had no financial disturbance of sufficient severity to be called a panic, and there, strange to say, they attribute the de- pression to "the panic in the United States," although the panic in the United States occurred nearly a year later than the depression in France. THE FIVE YEARS' DEPRESSION FROM 1865 TO 1870 The years 1860, 1861, and the first part of 1862 consti- tuted the fourth low-priced period.* In 1862 commenced what we have hi later years learned to call a boom. The demand for iron doubled within a few months, and, as it was impossible to supply such a demand, the price ad- vanced enormously. The war, which had helped to depress business in 1861 and 1862, helped to increase it in 1863 and 1864. For several months during 1864 there was an iron famine. On several occasions the price of iron was advanced $5.00 per ton, between the afternoon of one day and the morning of the next. Many factories were time after time obliged to close their works because * See Appendix Z. 148 INDUSTRIAL DEPRESSIONS of the lack of iron, although they had demand enough to have kept them running night and day. Consumers fairly pleaded with the iron merchants for even a little to tide them over the stringency. As a special inducement, some consumers deposited money with the iron merchants, weeks in advance, simply with the idea of establishing a prior claim on the first iron that could be spared. Some consumers promised their entire future trade to certain merchants, if they would give them the preference on the first iron they received. Others threatened never to deal with iron houses who would not keep them supplied with iron. Scotch pig iron, by 1864, had advanced 300 per cent, in New York, No. 1 Foundry 295 per cent, in Philadelphia, and 344 per cent, in Cincinnati.* For a time, all that could be produced or imported was taken, but during the latter part of the advance, which ranged from $35.00 in August, 1863, to $80.00 in August, 1864, the situation changed. Construction and manufacturing for war purposes continued, but for other purposes in- vestment construction came almost to a standstill. The consumption of iron, which had advanced from 725,000 tons in 1862 to 1,116,000 tons in 1864, dropped to 882,000 tons in 1865. Construction fell off tremendously. Stocks of construction materials accumulated rapidly on all sides, and the price of iron fell 50 per cent, within the next ten months. The public attributed all these remarkable occurrences to the great Civil War. There is no doubt that the war had a great influence, but there was no war in England, France, Germany, and Belgium, yet, with the exception of Germany, they all suffered severely from an industrial depression. Germany suffered less, because her indus- tries were less extensive. Iron was not so powerful a factor with her in those days, and prices did not realize so large an advance. The industrial depression was very severe in three of these countries, and lasted for several years in all four of them. In 1866, during the depression, * See Appendix A. DEPRESSIONS 1833 TO 1887 149 there was a financial panic in England and in France, but this did not take place until the depression had been felt for more than a year; moreover, there was no panic in either the United States, Germany, or Belgium, although a depression existed in all three. This would seem to indicate that some depression cause, common to them all, and entirely outside of the panics, was simultaneously at work in each of these five countries. THE FOUR TO FIVE YEARS 7 DEPRESSION FROM 1872 TO 1876 AND THE PANIC OF 1873 The years 1870 and 1871 constituted the fifth period of low prices,* during which all the mechanical industries revived. The consumption of pig iron rose from 1,665,000 tons in 1870 to 2,548,000 tons in 1872.f Railroad build- ing in 1871 reached the enormous proportion of 7,379 miles, J the largest railroad construction ever known up to that time. The advance in the price of Scotch pig iron in New York from January, 1871, to September, 1872, amounted to 103 per cent., and the prices of all other construction materials advanced in its wake, while advances in the price of labor and strikes for higher wages were of frequent occurrence. Reflecting these advances in labor and materials, the cost of finished construction advanced from 50 to 100 per cent., from the spring of 1871 to the summer of 1872. The effect of the advances in price, in checking the volume of contracts for new constructive enterprises, was not only early, but rapid and pronounced. Contracts had almost ceased at the beginning of 1872. Railroad construction dropped from 7,379 miles in 1871, to 5,878 miles in 1872, to 4,097 miles in 1873. The imports of iron and steel and the manufacture thereof, dropped from 1,325,034 tons in 1872 to 707,661 tons in 1873. The production v of rails commenced to fall off in January, 1872, twenty- * See Appendix Z. t See Appendices Z and A. J United States Statistical Abstract. United States Statistical Abstract, also Appendix O. 150 INDUSTRIAL DEPRESSIONS one months before the panic, and declined steadily from that time.* Thus for twelve to twenty-one months before the panic of 1873 took place, the microbe of indus- trial depression was shown to be at work. Within the twelve months immediately preceding the panic, the mechanical industries had fallen off largely. The price of pig iron had dropped $10.00 per ton, bar iron $39.00 per ton, and iron rails $19.00 per ton. None of these calamities was the effect of a panic. No panic conditions showed themselves until the indus- trial conditions had already brought the mechanical industries to a very low ebb, but not to its lowest ebb, as construction in this case continued to fall off hi volume for about two years after the panic. This is another illustration of how certainly every long- lived and mysterious depression which is accompanied by a panic goes down to history as the effect of the panic, no matter what overwhelming proofs may be given to the contrary. The public in after years only remembers the startling and spectacular panic. In Great Britain it was the same. The panic came in November, 1873, while the depression commenced from one to two years before. From the following quotation, it can be seen how exactly the conditions surrounding the mechanical industries in England during 1872 corresponded to those in the United States. ' ' The Engineer, " of London, in February, 1873, says: "The progress of events during 1872 will not soon be forgotten by en- gineers. The position assumed by the working classes, and the unprece- dented demand for iron and machinery, combined to raise the cost of all the principal materials of construction to a point absolutely without parallel." "The Economist," of London, in March, 1873, said: "Of all the eventof the year (1872) the profound economic changes generated by the rise of prices and wages in this country, in Central and Western Europe, and in the United States, has been the most full of moment." * Failure of Jay Cooke & Co., September 18, 1873. Stock Exchange closed September 20, 1873. DEPRESSIONS 1833 TO 1887 151 CONDITIONS IN THE OTHER INDUSTRIAL NATIONS AT THIS PERIOD The business conditions in Great Britain, which at this time produced about one half of the pig iron con- sumed in the world, and was the greatest industrial nation at that period, are very instructive. The panic precipi- tated by the failure of Overend, Gurney & Co., on May 12, 1867, had about spent its force by the end of the year. During the greater part of 1868-1869 and 1870 prices ruled low, and the industries revived rapidly. The years 1870, 1871, and 1872 comprised a period of wonderful activity hi the industries and prices of labor, and con- struction materials advanced enormously. The Franco- Prussian war, which broke out so suddenly in July, 1870, had but little depressing effect. The interest rate was 3| per cent, on July 21, 6 per cent. August 4, and 2\ per cent. September 29. A tremendous amount of construc- tion was undertaken in 1871 and the first part of 1872. The unnoticed and mysterious down-turn in the industrial tide came early in 1872, and although prices made their final and greatest advance in 1873, the actual volume of the industries was much less hi 1873 than in 1872, and less in 1872 than in 1871. A reduction in wages, considered imperative before the close of 1872, brought on a serious strike. The Bank of England's rate was advanced from 3 per cent. August 21, to 4 per cent. September 25, and 9 per cent. November 1, which was contemporaneous with the financial panic. Thus that country experienced the premonitory symptoms of a down grade in the indus- tries a year before the symptoms of a down grade in the finances, and realized the actual and visible effect of the down grade in the industries a year before the visible effect of the down grade in finances became apparent; yet the industrial depression in Great Britain has erro- neously gone down in history as the result of the financial panic. This universal error is the result of failure to recognize 152 INDUSTRIAL DEPRESSIONS that finances and industries are two separate and distinct forces, that each can be affected by the other, but that each has such different qualities that it may for a time move entirely independently of the other. Turn now to the relative conditions of France and Germany (then a united empire). France had recently paid Germany the enormous war indemnity of 5,500,000,- 000 francs. With this, Germany paid her national debt, making money abnormally abundant in Germany and correspondingly scarce in France. As a result, the in- dustries in Germany were keenly stimulated; bankers actually had their agents out, soliciting manufacturers to take loans for the enlargement of their industrial enterprises at 1 per cent, per annum, and even as low as f of 1 per cent. The demand for labor and materials rose to unheard-of figures. The microbe of industrial depression (high prices of construction) was at work with great vigor. The down-turn in the tide of industrial prosperity came and grew rapidly, while money was so plentiful that it was begging for borrowers. The motive which controls the volume of the industries in all lands and at all times "the instinctive desire for gain " stim- ulated the industries to an enormous extent while prices were low, but it checked them to an enormous extent soon after prices commenced to advance, in spite of the great abundance of idle money and the abnormally low interest rates. The check to the production of factories, stores, and other enterprises resulted in an enormous accumulation of the materials ordinarily consumed in these enterprises. The accumulation of unsold goods resulted in a continued great fall in prices, and many failures followed. As Germany's industries had by this time grown to great proportions, so she suffered greatly from the industrial depression which followed. For years, all her industries remained in a badly crippled condition, and did not show signs of recovery until 1879. Now turn to the relative condition of France during DEPRESSIONS 1833 TO 1887 153 this same period. Her finances were crippled by the stupendous war indemnity she paid to Germany. Her whole population made haste to pour their savings into the treasury of the nation. The war indemnity was paid more quickly than any one supposed possible. It left the people cramped for means, and in consequence there was no great revival hi the industries. Prices rose moderately, it is true, but it was largely in consequence of the demand for materials from the prosperous nations about her. The moderate advances in prices had their due effect, but this effect was commensurately small, as the revival of the industries had been small. The result was that the industries of France, during this period, suffered less than the industries of any one of the great industrial nations. In fact, statistics show very little change in the volume of her industries at any time during this period. She suffered from a financial panic hi 1873, but this was to be expected in her crippled financial condition. Now turn to Belgium, small in size but proportionately great in her industries. She was the only one of the five industrial nations that did not experience a financial panic during this period. On the contrary, she suffered from a plethora of capital. Interest on deposits fell to i of 1 per cent, per annum, and good commercial paper was taken eagerly at -| of 1 per cent, and 1 per cent., and yet she suffered very seriously from an industrial depression, which lasted from 1873 to 1879. She experienced the same condition of extraordinary prosperity to her indus- tries in 1870, 1871, and 1872, with consequent abnormally high prices, but notwithstanding the great congestion of money in her bank vaults, her captains of industry showed the same inclination to pour their money into all kinds of industrial enterprises when prices were low, and to hold on to their money when prices were high. They possessed the same " instinctive desire for gain" that other people have, and "that ever-present motive" worked with them in the same way that it did with other people, but they 154 INDUSTRIAL DEPRESSIONS did not suspect it, nor recognize it as the cause of the depression. The citizens of Belgium who wrote upon economic questions at that time appear to have been very much embarrassed in their efforts to account for this industrial depression. In the United States, Great Britain, France, and Germany it was apparently a simple matter, for when the financial panics, which occurred in each of those four countries, had subsided, they had simply to attribute the industrial depression which continued to the finan- cial panic. The great mass of the people accepted this explanation, and it has so gone down in history. In Belgium, however, people were driven to account for it in some other way. Georges de Laveleye, editor of the Moniteur des Interets Materiels, of Brussels, declared that the long-depressed period and the accumulation of money was the consequence of a definite stage of industry having arrived, which was never before reached, namely, that "the industrial activity of the last half-century had resulted in fully equipping the civilized countries of the world with economic tools, and that the work of the future must necessarily be repair rather than construc- tion." What would M. de Laveleye have thought if he could have imagined the industrial growth which occurred in all the industrial nations thirty years later, represented by a volume of construction, in some of the nations, from 500 to 1000 per cent, greater than the construction which he predicted would never again be equalled? It would be hard to find a period in modern times when general and financial conditions were so radically different in these five nations. Many of the contributory causes of prosperity and depression were pulling in opposite directions in these nations, but there was one condition, high prices of construction, which existed in all of them, and in the degree which this existed in each it checked construction in each. In the exact degree that construc- tion was checked, each suffered from industrial depres- sions. This was a rare opportunity to have discovered DEPRESSIONS 1833 TO 1887 155 the true cause of these mysterious industrial depressions. If any one had taken the time to analyze all the business conditions in each of these five nations, he must necessa- rily have discovered the one cause which existed in all of them and brought industrial depression to all. THE FOUR YEARS' DEPRESSION FROM 1882 TO isss The years 1877, 1878, and the first half of 1879 consti- tuted the sixth period of low prices.* In 1878 the indus- tries commenced to revive. The consumption of iron rose from 2,500,000 tons in 1878 to 4,900,000 tons in 1881. The stock of iron was soon exhausted; prices commenced to advance, in the spring of 1879, and within twelve months Scotch pig iron had advanced 84 per cent, in New York, No. 1 Foundry 148 per cent, in Philadel- phia, and 125 per cent, in Cincinnati.! The unprecedented amount of manufacturing and construction contracts, placed while the low prices con- tinued in 1878 and 1879, kept the mechanical industries at high tide well into the year 1882. The subsequent depression revealed itself gradually, and was not attended by a financial panic,! although there were many impor- tant failures, several minor money flurries, and some Clearing House certificates issued in 1884. Railroad building, which was 11,568 miles in 1882, the largest ever known up to that date, fell back to 6,741 miles in 1883. The down grade continued steadily, from 1882 to 1885, when railroad building had fallen to 2,866 miles, and the consumption of iron had fallen to 4,348,844 tons. This depression lasted from three to four years. The industries did not commence to recover until 1886. This depression was experienced by all the five indus- trial nations, and was purely industrial in character, if we except the minor money flurries in the United States and France, which can hardly be called panics. The depression is on record as having commenced in England * See Appendix Z. f See Appendix A. t First Annual Report of the Commissioner of Labor, page 64. 156 INDUSTRIAL DEPRESSIONS a few months later than in the other four countries. It continued about four years in all five countries, and was so severe and long-continued that several government commissions were appointed to investigate its cause, yet, like the depressions of 1847 and 1867, because there was no great and general financial panic attending it to make it impressive, it is to-day hardly remembered in any of these countries. REMARKS ON THE WHOLE PERIOD, 1832 TO 1886 Up to this point we have considered three industrial depressions, known as the depressions of 1847, 1867, and 1882, during which there were in the United States no severe accompanying panics, and three, known as the depressions of 1837, 1857, and 1873, during which very severe financial panics occurred; but chronological his- tory shows that in the three last named periods their prominent events, namely, the revival in the volume of the industries, the abnormal advance in prices, the decline in the volume of the industries, the accumulation of unsold stocks, the fall in prices, and the recognized condition of industrial depression, had taken place from one to two years before the panics took place. Among the characteristics common to all of these six depressions was a radical shrinking in the volume of the industries, without any universally recognized cause, and the shrinkage in each case commencing when both finan- cial and industrial conditions appeared to be so prosper- ous that the public were almost unanimously predicting a long continuance of prosperity. In the case of the three depressions which were accom- panied by severe panics, the shrinkage in the volume of the industries commenced a long time before panic con- ditions appeared. In the 1837 period, the shrinkage amounted to more than 50 per cent, in 1836, a year before the panic. In the 1857 period, the shrinkage was greatest in 1854 and 1855, two and three years before the panic. In the 1873 period, the shrinkage commenced DEPRESSIONS 1833 TO 1887 157 twenty-one months before the panic. The industrial depressions were existing facts before any sign of panic, in each of these three cases. The depressions were some- thing distinct and apart from the panics, and would have occurred and run their course even if there had been no accompanying panic. The depressions which culminated in 1847, 1867, and 1882, although not attended by severe financial panics, lasted as long as the three depressions cited above, which were attended by severe financial panics. While it is true that industrial depressions do at times result from financial panics, just as they do at times result from war, pestilence, famine, or some other great calamity outside of the industries themselves, yet when this is the case, the cause is apparent to all. There is no mystery about such depressions. But depressions which originate from panics are not the subject of this investigation. What the industrial nations are seeking to know is, what causes the depres- sions which take place in the absence of any recognized cause the depressions which come in the midst of " great prosperity and bright prospect for its continuance." What is the mysterious and powerful force which is so overmastering and irresistible that it overrides and sub- merges all the visible and powerful causes of prosperity? What is this cause, which is so obscure and mysterious as to escape notice, and which is so hidden and perplexing that it has baffled all the searchers, both national and individual, who have for years endeavored to discover and expose it? What brings about these stupendous national calamities, which develop so mysteriously, which creep over and become fastened upon a country before they are even suspected, which transform industrial exhilaration into industrial gloom, and which result in a reduction of thousands of millions per annum in the earnings of the people? This is the kind of depression which the world has learned most to dread, and which so many of the nations have appointed government commissions to in- vestigate in the hope of discovering their cause. 158 INDUSTRIAL DEPRESSIONS No one can make a careful analysis of this period of fifty-five years, between 1832 and 1887, without being profoundly impressed by the fact of how completely the price of iron and presumably of all other construction materials controlled the volume of construction. Wars, financial panics, etc., undoubtedly had their effect in accelerating or retarding the existing trend of business, just as everything else had its effect, but the combined effect of all these external things does not in a single instance appear to have changed the inexorable trend of investment construction. In this period, as well as all periods, large construction depends upon whether or not it can be produced at a cost which promises to pay a satisfactory revenue. The six depressions we have just reviewed are six object lessons. They extend over a period greater than half a century, during which the industries of the country grew from an iron consumption of about 200,000 tons to a consumption of over 6,000,000 tons. This period was long enough to have insured the occurrence of almost everything which influenced the increase or decrease in the volume of business. During this period the country was under the control of two different political parties. Tariff was part of the time high, and part of the time low; paper money was during long periods at par with gold, and at one time gold was worth two and one half times as much as paper money. The period covered time of war and time of peace; the fluctuations in the price of the necessities of life, of labor, and of construction materials, were enormous, and in the latter occurred no less than ten times (see page 204). Many panics occurred; some of them were very severe, while some were so slight as to be now almost forgotten. It would be difficult to name any kind of occurrence or condition which affects business, that did not take place during that period. But in all these numerous and varying conditions it cannot be discovered by the most careful analysis that the six depres- sions occurred in any one of these five nations with, or DEPRESSIONS 1833 TO 1887 159 following, any one of these conditions, except high prices of construction, while this condition preceded each one of the six depressions contemporaneously in all of the five industrial nations, with the same certainty that sunrise precedes sunset. CHAPTER XIV ANALYSIS OF THE INDUSTRIAL DEPRESSIONS FROM 1887 TO 1897 THE five depressions which occurred during this period were each the result of an external malady.' They were caused by some derangement in the financial system. The industrial system was entirely free from any internal malady during this whole period. The volume of the industries declined quickly and largely when each of these financial disturbances occurred, and commenced to revive rapidly as soon as they were alleviated or removed.* THE DEPRESSION CAUSED BY THE PANIC OF 1890 The year 1890 opened under highly favorable industrial conditions. The effect of the depression of 1882 to 1885 had passed away. The business of the country had ex- perienced four years of recuperation (1886 to 1889), during which the consumption of iron had steadily risen from 4,300,000 tons in the year 1885 to 7,700,000 tons in the year 1889, and from a 6,900,000 tons-per-annum rate hi September, 1889, to a 9,400,000 rate in March, 1890. * In reviewing this chapter, and those which come after it, we have had the advantage of statistics, from which we could calculate and portray on Appendix Z the monthly fluctuations in the rate of production and con- sumption of iron, which so correctly reflect the Quotations in construction. Such statistics for earlier years are unfortunately not attainable. If one would appreciate their value, compare the annual production and con- sumption of iron in 1896 and 1897 with the annual rate of monthly pro- duction and consumption as shown in Appendix Z. Had such statistics been obtainable for 1833 to 1887, the prompt and inexorable effect of high and low prices during that period might have been made more vivid. As the annual rate of each month's production is given from 1890 on, we will not hereafter refer so constantly by footnote to Appendices L and Z, but suggest that the reader refer to them frequently, as they give a vivid picture of the changing conditions. 160 DEPRESSIONS 1887 TO 1897 161 A financial panic occurred in Great Britain in Novem- ber, 1890, precipitated by the Baring troubles. It had a severe effect upon the industries of the United States, reducing them more than 35 per cent, within five months, as evidenced by the rate of iron consumption, which fell from a 9,200,000 tons-per-annum rate in November, 1890, to a 5,900,000 rate in April, 1891. The industries them- selves, being free from any internal depression cause, commenced to recuperate almost immediately after panic conditions ceased. Within two months the consumption of iron had risen to a 7,600,000 tons-per-annum rate, four months later had fully recovered, reaching the 9,400,000 tons-per-annum rate, and five months later was larger than ever before in the history of the country, hav- ing risen to a 10,000,000 tons-per-annum rate in March, 1892. THE DEPRESSION CAUSED BY THE PANIC OF 1893 In June, 1893, a financial panic was precipitated in the United States by the unfavorable working of the Silver Coinage Law. This panic paralyzed everything for a time. The industries fell off 60 per cent, within five months, as evidenced by the rate of iron consumption, which fell from a 9,400,000 tons-per-annum rate to a 3,800,000 rate within five months. This was one of the most severe financial disturbances the country had ex- perienced for many years. It necessitated a call for a special session of Congress. The House of Representa- tives promptly passed a bill repealing the Silver Coinage Law, but the Senate's bill to the same effect was not passed until October. Immediately after the passage of the bill, the industries commenced to revive. The consumption of iron increased from a 3,800,000 tons- per-annum rate in October, 1893, to a 6,500,000 tons- per-annum rate within six months, thus regaining more than half the loss caused by the panic, at which juncture the industries were again affected by the financial condition. 162 INDUSTRIAL DEPRESSIONS DEPRESSION CAUSED BY FINANCIAL DERANGEMENT OF APRIL, 1894 During April, 1894, it became apparent that the repeal of the Silver Coinage Law and the sale of United States bonds was not sufficient to protect the $100,000,000 gold reserve, and finances were again disturbed. Within two months a decline of more than 50 per cent, in the volume of the industries had taken place, iron consumption hav- ing fallen from a 6,500,000 tons-per-annum rate in April, 1894, to a 3,200,000 rate hi June, 1894. At this juncture a sale of bonds replenished the gold reserve. 'The decline in the industries was more than recovered within the next three months. Although the large deficiency in the gov- ernment revenues continued, and the legislation which caused the frequent depletion of the gold reserve, popularly known as "The Endless Chain," remained upon the statute books, the contending causes and conditions of prosperity were so overwhelmingly powerful that by Sep- tember, 1895, industrial activity was greater then ever before in the history of the country, iron consumption having reached a 10,200,000 tons-per-annum rate. DEPRESSION CAUSED BY THE "VENEZUELA PROCLAMATION " OF DECEMBER, 1895 The industrial activity, noted in the last paragraph, continued to increase rapidly until December, 1895, when iron consumption had reached an 11,200,000 tons-per- annum rate, at which period the President's Venezuela message was sent to Congress, and another panic was precipitated in Wall Street. The industries fell off 24 per cent, in seven months. Iron consumption fell to an 8,500,000 tons-per-annum rate. DEPRESSION CAUSED BY THREATENED ABOLITION OF THE GOLD STANDARD IN JULY, 1896 The financial system had not recovered from this last blow, when the gold standard was threatened by the DEPRESSIONS 1887 TO 1897 163 presidential campaign of 1896. Financial affairs were still more seriously disturbed. Gall money on the New York Stock Exchange advanced to 100 per cent., and the volume of industries, already depressed in July, declined in volume 29 per cent, within two months after the nominating convention which threatened the gold basis, iron consumption falling to a 6,000,000 tons-per-annum rate in September, 1896. The industries revived rapidly after the election in November, 1896, regaining their last decline within two months, and by November, 1897, were again larger than ever before in the history of the country, iron consumption reaching an 11,600,000 tons-per-annum rate. REVIEW OP THE FIVE DEPRESSIONS BETWEEN 1890 AND 1897 Here we have five cases, November, 1890, June, 1893, April, 1894, December, 1895, and July, 1896, each showing unmistakably all the conditions necessary to class them as depressions caused by external derangements. In each of these cases a serious financial disturbance caused an immediate and enormous depression in the industries; in each case the external cause was known and recognized, and in each case the industries revived as soon as the financial disorder was alleviated or removed. The great increases and decreases which took place in the volume of the industries during this period are correctly reflected in the fluctuating rate of iron consumption which took place during the different months.* Throughout this entire period the industries were not only free from any potent depression causes within themselves, but the incentive of abnormally low prices for construction materials was so powerful that the industries bounded forward rapidly whenever there was the least sign that the financial trouble was over.f The turn in the tide which grew to the boom of 1899 occurred while the unfavorable redemption law, popularly known as "The Endless * See Appendix Z. 164 INDUSTRIAL DEPRESSIONS Chain," was still in existence, and within a period when the Government's annual revenues changed from $105,- 000,000 surplus to $89,000,000 deficiency. "The Endless Chain" brought the country to the verge of bankruptcy, a short time before, but counted for nothing when the elements of industrial prosperity obtained the mastery. STRUGGLE BETWEEN FAVORABLE INDUSTRIAL CONDITIONS AND UNFAVORABLE FINANCIAL CONDITIONS Many people speak of this period as the panic of 1893, while others more correctly speak of it as the financial difficulties of 1890 to 1896. As a matter of fact, this entire period was a struggle between favorable industrial conditions and unfavorable financial conditions. At no tune between 1889 and 1898 was there anything within the industries themselves to prevent their revival and a subsequent period of maximum prosperity, or what we call a boom. The depression of 1882 had spent its force, and a long period of six years had followed during which the country had time to recuperate, liquidate, and get into a settled and sound condition. Everything indicated that the country was in such a condition during the greater part of the year 1889. The consumption of iron had risen from 4,300,000 tons in 1885 to 8,800,000 tons in 1890. A period of low prices had occurred in 1885 and 1886, and again in 1888 and 1889, and everything in the industries was promising, when the panic of 1890 occurred. Previous to this, the country, having passed through all the conditions of convalescence and full recovery, was not only industrially ready for a revival in 1889, but con- tinued industrially ready during all the time between 1889 and 1899; but the series of financial disturbances checked each effort until towards the close of 1896, at which time the industrial conditions finally obtained the mastery. That the depressions hi each case were the effect of the external cause was clearly shown by the fact that the industries declined largely and quickly after each panic, DEPRESSIONS 1887 TO 1897 165 and revived largely and quickly as soon as panic effects abated or disappeared.* The most severe financial panics are disorders which last but a few months at most, often but a few weeks or days, sometimes but a few hours. Notably, the panic of May 9, 1901, when one of the most astonishing panics in history commenced on the New York Stock Exchange, reached its height, and ended within five hours. It is impossible for a financial panic, no matter how severe, to cause a prolonged industrial depression when the conditions which produce industrial depressions do not themselves exist. A severe financial panic may bring a severe temporary check to the industries, as shown in above cited cases, but such checks will be short-lived. * See Appendix Z. CHAPTER XV ANALYSIS OF THE INDUSTRIAL DEPEESSIONS FROM 1897 TO 1908 THE three periods of recovery, boom, and decline in the industries, during the above twelve years, present a vivid and instructive object lesson. The fact that the first period was not accompanied by any financial disturbance, while the last one was, gives another illus- tration of how soon the public forgets depressions which are not accentuated by a panic. The sequence of perti- nent events which followed the three advances in prices and the three declines in prices, in this twelve-year period, were substantially the same as in the six periods de- scribed in Chapter XIII. This being the case, a detailed description of one will be sufficient to give a clear idea of all of them. We shall, therefore, describe in detail the one from 1897 to 1900.* The decline in the industries in 1907 was unquestionably precipitated by the panic in October, as construction was at its height when the panic occurred; but the microbe of depression had already * On referring to Appendix E, it will be observed that the average price of the four principal grades of iron in five of the chief iron markets of the country in July, 1897, was $9 per ton, and on referring to Appendix Z it will be observed that this was the lowest average price reached in this country during the nineteenth century. For the purpose of conveying a clearer impression of the changes in prices, this lowest price will here- after, be spoken of in this book as zero, and the fluctuations in prices as such and such a percentage above zero. For the purpose of conveying a clearer impression of the changes in production and consumption, the volume of each will be spoken of, not as so much per week or so much per month, but as the per annum rate of each month. For instance, the weekly production of iron during January, 1896, was 203,946 tons, equivalent to an annual production of 10,605,192 tons; therefore, the production of iron In January, 1896, will be spoken of as at "a 10,600,000 tons-per-annum 166 DEPRESSIONS 1897 TO 1908 167 done its fatal work during the high-priced period in 1906, and the disease would have broken out upon the surface in 1908 even if there had been no panic. This will be fully demonstrated later on in this book. THE REVIVAL, BOOM, AND DECLINE, FROM 1897 TO 1900. THE REVIVAL IN 1898 AND 1899 The years 1897 and 1898 constituted a low-priced period.* In January, 1897, pig-iron was 13 per cent, above zero. In July it was at zero, and in December, 1898, it was 11 per cent, above zero. The average price for the twenty-four months was but 8 per cent, above zero. The visible revival of the industries from October, 1896, to May, 1897, although rapid and large, was not more in amount than a natural recovery from the disas- trous effect of the threatened overthrow of the gold basis hi the summer of 1896.f Those who watched conditions closely, however, knew that future-delivery contracts for structural materials had increased enormously, before the zero point was reached in July, 1897, that stocks of con- struction materials, particularly of iron, had been de- creasing since April, and that iron prices commenced to advance in the West and South in August. The far-seeing ones, referred to on page 128, were making large contracts for investment construction as early as the first half of 1897, and it was this investment construction which carried the consumption of iron up to a 12,000,000 tons-per-annum rate during the latter half of that year. This exceeded anything the country had ever experienced, but the movement did not halt rate." Monthly consumption will be spoken of in the same manner. The stock of iron on hand, when mentioned, will be the total of the stocks in yards of the furnace companies and in the yards of the Warrant Com- pany. The statistics of production, consumption, and prices of iron used in preparing Appendices L and Z are from the Annual Reports of the American Iron & Steel Association of Philadelphia; the Monthly Reports of the Western Pig Iron Association of Pittsburg; the Annual Reports of the Cincinnati Chamber of Commerce, and the weekly issues of "The Iron Age" of New York. * See Appendix Z. t Ibid. 168 INDUSTRIAL DEPRESSIONS here. The low-priced period continued all through the year 1898; as long as the low prices continued the con- tracts for important investment construction continued, and by the end of 1899 the consumption of iron had risen to a 15,800,000 tons-per-annum rate. That this was chiefly new construction is evident from the fact that it raised the capacity of the country to a new and higher plane. That it was chiefly contracts for large enterprises is evident from the fact that during these few months it brought into existence factories, mills, etc., which raised the country from a plane of industrial pro- duction which consumed 9,000,000 tons of iron per annum to a plane which consumed 13,000,000 tons. There are no statistics gathered from which we can determine precisely when the contracts were signed for this large volume of extra construction, but we know that the work in producing it was practically finished by April, 1900, from the fact that iron consumption fell from a 15,800,000 tons-per-annum rate to a 10,800,000 tons-per-annum rate within four months from that time. Now, if the average time which elapsed between the signing of the contracts for this construction and the actual completion of the construction was as much as fifteen months and the table on page 114 as well as Appendix L indicate that it was even more than this then the contracts must have been made before the end of 1898, and before iron advanced as much as 10 per cent, above zero. Is it not evident, therefore, that the contracts for investment construction were substantially checked soon after the opening of 1899? The current necessity construction with ordinary repairs and replacements, much of which is made from week to week and without written contracts, was amply sufficient to account for all the materials that were sold at the higher prices. These are the conditions which explain why the manu- facturers of iron and other construction materials realized, during this industrial boom, so small an advance on the materials they manufactured and delivered, notwith- DEPRESSIONS 1897 TO 1908 169 standing the price of iron was advancing rapidly all the way from zero to 147 per cent, above zero.* THE SPECTACULAR ADVANCE IN THE PRICE OF IRON IN 1899 It was the large volume of investment construction thus put under contract so gradually and quietly that no one realized its magnitude, which finally swelled the demand for construction materials so far beyond the capacity of the country to supply, and which ultimately carried prices to such abnormally high figures. Previous to this period, the largest year's production was 9,600,000 tons. In May, 1897, the furnaces of the country were producing it at a 9,100,000 tons-per-annum rate and had on hand 1,102,000 tons. This with the 216,000 tons in the storage yards of the Warrant Company amounted to a visible stock of 1,318,000 tons. This was the largest ever accumulated hi the United States up to this date. In December, 1898, production was at a 13,000,000 tons- per-annum rate and there was still a surplus stock of 705,000 tons. Evidently no one yet realized the large amount of construction which was under contract, for prices were still but 11 per cent, above zero. After this date, however, the demand for materials to supply actual construction increased so enormously that within four months the surplus stock was down to less than seven days' production. Iron advanced to 16 per cent, above zero, in January; to 27 per cent, above, hi February; to 52 per cent, above, in March; to 99 per cent, above, in July, and to 147 per cent, above, in December. THE BOOM IN 1899 During this period of advancing prices, practically every old furnace stack that could be repaired was put in blast. Iron production was increased to a 15,800,000 tons-per- annum rate by November, and the iron stocks were prac- tically exhausted. Old cast and wrought scrap iron, which had for years collected in out-of-the-way places, * See Chapter XI and particularly pages 118 and 119. 170 INDUSTRIAL DEPRESSIONS where in depressed times it did not pay to collect and transport it, was gathered up, transported, and consumed, to the extent of hundreds of thousands of tons. Almost anything asked for iron which could be delivered promptly was accepted. High as the quotations were for iron, large premiums above quotations were paid for any that could be delivered immediately. The boom was at its height, and the indications of its continuance were most pronounced just before the down- turn. People who had waited twelve months to get products which were promised in six, or who had waited two years and sometimes longer to get possession of houses, stores, factories, etc., which were contracted to be completed in one year, were frantic to get possession of them. Builders were urging manufacturers for products, and manufacturers were urging producers of raw materials, who in turn were behind with them. Very little work of magnitude was completed on time. It was simply impos- sible to procure labor and materials to accomplish it. All through the last half of 1899 and the first quarter of 1900, the demand for labor and materials was intense. Money was actually paid to corrupt labor leaders to call a strike on one job and turn the workers upon the job of the party who paid the money. People hooted at the prediction that high prices would stop this prosperity. If high prices could stop prosperity, they said, it would have been stopped long ago. "Had not all branches of actual business increased as prices had increased?" All this time the volume of unfinished work on the existing contracts for investment construction was grow- ing less and less. Not so with actual construction, which up to November, 1899, absorbed everything which could be produced. THE DECLINE IN 1900 All through the high-priced period of 1899, the microbe of industrial depression was doing its deadly work. When the year 1900 opened, the disease permeated the DEPRESSIONS 1897 TO 1908 171 whole foundation of the industrial system; it only re- mained to eat its way through and break out upon the surface. All through the last three quarters of 1899, when bids were handed in on the plans and specifications for the immense amount of construction contemplated, the prices asked were so enormously above what the same work would have cost hi 1897 and 1898, that one after another of the purse-string holders decided not to make contracts for anything but necessary construction until prices dropped back to normal figures. DISEASE BREAKS OUT UPON THE SURFACE IN 1900 By May the disease commenced to break out upon the surface and soon became startlingly visible. Contractors who had bought materials for months ahead had little or no work to put them into; construction materials com- menced to accumulate upon every side; consumption of iron fell from a 15,000,000 tons-per-annum rate in April to a 10,800,000 tons-per-annum rate in August. Sixty- two furnaces went out of blast in June and July, and forty more by the end of October; yet even with this large curtailment in production, 780,000 tons of iron had accumulated by October, and contracting for new con- struction, outside of actual necessities, was almost at a standstill. It was these simple individual acts of the far-seeing investors which were quietly taking place during 1899, unnoticed and unheralded, that turned the tide of visible prosperity in May, 1900. This falling off in the making of new contracts took place so gradually and quietly that contracts had almost ceased being made, months before the country realized it. The sufferers looked for the cause in every place but the right one, probably because the right one was too simple, too commonplace, and was present so long before its effect was visible that it was not recognized and identified. Human nature demanded some great or mysterious cause for so great and mysteri- ous a change. 172 INDUSTRIAL DEPRESSIONS There was nothing new in this falling off in contracting during the height of prosperity, nor hi this mysterious falling off in actual construction about thirteen months afterward. Eight times in the last eighty years the same thing has happened, and always from the same cause, yet the public has each time failed to realize the falling off in contracting when it occurred, or to suspect the real cause of the falling off in actual construction when that occurred. Will any one question the assertion that this great check to investment construction was on account of high prices? Business anticipations were at the highest point; money was in the greatest abundance; the total amount in circulation, the amount per capita, the total deposits, the total cash in banks, and the loans and discounts had never been so great. Crops were tremendous.* There was not a cloud on the horizon. The demand upon archi- tects for plans and specifications for new construction work was greater than they could possibly supply, not- withstanding the fact that their office forces had been largely augmented. In all our search during the first part of 1900 we were able to find but one man who did not expect a continuance of the tremendous rate of con- struction throughout the entire year of 1900, yet in the face of all these favourable conditions, and in the total absence of any recognized unfavorable condition, the industries suddenly fell off in the summer of 1900 to an extent that carried iron consumption down from a 15,- 000,000 tons-per-annum rate to a 10,800,000 tons-per- annum rate. This was substantially from a boom to a depression basis. The whole course of events was perfectly simple. The extraordinary amount of investment construction con- tracted for in the low-priced period, which terminated about June, 1899, kept the business of the country up to its maximum capacity until about July, 1900, at which * Comparative data in this paragraph taken from the United States Statistical Abstract of 1908. DEPRESSIONS 1897 TO 1908 173 time the delayed investment construction was substan- tially completed, and the volume of actual construction dropped back to a depression basis.* It is hardly likely that any generation will furnish a more vivid illustration of the effect of prices upon con- struction, and the effect of construction upon general prosperity, than was crowded into the four-year period between the beginning of 1897 and the end of 1900. If any reader doubts the power of prices over the volume of construction, let him examine carefully Appendix L in connection with the table on page 114. The interpre- tation we put upon this showing is: that the contracts for construction, made chiefly in 1897 and 1898, so greatly exceeded the capacity of the country to execute that it carried prices up to 147 per cent, above zero by December, 1899; that the making of such contracts for purely in- vestment purposes was checked by these high prices, and had about ceased in June, 1899, but that the volume already made was so far in excess of the country's capacity to execute that it required thirteen months after that date to complete them. Immediately after this the vol- ume of construction dropped to a necessity basis, until it was again increased by low prices. THE REVIVAL, BOOM, AND DECLINE FROM 1901 TO 1903 During the decline in the industries in 1900, the price of iron fell within four months from 139 per cent, above zero to 86 per cent, above, and in September, one month later, to 52 per cent, above. The whole decline of the period was from 147 per cent, above zero to 46 per cent, above. This sudden and great fall in prices changed the whole industrial aspect as if by magic. Consumption revived immediately, and by March, 1901, had not only fully recovered, but was greater than ever before.f The re- covery was much quicker than in any previous revival in the nation's history. A great many individuals, firms, * See Appendix L, and Table, page 114. f See Diagram L. 174 INDUSTRIAL DEPRESSIONS and corporations all over the country had plans and speci- fications of constructive work which had been prepared for them in 1899 and 1900, and which they had aban- doned or postponed on account of the high prices then asked. Between these people and the building contract- ors, who had made the bids which had been declined, there were naturally negotiations and many efforts made by the contractors to get these enterprises revived, and most of them were revived during the low-priced period of 1901. ILLUSTRATION In the case of a little community in which the writer spent much time at this period and took the opportunity to investigate, there were twenty-three residences erected from 1898 to 1900, all contracted for during the low- priced period of 1897 to 1898. In the high-priced period, from 1899 to the first half of 1900, plans had been pre- pared and bids made on sixteen additional residences, all of which were declined solely on account of the high prices. In the latter part of 1900 and in 1901, after prices had dropped, these sixteen residences were put under contract and built in 1901 to 1903. This is a typi- cal picture of what was going on all over the country at this time. It was the high prices of construction in 1899 and the first part of 1900 which stopped the building of these sixteen residences. It was the low prices of construction in the last part of 1900 and 1901 which caused the owners to put the work under contract. The great construction of 1901 and 1902 and the spring of 1903 would not have taken place but for the great fall in prices in 1900. SEQUENCE OF EVENTS It is not necessary to repeat here in detail the sequence of events which attended the revival, boom, and decline hi the industries between the autumn of 1900 and the autumn of 1903. In all then* main features they were DEPRESSIONS 1897 TO 1908 175 the same as between the summer of 1897 and the summer of 1900, which have just been described in detail. First came the low-priced period, then the great in- crease in construction contracts, then the great increase in demand for labor and materials, then the short supply of both and the spectacular advance in the price of iron, followed by all other construction materials; then the quiet and unnoticed falling off in contracts for investment construction; then the height of visible prosperity, money in abundance, intense demand for everything in the shape of construction materials which could be produced, and unbounded confidence in the future; then the high pre- miums for articles which could be delivered immediately, in the face of a decline in prices for future delivery; then the completion of the low-priced contracts, followed by the sudden decline in volume of construction. In the period under consideration, prices of iron ad- vanced from October, 1901, to October, 1902, from 54 per cent, above zero to 165 per cent, above zero. When the contracts for investment construction which were made during the low-priced period were completed, the consumption of iron dropped from a 20,200,000 tons-per- annum rate in June, 1903, to a 10,100,000 tons-per-annum rate within six months. TWO OBJECT LESSONS Here we have within six years two remarkable object lessons. During this period, there was no financial panic or other external event of sufficient importance to bring any check to the constructive industries. On the con- trary, both of these checks commenced when the people saw nothing but bright prospects ahead and were pre- dicting a continuance of maximum prosperity. There was absolutely nothing outside of the industries to give warning of these two sudden declines in the volume of the industries. The internal cause, on the other hand, was distinct and prominent, and the effects were direct and emphatic. When the demand for delivery of mate- 176 INDUSTRIAL DEPRESSIONS rials exceeded the supply, prices advanced enormously. When prices advanced, contracts for construction fell off largely. When the volume of unfinished work on contracts grew alarmingly small, prices for future delivery of materials commenced to decline. When the extra volume of construction was completed, actual construc- tion fell enormously. Then followed the flood of alleged causes, which included almost everything but the real cause. THE REVIVAL, BOOM, AND DECLINE FROM 1904 TO 1907 The revival, boom, and decline which took place within the four years from 1904 to 1907 made up a period which was so different in some ways from the two periods just preceding it, or in fact from any former period, that it cannot be passed over by simply referring to it as a repe- tition of any previous period. The United States had but recently made great strides in the accumulation of wealth, which had increased from eighty-eight and one half billions in 1900 to one hundred and seven billions in 1904. This was an increase of eighteen and one half billions in four years, which, in amount, was greater than the entire accumulated wealth of the country in 1860, which was but sixteen and one sixth billions. The bank deposits of the country had increased in this four years from seven billions to ten billions, as against five billions in 1897.* The country had never before faced such conditions. The revival which followed was not like a revival after a financial panic, nor like a revival after many years of depression. It was a revival after two nearby booms, in which the increase in business and wealth had been unprecedented in this country, or in any other country, and it developed features which were peculiar to itself. The two recent booms had both been brought to a sudden end, not by financial panics, nor any other great external calamity, nor by any aggregation of small contributory * Statistical Abstract of the United States. DEPRESSIONS 1897 TO 1908 177 causes, but solely by the abnormally high prices of con- struction. Whenever this cause has existed in any of the industrial nations during the last century, it has in due time and with inexorable certainty brought a sudden check to the industries of that nation. After each of the two booms referred to, the abnormally high prices dropped quickly, and the industries revived quickly, showing plainly that the declines in the volume of the industries had not been caused by an external disorder, and pointing clearly to what the internal disorder was. There was absolutely nothing to cause these two sudden checks to the industries of the nation in 1900 and 1903. except the abnormally high prices of construction. That was all that was necessary to bring the depressions about. That was the one cause, and, when prices dropped at the beginning of 1904, the one cause which checked and held back the vigorous growth of the nation's business was removed, and immediately the industries again bounded forward. THE REVIVAL By referring to Appendix L, it will be observed that during the last boom actual construction increased in volume up to June, 1903, but that prices commenced to fall in October, 1902, eight months before. Between the last-named date and November, 1903, prices had fallen from 163 per cent, above zero to 49 per cent, above zero. Following this there was a period of eleven months (November, 1903, to October, 1904) during which prices of iron held between 49 per cent, above zero and 42 per cent, above. This constituted a period of low prices. The country so recognized it, and during this period the architects, designers, and engineers of the country were flooded with work. What they had experienced in the low-priced periods of 1898 and 1901 was small in com- parison. At no time in the country's history had so many great enterprises been projected. The volume of contracts for new construction during this eleven months 178 INDUSTRIAL DEPRESSIONS was not only greater than ever before, but greater than the public had any conception of at the time. It was greater, because the wealth and available capital were greater. The magnitude of the volume of construction contracted for was reflected in the vastness of many of the new enterprises. Some of them required many months in which to complete the plans and specifications, and many more months in which to do the preliminary work, before delivery of materials commenced to be required for their erection. Some of them did not require delivery of the majority of materials until 1905 and 1906, and even as late as 1907. During the high-priced period of 1902 and 1903, many plans and specifications for new construction had been made which were held back or abandoned at that time on account of the abnormally high prices. Many of these projects were revived and put under contract late in 1903, after prices had fallen, and work was commenced upon them at the beginning of 1904. This started work on an unusually large number of contracts within an unusually short time. The volume of demand for materials for the smaller contracts swelled the early demand enormously, and consumption of iron increased from an 11,400,000 tons-per-annum rate in January, 1904, to a 19,500,000 tons-per-annum rate in April; then, within three months, consumption dropped back to a 12,900,000 tons-per- annum rate (see Appendices L and Z). During all this time the projectors of the larger enterprises were maturing their plans, making contracts for construction, and excavating for huge structures, etc., but the demand for delivery of materials for these greater enterprises did not meet expectations. This was because of the long time it required to complete the plans and do the pre- liminary work. Of this class of enterprise, the new Pennsylvania Railroad Terminal hi New York City is a notable example. The public did not understand the tremendous con- tracting for new construction and the large falling off in DEPRESSIONS 1897 TO 1908 179 actual construction which took place in the summer of 1904 (see diagram, Appendix L). The demand for ma- terials was very satisfactory during the first quarter of 1904, but not so satisfactory during the second quarter. By August the demand for labor and materials commenced to grow. The consumption of iron increased to a 14,- 100,000 tons-per-annum rate during that month. By April, 1905, it had increased to a 23,500,000 tons-per- annum rate. The price of iron advanced to 80 per cent, above zero, and the next month consumption commenced to fall off. By July it was down to a 20,000,000 tons- per-annum rate. Prices dropped to 61 per cent, above zero, and by December, 1905, consumption had risen to a 25,000,000 tons-per-annum rate (estimated),* and the prices to 93 per cent, above zero. By August, 1906, consumption was down to a 22,700,000 tons-per-annum rate (estimated), and prices were 92 per cent, above zero and advancing. From this date, both consumption and prices advanced until May, 1907, when consumption was at a 27,000,000 tons-per-annum rate (estimated), and prices 173 per cent, above zero. When the panic came in October, consumption was at a 27,500,000 tons-per- annum rate (estimated), and prices had dropped to 128 per cent, above zero. * As will be noticed, all rates of consumption after November, 1905, are given as estimated. This is because statistics covering stocks of iron and consumption of iron ceased to be made public at that time. The Ameri- can Iron & Steel Association ceased publishing stocks at the end of 1904, the cessation being explained by the following paragraph, which appeared in their annual Statistical Report for 1905: "By request of leading manufacturers of pig iron, we have this year omitted, for the first time in more than thirty years, the collection of the statistics of unsold stocks of pig iron." The Western Pig Iron Association continued to publish stocks until November, 1905, after which that association ceased publishing. "The Iron Age" also ceased publishing them about that time; the two authorities last named, in answer to inquiries, explained their action by saying, in sub- stance, that so many producers had refused to continue to furnish statistics of stocks on hand, that they found it impossible to gather the necessary information. All these parties continue to give the production; but with- out a record of the increases and decreases in stock it is impossible to arrive at the rate of consumption. 180 INDUSTRIAL DEPRESSIONS From the above, or more clearly from diagram, Appen- dix L, it will be seen that the advance in prices during the last quarter of 1904 was followed by a falling off in con- sumption in the second quarter of 1905, and that the advance in prices in the last quarter of 1905 was followed by a falling off in consumption in the second quarter of 1906. This was while there were still some reserve stocks on hand, and before the heavy demand for materials for the large enterprises referred to on page 178 had out- stripped the capacity of the country to supply; but after the reserve stocks were practically exhausted, prices ad- vanced rapidly, and by December, 1906, they had reached 172 per cent, above zero, in which neighborhood they remained until May, 1907. THE BOOM With every large increase in investment construction comes a large increase in necessity construction. The increase in necessity construction does not lead, but it follows surely. When the abnormal demand for delivery of the materials contracted for to erect the investment construction comes, with its resultant high prices, it stimulates the increase of capacity to produce these materials. This brings about the building of new fac- tories, furnaces, mills, etc., as well as the enlargement of old ones. This increases the contracts for necessity con- struction, even in the face of high prices and a falling off in investment construction. High prices do not have as much influence on necessity construction as they do on investment, for the former must be carried forward whether prices are high or low. The demand for mate- rials for necessity construction grows and feeds upon itself when it comes, and may be even larger in volume than investment construction for a time, but it is of shorter duration. It swells the demand for labor and materials, however, and must pay the high prices while it exists. The investment demand, which is controlled almost DEPRESSIONS 1897 TO 1908 181 entirely by prices, is, however, the governor of the volume of all, for when that is completed and experiences its sudden decline in volume, the stimulus for the large increase in necessity construction ceases, and that, too, experiences a large decline in volume. The consumption of iron during this revival rose from a 12,900,000 tons- per-annum rate in July, 1904, to a 27,500,000 tons-per- annum rate in October, 1907. THE DECLINE When the financial panic of October, 1907, occurred, consumption of iron dropped from a 27,500,000 tons-per- annum rate to a 12,500,000 tons-per-annum rate, within three months. Factories, furnaces, mills, and industrial machinery generally all over the country received a sudden check, and a great army of breadwinners was again thrown out of employment. There was no flood of untenable alleged causes in the United States to account for this sudden depression of the industries, as it was perfectly evident to every one that it was the result of the panic; but the industrial nations of Europe soon after suffered from a sudden de- cline in their industries, and those nations experienced no panic; therefore, the flood of untenable alleged causes had full sway in those countries. This is good evidence that the people were at a loss to account for the depres- sion in those countries, and that it was not, in those coun- tries, the effect of an external, known, or acknowledged cause. Now the United States, as well as the four industrial nations of Europe, had experienced a period of abnor- mally high prices in the first half of 1907, similar to the periods of 1899 and 1902 (see diagram, Appendix L); therefore, if the theory on which this treatise is founded is correct, the industries of all these other countries as well as of our own country must have been in a condition of impending depression from purely industrial causes, when the panic of October, 1907, occurred in the United 182 INDUSTRIAL DEPRESSIONS States. The events of 1907 in the United States should therefore be analyzed to find out if the facts confirm this theory. Analysis of this period shows that contracts for in- vestment construction commenced to fall off during the latter part of 1904, but that contracts for necessity con- struction continued in large volume through 1905 and 1906. The whole volume of contracts for construction, as far as actual cubic quantity is concerned, however, was less in 1906 than in 1905, and less in 1907 than in 1906. The amount of construction contracted for in 1907 was surprisingly small in comparison with 1904, when actual quantity is considered. In fact, analysis shows that the volume of contracts for unfinished construction in the United States by September, 1907, the month before the panic, had fallen so low that it had almost reached the necessity basis ; while as noted above, actual construc- tion was at that time just the reverse, that is, at the highest point for the entire four years. The microbe of industrial depression commenced its work in this boom as early as December, 1904, when the contracting for investment construction first commenced to fall off. This class of contracting revived somewhat in the spring and summer of 1905, but fell off rapidly after that time. Long before the beginning of 1907, the far-seeing ones had ceased making such contracts. The contracts for construction made in 1907 were confined almost entirely to necessity construction, and a small amount of investment construction indulged in by in- vestors who were less prudent than the far-seeing ones. Month after month, in 1907, the unfinished work on existing contracts was growing less and less, while month after month the actual construction was growing greater and greater. Construction contracts, as we have shown, are neces- sarily made months and years before the actual work they involve is completed, hence it follows that the making of construction contracts must shrink to a minimum DEPRESSIONS 1897 TO 1908 183 months and years before the work they involve shrinks to a minimum. This shrinkage in the volume of contracts for invest- ment construction in 1906 and 1907, and shrinking in the volume of contracts for necessity construction, was apparently not even dreamed of by the public. They only saw the immense and constant increase in actual construction. The country should know every month the amount of unfinished construction on the whole volume of existing contracts for construction, just as the builders of battle- ships and other large structures know from month to month just what percentage of their respective construc- tions is completed, and what percentage is still to be executed. CONDITION OF THE INDUSTRIES IN 1907 AS SHOWN BY THE BUILDING PERMITS OF SIXTY CITIES Unfortunately we have no system of gathering statistics to warn the public of the silent, rapid, and inexorable lessening of the amount of unfinished work on existing contracts, and no reliable statistics of the great falling off in the making of new ones. Everything upon the surface seems to indicate just the reverse of what is actually taking place. The only statistics we have at the present time which give any basis for even an ap- proximate estimate of these conditions are the quarterly reports of the United States Steel Corporation, giving the " Unfilled Orders on Hand" of its subsidiary companies (see Appendix Q), and the monthly and annual statements of "The American Contractor," of Chicago, giving the building permits of some sixty cities (see Appendix P).* As will be observed, the building permits issued by these sixty cities in 1906 amount to a total of $667,032,499, and in 1907 to a total of $580,492,196, showing an apparent loss of but $86,540,300 for the year. * Since the above was written, the Department of Commerce and Labor has commenced to gather and publish statistics of the Building Permits. 184 INDUSTRIAL DEPRESSIONS The probability is that most people who saw and read this report of building permits were impressed with the idea that these statistics indicated that there was more than enough business hi prospect to employ the whole capacity of the country as soon as the effect of the panic was over. They probably knew that the amount of con- struction contracted to be executed in 1906 and 1907 proved to be greatly in excess of the capacity of the country to execute in those years, and, as the figures in the above paragraph showed a loss of but 13 per cent, between the two years, the natural inference must have been that there was as much in prospect for 1908 as the country would be able to execute. Let us analyze this report, and find out what it really did indicate. ANALYSIS OF BUILDING PERMITS Now it is the quantity of construction and not its cost in dollars and cents which gauges the amount of labor em- ployed and the amount of materials consumed. If a given structure were built in 1898 at a cost of $10,000, and the exact duplicate of that structure were built in 1907 at a cost of $20,000, it increased the building permit list, in the last year, 100 per cent, in the city where it was taken out, but it did not provide one hour more employment to the breadwinners who were connected with its erection, or consume one particle more of construction materials. If, therefore, we would know the true significance of the relative amount of building permits of these sixty cities for the years 1906 and 1907, we must reduce both years to the same level of prices, as these building permits are supposed to represent the cost of the proposed construc- tion at the time the permits are applied for, and the cost of construction was much higher in 1907 than in 1906. By reference to Appendix E, it will be observed that the average price of iron per ton for the years in question was $18.34 in 1906 as against $22.40 in 1907, an advance of 21-jVo- per cent. Taking this as the gauge of the DEPRESSIONS 1897 TO 1908 185 cost of construction, and reducing the two years to the same basis, on this percentage we find that the loss of 1907 over 1906, on a quantity basis, was equivalent to $231,019,542, or something over 34 per cent. Now, as a rule, the largest amount of building permits for each year are taken out from March to July, inclusive. In the reports we have before us, of one of the largest Ameri- can cities,* the sum total of those taken out in these five months is 58 per cent, of the amount taken out in the whole twelve months. If, therefore, the usual custom prevailed, and as much as 58 per cent, of the permits for each year were taken out in March to July, during which period the average price of iron was $16.75 per ton in 1906, as against $23.99 per ton in 1907, then the amount covered by the permits taken out in the year 1907, on a quantity basis, was equivalent to a loss of $286,823,974, which was 43 per cent, less than hi 1906.f By reference to the diagram in Appendix L, it will be observed that the necessity construction for 1907, represented by the space between the line (7, the line B, and the side lines V and TF, was equal to about two thirds of the whole construction of the country for that year, and that as the building permits taken out hi 1907 showed a falling off of from 34 per cent, to 43 per cent, below the permits taken out in 1906, construction contracts were actually down to, or below, the necessity basis hi 1907; hence the actual construction of 1908 would have been down to a necessity basis, even if there had been no panic. From this analysis, it seems to be clear that what appeared upon the surface of the statistics of building * Philadelphia. t Any estimate made on these figures must necessarily be merely an approximate estimate, as there is no data giving the exact percentage of difference in the average cost of general construction between the two years. If the average advance in all things entering into construction was the same as the advance in iron, and the permits were taken out in the usual monthly proportions, then the falling off in quantity between 1906 and 1907 would be forty-three per cent. 186 INDUSTRIAL DEPRESSIONS permits to be good evidence that the business of 1908 would have been up to the full capacity of the country had there been no panic, was in fact conclusive evidence that the year 1908 would, hi any case, have recorded the beginning of another period of industrial depression hi the United States. CONDITION OF THE INDUSTRIES IN 1907 AS SHOWN BY THE UNFILLED ORDERS OF THE UNITED STATES STEEL CORPORATION The quarterly reports of the United States Steel Corporation of the " Unfilled Orders on Hand" referred to on page 183, are on some accounts more satisfactory to make estimates from than the building permits of the sixty cities, as the Steel Corporation's output represents about 50 per cent, of the entire business of the country in its particular line of production, and therefore reflects the volume of the country's entire business. Then, too, the figures are given in quantities, instead of market values, hence they are free from any uncertainties as to the volume of business they indicate. On reference to Appendix Q, it will be observed that on December 31, 1906, the unfilled orders of that corporation amounted to 8,489,718 tons, while on September 30, 1907, which was before the financial panic, they had decreased to 6,425,000 tons. This shows a falling off of 24 per cent, in nine months. If there had been no panic and this rate of decrease had been kept up during the next three months and there is no reason to believe that it would not have been it is quite clear that the country would have entered the year 1908 with a reduction of 32 per cent, within twelve months hi contracts for construction materials. By re- ferring again to the diagram in Appendix L, it will be observed that this would have brought the country's contracts for construction down to a necessity basis in January, 1908. This being the case, it is clear that the country would have been in a condition of industrial DEPRESSIONS 1897 TO 1908 187 depression soon after January, 1908, even if there had been no panic. REMARKS From these facts it is clear that the theory referred to on page 181, to the effect that an industrial depression from purely industrial causes was pending in this country when the panic of October, 1907, occurred, was abun- dantly confirmed by the evidences given of the reduced amount of unfinished construction work remaining when the panic came, and by the continuance of the depression after the panic effects had passed away. The condition of a large decrease in the contracts for construction over a long period, at the same time that there is a large increase in actual construction, was not peculiar to this last boom nor to this country. It has existed in all of the industrial booms of the last cen- tury, in all of the industrial nations. This is the con- dition which so invariably deceives the public towards the end of each boom period, and 'causes it to be confi- dent that there is a long period of assured prosperity ahead, whereas, if the true conditions were recognized, it would be known that the microbe of industrial depression had already done its deadly work, that the whole indus- trial system was saturated with the malady, and that the malady itself would soon make its presence known by breaking out upon the surface. This was the condition of the industries during the height of visible prosperity in 1899, again in the height of visible prosperity in 1902, and again during the height of visible prosperity in 1907, and this condition has always been followed by an industrial depression. An industrial depression solely from industrial causes was impending in all the industrial nations during the latter part of 1907, and it soon made its appearance in all of them, although a financial panic occurred in but one of them. The panic undoubtedly precipitated the depres- sion in this country, but only by a very short tune. 188 INDUSTRIAL DEPRESSIONS Adam Smith maintained, more than a hundred years ago, that low prices stimulated consumption and high prices checked consumption. He did not mean that this applied to small things and necessities only. He meant that it was true of all things in which people invest their money. All men see from day to day that it is true of small things, but of construction, appearances seem to indicate that the reverse of the rule is true. Our analysis satisfies us that it is not only true of all things, but that construction is even more sensitive to this motive than are necessities or small things. We believe that small fluctuations in price are as certain to influence the volume of what we call investment construction, as are small fluctuations in the Bank of England's discount rates certain to influence the volume of the Bank's loans. PART IV DEDUCTIONS DRAWN FROM THE RESULTS OF ANALYSIS CHAPTER XVI DEDUCTIONS DRAWN FROM THE RESULTS OF ANALYSIS IF the ups and downs of the business of the industrial nations were still controlled by large and small crops, or were controlled by some celestial or terrestial force, or by some cause which occurred with simple or compound cycles of periodicity, it would be possible to make some predictions as to how long any depression would last. The most exhaustive analysis, however, does not show the least evidence of any uniformity as to the length of time which has elapsed during any stage of these ups and downs. The following table gives the approximate length of tune between the different stages of the ups and downs hi the nine booms and depressions between 1835 and 1907 hi the United States: Years of largest con- struction Number of years occu- pied in the down grade Number of years of low prices Number of years occu- pied in the up grade Special features 1835 7* 3 4| Panic in fall of 1837. 1847 4* 2* 4* * 1856 5 2* 3 Panic in 1857. 1864 5 2 3 * 1872 6 2J 3 Panic in fall of 1873. 1881 15 3 3 Five financial disturb- ances between 1890 and 1896. 1899 H 1J 3* 1903 1 2 si * 1907 Panic in fall of 1907. * Only minor financial flurries. As will be observed, this table shows no uniformity in the length of time which has elapsed during any stage of the ups and downs. The periods of depression vary from 191 192 INDUSTRIAL DEPRESSIONS one to fifteen years, the periods of recovery from three to four and one half years. Among the several notice- able features shown by this table, is the fact that hi the depression periods, which were accompanied by one or more financial panics, the time occupied by the down grade, or depression, has usually been much longer than when such periods were not accompanied by a panic. The longest period (1881 to 1899) was accompanied by five financial disturbances. This would seem to be a quite logical result,; but it cannot be claimed as a rule or a necessary consequence, as the period following 1864 was an exception. That period of depression, though not accompanied by a panic, was as long as the next period before, which was accompanied by a very severe panic. As there is no uniformity in the length of a boom, so there is none in the length of a depression. Both are simply business movements governed by business condi- tions; these business conditions are constantly changing, and consequently there are no two booms or depressions found which are alike in the length of time they occupy, nor can any two be found which are exactly alike in all their general features. People pay out their money for food, clothing, fuel, and lights, with a near approach to regularity, but the people who have surplus funds pay these funds out hi the construction of buildings, railroads, ships, etc., with great irregularity. All revivals of construction have been on low prices, but no uniformity can be discovered as to how low prices must go before a revival takes place. On reference to Appendix Z, it will be seen that eight of the eleven revivals have been on prices of iron which were lower than ever before. The three exceptions occurred as follows: one in 1871, when the price was 50 per cent, higher than the lowest previous price, which was in 1861 ; another occurred in 1901, when the price was 32 per cent, higher than the lowest previous price, which was in 1897, and a third occurred in 1904, when the price was 28 per cent, higher than the lowest previous price in 1897. DEDUCTIONS FROM ANALYSIS 193 In the face of all this absence of regularity of conditions in the past, it would be a wise man who could at any time predict when, or on what basis of prices, a revival of con- struction would take place. The only thing that can be calculated upon with certainty, is that a depression caused by high prices of construction will not come to an end until prices of construction again drop to such a low figure that the far-sighted individuals who control the purse-strings of the country believe them to be at or near the bottom and too low to continue. EFFECTIVE DEMAND We have seen that, with the entire force of industrial breadwinners continuously at work, producing the largest possible quantity of the objects of permanent wealth, it would be impossible for them to produce more than man would have the means to acquire, or more than he would have the desire to possess (see page 41). In these facts lies the rock of industrial safety, for in these facts we have evidence that a continuous condition of maximum pro- duction of the objects of permanent wealth is not only natural but practically possible, and maximum production of the objects of permanent wealth is prosperity. Maximum production, however, will not long continue, unless it is supported by maximum sale. The experience of the past shows that as long as prices are low, and people believe they are gaining by purchasing, they will continue to purchase, and prosperity will continue; but just to the extent that prices go so high that people believe they will lose by buying, just to that extent they will stop buying, and, if this condition is continued, depression will result. Prosperity, therefore, does not depend upon the pro- ducer's ability to manufacture and his desire to sell, but upon his ability and willingness to sell at a price that will induce the purse-string holders to purchase. Therefore, prosperity depends upon an effective demand. Now effective demand is defined as "a desire for an article, and the possession of some equivalent to be given for it." 194 INDUSTRIAL DEPRESSIONS This description may seem sufficient to the theorist, but to the practical mind it lacks a most important feature. For instance, when the depressions of 1900 and 1903 occurred, the ever-present desire for such objects of wealth as constructive products existed to the fullest extent, and the existing means to pay for them was greater than ever before hi the history of the country. Notwithstanding these conditions, the demand fell off enormously, simply because the producers were either not able or not willing to sell at a price which the investing purse-string holders were willing to pay. Political economy should have accurate and exact treatment, otherwise the conclusions reached will not be accurate. The desire for an article and the possession of an equivalent to give in exchange for it may exist in the greatest abundance on the part of the purse-string holders, but if it is not met by producers with the article desired, and the ability and willingness to sell it at a price the purse-string holders are willing to pay, maximum production will not long continue, and, if this condition is not changed, depression will certainly result. For illustration of the opposite conditions, turn to the low-priced periods of 1897, 1898, 1901, and 1904, when there existed a genuine effective demand, namely, the coming together of purse-string holders and producers. The first had a desire for objects of construction, with the means to give in exchange for them, and the second were able and willing to supply such objects at prices which the first were willing to pay. These are the ideal condi- tions of prosperity, and whenever and wherever they have existed, unless prevented by external and recognized derangement, they have resulted in prosperity, and the prosperity has continued as long as these conditions existed. But as soon as prices advanced to figures which the purse- string holders were not willing to pay, the effective demand ceased to exist. CHAPTER XVII MAGNITUDE OF THESE DEPRESSIONS, AND DANGER THAT THE VALUABLE LESSONS THEY SHOULD TEACH WILL BE LOST AN industrial depression which throws out of employ- ment one out of every five of the breadwinners of this country is a great calamity. It is a loss at the rate of over $3,000,000,000 in the annual earnings of the people, an amount nearly equal to the value of all the gold and silver taken out of the western continent since it was discovered by Columbus. As the country grows in popu- lation and wealth, the magnitude of these calamities grows. As labor becomes specialized, and as the control of the great industries becomes centralized, the helpless- ness of those who are thrown out of employment becomes greater. What has already grown to be a serious matter may grow to be a dangerous matter. The United States has experienced eleven of these calamities within eighty years. Is this not enough? Must the country suffer from eleven more before it will make a persistent effort to satisfy itself what the real cause is? Will the opportunity to identify the true cause be any better at the end of another eighty years? It is the magnitude of these disasters which measures the im- portance to the industrial nations of knowing why they come and how they may be avoided. If it be true that these depressions are caused by the abnormally high prices of construction, can the government or the people afford to spare any expense or trouble to satisfy them- selves of this truth, and, if possible, prevent these depres- sions in the future? A thorough analysis of any one of the depressions which 195 196 INDUSTRIAL DEPRESSIONS has occurred during the last fifty years would have revealed the truth, but, after each one, the great flood of untenable alleged causes, born of synthetic reasoning, has buried the real cause out of sight. The same danger now threatens to deprive the country of the valuable lessons the last depressions should teach, and, what is still more fatal, every depression, except those caused by or accompanied by panics, has been belittled or ignored, until a large part of the public has come to believe that we can get rid of depressions by simply doing away with panics. This they think we are in a fair way to accomplish, and so little or no effort is now being made, either by govern- ments or by individuals, to study the cause of depressions. It is reasonable to believe that industrial depressions may be eradicated from the industrial system as many maladies are eradicated from the human system. To accomplish this, the disease must be located, the microbe identified, and an effectual remedy discovered and applied. In the present case, the people do not understand even the nature of the malady, its location, or the character of the microbe. To convince the people is, therefore, the first and most important step in the work of preventing these calamities in the future. DANGER THAT THE NATION WILL LOSE THE VALUABLE LESSON THE TWELVE-YEAR PERIOD SHOULD TEACH There will probably never be a period in the future when low prices of construction and high prices of con- struction will have a clearer or more vivid illustration of their dominating influence over the increases and de- creases in the industries of the nation than in the two periods of revival and decline between 1896 and 1903. During these periods hundreds of the contributory causes of prosperity and depression were in existence, and each had its due influence, but they counted as nothing in the presence of the one great controlling influence of high and low prices of construction. Rigid analysis shows that the connection between the cause and the effect was in MAGNITUDE OF DEPRESSIONS 197 each case prompt, positive, clean-cut, and inexorable. In each case, when prices were low and stable for any considerable period, contracts for investment construction were made in greater volume than ever before in history. When prices advanced, this class of contracting was reduced to a minimum, and, when the extra construction was completed, there was not enough remaining to absorb the available supply of labor and materials, and the booms quickly came to an end. The dominating influence of the high and low prices of construction was just as perfect in the period of revival, boom, and depression, between 1904 and 1907, as it was in the two periods just before. The only difference was that the pending falling off in actual construction did not have an opportunity of revealing itself as independent of the panic of October, 1907, in consequence of its having been preceded and overshadowed by the vivid and startling occurrence of the panic. A glance at the diagram in Appendix L will make it clear that the two short depressions of 1900 and 1903 were as severe while they lasted as the longer one which com- menced with the panic of October, 1907. In fact, they carried the rate of construction down to even a lower point, and the newspapers teemed with accounts of the great distress and of the thousands of idle workmen all over the country. "The New York Herald" of October, 12, 1903, states that the falling off in building operations in eight cities amounted to $42,500,000 in nine months, as compared with 1902, including $10,000,000 hi New York (Manhattan) and $14,000,000 in Chicago. It also mentions the great number of projected buildings for which permits were obtained, but the projectors " changed their minds, " and adds, that in cities where the building permits showed a gain the actual building showed a loss. In New York there was a great strike in the building trades in progress in 1903, and the large falling off in con- struction was attributed entirely to this strike. The absurd feature of this claim was that the falling off was 198 INDUSTRIAL DEPRESSIONS greater in Chicago, where there was no strike, than it was in New York. In fact, in an article in "The New York Commercial Advertiser" of October 8, 1903, it was stated that Chicago had not been so free from labor troubles for a long time, and that there were probably not 300 building tradesmen on strike, and yet the falling off in Chicago was $14,000,000 against $10,000,000 hi New York. The fact was that the strike in New York stopped work on many of the structures a few weeks before the large volume of investment contracts were completed, and by that much time delayed the impending falling off in construction in New York. In Chicago and the country generally, the buildings were completed without any interruption, after which workmen were discharged in large numbers, simply because there was not enough construction remaining to keep them employed. It would have been the same hi New York, had there been no strike. The two depressions of 1900 and 1903 are particu- larly valuable for analysis: first, because of their great severity; second, because of the entire absence of any serious external depression cause to influence the sequence of events, and, third, because of the short time they covered, and hence the number and rapidity of the illustrations of the inexorable sequence of the real cause and its effects. Among the most noticeable features of these two short depressions was that they occurred in all five of the indus- trial nations contemporaneously, and that a great number of articles were published in each one of them attributing the depressions to a number of local alleged causes peculiar to the respective nations. They lost sight, apparently, in each nation, of the fact that the four other industrial nations were also suffering from like depressions. This should have at least created the suspicion that the same cause might be responsible for the depressions in all of them. Another noticeable feature was the almost total absence of any hint from any source of what the real cause was. MAGNITUDE OF DEPRESSIONS 199 There is great danger that the two severe depressions of 1900 and 1903, which were not attended by panics, will be so belittled and ignored that they will in time be practically forgotten, and that history will tell of "the great eight-year boom of 1899 to 1907, which was brought to an end by the panic of October, 1907." Thus the valuable lessons which were so vividly illustrated in the twelve-year period may be totally lost to the world, as were the depressions which were not accompanied by panics from 1832 to 1885. The premonitory symptoms of this tendency are already cropping up in many direc- tions. In the annual review of an important association, published in June, 1902, occurs the following sentence: "The era of unexampled prosperity for the industries of this country, which may be said to have been ushered in at the beginning of 1899, when an active demand for iron and steel was suddenly developed, accompanied by rising prices, has continued from that day to this, and at no time has it been more noticeable or more fruitful of good result than when these lines are written in May, 1902." Again, in an annual report at the close of 1907, the same authority writes: "The year 1907, which is drawing to its close as this report is written, has witnessed the sudden culmina- tion of the period of remarkable and long-continued pros- perity which was ushered in early in 1899"* As will be observed, both the periods of depression in 1900 and 1903 are ignored. In fact, the substance of the wording of these clauses is to the effect that they did not take place. In the first of these two ignored depressions, the consumption of iron in the United States fell off from a 15,800,000 tons-per-annum rate to a 10,800,000 tons- per-annum rate. In the second period, consumption of iron fell off from a 20,200,000 tons-per-annum rate to a 10,100,000 tons-per-annum rate, and this meant in each case that construction fell off in proportion. These depressions were not confined to the United States they visited all the industrial nations. They came from * The italics are the writer's. 200 INDUSTRIAL DEPRESSIONS the abnormally high prices of construction in all those nations. There was no other event of sufficient force to have caused these depressions in any of the industrial nations, and the depression not only ceased soon after the high prices of construction ceased, but throughout the whole period the fluctuation in the volume of contracts for construction kept pace with the fluctuation in the cost of construction. In Germany, iron prices were controlled by a powerful syndicate, which kept prices up hi the face of a quick decline in the other nations, and the result was that the depression was more severe and prolonged in Germany than in the other nations. In both of these ignored depressions, the industries were cut down lower in volume in the United States than they were by the financial panic of October, 1907, as shown by iron consumption, which was reduced to a 10,800,000 tons-per-annum rate in 1900, and to a 10,100,000 rate in 1903, as against a 12,500,000 tons-per-annum rate in 1908. The distress among the breadwinners of the land, while the depressions lasted, must have been greater in the two former periods than it is at present, for the volume of construction was then smaller. The only difference is that in the last instance there was a vivid and startling panic. Then, too, we can see much more clearly what is near at hand than what is far removed. The depressions of 1900 and 1903 are in the past. We do not realize the distress of those periods as sharply as we do the distress of to-day, but the depressions existed, and, as they were of great severity while they continued, belittling or ignor- ing them cannot alter the facts. The effect this covering up of facts has in blinding the people and preventing their realization of true conditions is, however, most deplor- able. The depressions of 1900 and 1903 were the shortest on record that were caused by purely industrial derange- ments, yet the backset these two depressions gave to the constructive interests of the country was such that it was fifteen months and eighteen months, respectively, MAGNITUDE OF DEPRESSIONS 201 before the loss in industrial activity (as indicated by the monthly rate of iron consumption) was fully restored.* UNHEEDED WARNINGS For some months before the two sudden declines in the country's construction enterprises in 1900 and 1903, there had been among the news items from many parts of the country several articles giving the names of large railroad corporations which had decided, on account of the high prices, to cut down enlargements and improve- ments to actual necessities. One railroad president, in a statement made in November, 1902, relating to the cur- tailment already made by his road, was reported in the daily papers as having stated that the cost of railroad supplies had increased 80 per cent., 150 per cent., and 237 per cent, above the prices of 1897. This curtailment was an indication of what was going on all over the country among individuals, and among small corporations as well as among large ones. But these news items made little impression upon the public mind. What the public saw all about them was much more impressive. What they saw was, that consumption of iron actually increased from a 17,600,000 tons-per-annum rate in January, 1903, to a 20,200,000 tons-per-annum rate in June, though this was many months after these news items were published. Was what they saw not evidence enough to the public that high prices do not affect construction? Is it not clear that it will be no easy matter to break down opinions formed upon such plausible evidences as one's own eyesight? In both 1900 and 1903, when the depression came, there was hardly a suggestion from any source of what the real cause was. On the contrary, the flood-gates of untenable reasoning were thrown wide open. There were almost as many different reasons given for the collapse as there were writers upon the subject. In a review of the 1903 collapse, the editor of one of the great periodicals, which reaches every state and territory in the Union, attributed it * See Appendices Z and L. 202 INDUSTRIAL DEPRESSIONS to a number of causes, viz., "unsuccessful underwriting schemes," " doleful predictions about the crops, " "drought in the east," "weakness in iron and steel created appre- hension among iron-consumers," "unsatisfactory condi- tions of market for securities caused railroad companies to postpone projected improvements," etc. ; the writer of the article, being apparently totally unmindful of the fact that for many months before, and while money was easy for them to borrow, most of these railroads had not only stopped contracting for everything but necessary improve- ments, but had publicly and repeatedly given high prices as their reason for so doing. All these warnings were unheeded when they were given, because actual construc- tion was at its height. After the collapse came, these warnings seem to have been totally forgotten. Perhaps one reason why high prices are not recognized as the cause of these depressions is, that every one who has anything to sell, whether it be commodities, skill, or personal services, wishes high prices, and so are not dis- posed to disparage a condition which they personally desire to see continued. We notice that in market reports, during depressed periods, current prices are compared to boom figures, and are spoken of as having declined such and such a percentage. No one seems disposed to mention what percentage current figures are above old low prices. This manner of reviewing markets is most soothing to one's feelings, but not calculated to enlighten one as to actual conditions. CHAPTER XVIII ANOTHER DANGER TO BE COUNTERACTED A NOTHER danger, which must be headed off and dis- <** sipated, is the tendency to believe that modern methods have so changed conditions that these calamities are not likely to come again. This is perhaps the most serious danger of all, for wherever it gains lodgment, there all forethought and effort to make wise and adequate provisions towards preventing these depressions will cease. After every depression thus far, people have soon drifted back into the same habit of deluding themselves with the idea that the abnormal conditions which brought on the abnormal advance in prices can never again recur. These delusions have come so often, and they have fol- lowed the ups and downs in the country's business with such persistent regularity, that we know of no better name to give them than " Cyclic Delusions." We will describe two of them, which pertain to prices. CYCLIC DELUSION NO. 1 "VERY HIGH PRICES WILL NEVER COME AGAIN" Each time that pig iron has experienced several years of low prices, there comes a general belief that the price of iron will never again reach abnormally high figures. This belief becomes almost universal. It is harped upon during the entire period of low prices. If you attempt to combat it, all your arguments and statistics are simply swept aside by the declaration that " conditions now are different from what they ever were before"; but the very high prices come again, notwithstanding, always from the same causes, and following the same train of events. The price of pig iron advanced in this country: 203 204 INDUSTRIAL DEPRESSIONS From $38.00 in 1823 to $75.00 in 1825 " 35.00 1833 70.00 1837 " 23.00 1843 52.50 1845 19.00 1852 42.50 1854 20.00 1861 80.00 1864 30.00 1871 61.00 1872 19.00 1879 41.00 1880 9.00 1897 22.25 1899 " 13.15 1900 23.84 1902 " 12.33 1904 24.50 1907 Here are ten distinct refutations of the general belief. Six of these occurred within the recollection of the writer and of many others still in the iron business, and yet, just as soon as the price of iron sinks to very low figures again, the same belief will take possession of the public mind, and will be maintained by the same plausible reason, that "conditions now are different from what they ever were before." Conditions are always different from what they ever were before, and always will be, because the world moves, and changes as it moves, but the law of supply and demand has not changed and never will. High prices for iron will return with each general revival of indus- tries, just as long as it is impossible to supply a greatly augmented demand, when the demand takes place. ILLUSTRATION Soon after the beginning of the boom of 1899, when iron had advanced only about $2 per ton, against little or no advance in cost, the Vice-President of one of the largest furnace companies producing iron for the market called upon a friend in New York City. After telling him of the large profit his company was making, he said that its officers had decided to hold prices where they were, and prevent any further advance, by taking orders at current prices as far ahead as their customers wished to contract. "But," said his friend, "what will happen when your company and all the other furnace companies have taken orders for all they can produce for six months or a year ahead, and then it turns out that several million tons CYCLIC DELUSIONS 205 more are needed by the consumers within that time?" This question was as good as a prophecy for iron^advanced $14 per ton instead of $2 within the year., On page 117 an account is given showing how the United States Steel Corporation in 1901 attempted to check the advance in steel, when it was about 65 per cent, above the low price of 1897, yet during the next year prices in the general market advanced to 124 per cent, above the low price of 1897, although the Steel Corpora- tion held to the price agreed upon. The iron-producers not only do not anticipate these abnormal advances, but previous to their occurrence they do not believe them possible. There are many conditions that contribute to this belief. For instance, in 1874, iron-producers pointed to the fact that an iron-furnace then made 50 tons per day, while, ten years earlier, furnaces made but 8 to 18 tons per day. This increased capacity, they argued, would prevent any abnormal advance in the future, but the 50-ton furnaces were as inadequate for their time as the 8 to 18-ton furnaces were for their time. In 1886 they reminded you that furnaces were then producing 200 tons per day, instead of 50. In 1897 they reminded you that iron-furnaces were then producing as much as 700 tons per day, and in each case they con- tended that this wonderful improvement would prevent iron ever again reaching abnormally high figures. But the abnormal prices have continued to recur, and will continue to recur , just as long as the conditions which produce them continue to exist, and so will the great booms and depressions. Remove the cause, and the results will disappear. As stated on page 204, we have had ten refutations of the oft-recurring convictions that abnormally high prices will never again occur. We may calculate, with substan- tial certainty, that this fallacious conviction will come again, unless the business men of the country take the necessary time to analyze the facts and realize the truth. Can you find any one to-day who will say he believes we will ever again have an advance of from 100 per cent, to 206 INDUSTRIAL DEPRESSIONS 300 per cent, in the price of iron? Could you have found such a person in 1897? What is to prevent another such advance? The last advance was the greatest in history; it occurred when we were on a gold basis. The only other advance which compared with it was during the civil war, when gold was at an enormous premium. The causes which produce these advances are increasing in power, not decreasing. Look at the facts. From 1890 to 1897 the annual production of iron in this country was on a plane of about 9,000,000 tons; within the next decade it jumped to a plane of about 25,000,000 tons. Have we any reason to believe that the next jump will not be as great? Atten- tion has been called elsewhere to the fact that the rate of increase in iron production in this country was equal to 143 per cent, in the decade from 1895 to 1905, as against 114 per cent, per decade in the forty-one years from 1864 to 1905. There is nothing in these facts nor in any of our surroundings to indicate that the industries have reached their culminating point. Just the reverse. Dr. Wm. Kent, in "The Iron Trade Review" of January 10, 1907, states that, if the future rate of increase should be but 100 per cent, per decade, the production in this country will amount to 66,000,000 tons per annum by 1920. We know that the capacity to produce iron at the pres- ent time (April, 1911) is in excess of the demand, and in all probability we will rest content with that knowledge, and when the next boom comes the demand will undoubt- edly quickly outstrip the supply, as heretofore. Of course, no one now looks for any such occurrence to take place, nor did they ever look for it in the past. But it has occurred already nine times. Then, too, there are the delusive figures of the "furnace capacity" of the United States. These figures un- doubtedly tend greatly to mislead the iron-producers as well as the public. In April, 1898, the furnace capacity of the country was officially reported at 19,081,000 tons per annum, and yet when the boom came the following CYCLIC DELUSIONS 207 year, and prices advanced to 147 per cent, above zero, the furnaces were able to produce only 13,620,000 tons. Now, if at the time of the next boom the claimed capacity to produce iron falls as far short of the actual capacity as it did in 1899, and the usual increase in demand takes place, it is perfectly apparent that we will then have another famine in supply and another enormous advance in the price of iron. The average stock of pig iron carried in the United States during the last twenty-five years has been less than twenty-three days' production, and it takes practically a year to build a new furnace. Furnaces in this country, which run regularly, usually have their product contracted for several months ahead, and in ordinary times the tonnage thus contracted for supplies the wants of the consumers for an equal length of time; but it is when active times come, when the consumers have business enough to double their output, which it is impossible for the producers to do, that the trouble comes. No alarm is felt as long as the consumers can buy for future delivery, but when it becomes apparent to them that they have bought all the furnaces can make for a given period, and that this amount is not as much as will be needed in that period, then the trouble commences. Then comes a sudden awakening. Each consumer tries to secure enough to supply his indi- vidual needs, and, in the wild scramble which results, prices are carried up 100 per cent, or more. It has never been in the power of any man, or any set of men, to prevent these abnormal advances. CYCLIC DELUSION NO. 2 "PRICES WILL NEVER GO SO LOW AGAIN" Each time the price of pig iron reaches a very high point, there comes a general conviction that it will never again fall to very low prices. The reason usually assigned for this belief is that the actual cost of production has increased so greatly that this enhanced cost will necessarily sustain future prices on a higher level; but the very low prices 208 INDUSTRIAL DEPRESSIONS come again, notwithstanding this oft-repeated argument, The price of iron dropped: From $70.00 in 1837 to $22.00 n!843 " 52.50 1847 " 19.00 1852 " 42.50 1854 " 20.00 1861 " 80.00 1864 " 30.00 1871 " 61.00 1872 " 19.00 1879 " 41.00 1880 " 17.75 1885 " 21.00 1887 " 9.00 1897* " 22.25 1899 " 13.15 1900 " 23.84 1902 " 12.33 1904 " 24.50 1907 " Here are nine distinct refutations of this periodic delusion, six of which occurred within the recollection of the writer and many others still in the iron business. Before the next boom comes, we may witness the tenth refutation of this delusion. In the past, iron has not only usually gone as low as before, but in most cases even lower. The reason prices usually go as low as before is that boom costs, like boom prices, are ephemeral. When the cost follows the price of iron up, it is apt to follow the price of iron down. Enhanced cost is simply the sym- pathetic advance in the prices of labor, ore, limestone, fuel, freights, royalties, etc. The same conditions which carry iron down carry these down. All go abnormally low, as a result of their having gone abnormally high. Extremes beget each other. "The farther the pendulum swings to the right, the farther it will swing to the left." The reason prices usually go lower than before is that the economies and constant improvements in the manu- facture of iron in the United States have thus far put the normal cost of iron, in hours of labor, on a lower level each decade, and on the down grade of an industrial depression there is usually no permanent halt until this lower level is reached. Iron was produced in Alabama in 1889 at a cost of about $9 per ton, in furnaces which then turned * Bessemer pig iron. CYCLIC DELUSIONS 209 out from ninety to a hundred tons per day. This was the record of low cost up to that date. Through improved methods the same furnaces, nine years later, were produ- cing 175 to 225 tons per day, at a cost of about $6 per ton. There is no reason to believe that the limit of this tendency to a larger yield per capita each decade has been reached in the United States. In other words, it is difficult to believe that improvements in manufacture have stopped. As to the supply of raw materials, we have only to say, that to the writer's personal knowledge the cry of limited minerals has been raised for more than forty years, yet, through new discoveries, each decade shows a larger known supply. Thus far, we have merely " scratched the surf ace. " We know little of what is within a thousand feet of the surface. During the long years of depression which follow a boom, the market price of iron is almost continuously made by the weak furnace companies, not by the rich ones. If the producers were all rich, and all able to hold their product until the consumers needed it, it might be different; but there are always some weak furnace com- panies, and they force sales when they need money, whether the consumers are ready to buy or not. To do this, they must reduce prices until they are so low as to be induce- ment for some one to buy in advance of his needs. These forced sales make the market, very largely, all through the dull years. The rich furnace companies must meet these prices, or hold what they make. What they usually do is to meet them, and comfort themselves with the theory that, when the needy ones are driven to the wall, the strong ones will be able to control prices; but this theory of "the survival of the fittest" develops more weak ones each year, for some that were strong at the start gradually become weak, and so, in long periods of depression, there have always been enough weak ones to keep prices down during the entire dull period. Sometimes, conditions become so desperate that various means are devised for restricting production. Nothing avails, however, and 210 INDUSTRIAL DEPRESSIONS the distress continues, while furnace after furnace drops out of the race until there comes another general revival of business. Then the furnace capacity is found to be so far short of the new rate of demand that another abnor- mal advance cannot possibly be prevented. The existence of the great consolidations is another condition often cited in late years as a reason that prices will not again go as low as in the past. The great corpora- tions may postpone the decline in prices for a time, but, sooner or later, natural laws will assert themselves. The power of the great corporations is as nothing when it comes in conflict with natural conditions. The price went down in Germany, in 1891, although prices and sales were entirely controlled by a powerful syndicate and the entire production was sold for two years in advance. Syndicates and con- solidations may put the price of articles up, and hold them up, but they cannot compel individuals to consume these articles, and, if not consumed in sufficient quantities to keep all the breadwinners employed, prices will go down. There is no human force on earth so powerful as a sponta- neous thought which gains lodgment in the minds of a great aggregation of individuals. Before such a force, the power of syndicates and great corporations is as noth- ing, and must succumb, just as the power of empires and kingdoms has gone down before this great force. On page 117 we have given an account of how the United States Steel Corporation made a heroic effort to stop the advance in the prices of steel products, when they had reached about 65 per cent, above the low prices of 1897, and yet, although it had effect for a time, they ultimately reached 124 per cent, above the 1897 prices. Then again, in 1908, after prices had fallen greatly, we saw how the principal steel-producers endeavored to prevent prices going lower; in this, too, they succeeded for a time, but later on gave it up as a hopeless task. The great corporations have wonderful power in many ways, but they are, at the most, but a part of the " manu- facturers" of whom we spoke on page 125. The final CYCLIC DELUSIONS power is not with them. They may, at times, by their acts, accelerate or retard prosperity or depression, but at other times, even this power may be beyond their con- trol. The final power which creates maximum prosperity, or checks it, rests with the purse-string holders. CHAPTER XIX RESUME THE object of this book is to disclose, and make recog- nizable, what analysis has revealed as the manifest cause of that class of industrial depressions which, in late years, have come to the manufacturing nations in the absence of any universally recognized cause. Having had this one object in view, we may have given so much space to some special subjects, and so little to others, as to have given some wrong impressions. For instance, from the commencement to the end of this book, iron has been made very prominent. This was partly because iron is the acknowledged basis of the industrial system, and partly because it is the acknowledged " barom- eter of trade"; and having been recognized as such for so long a time, the statistics concerning it are so reliable, and the records so complete, that it is practically the one preeminently trustworthy gauge of everything connected with the industries. Indeed, without the available facts in relation to iron, it is hard to conceive how we could have arrived at the unknown cause of these mysterious industrial depressions, for we have had its fluctuations in price and in volume of consumption as a witness, not only of industrial conditions at different periods, but of the comparative conditions and progress of the industries in different nations. It has, in fact, been to our analysis what the magnetic force is to the mariner. It must not be inferred, however, that iron is given any undue weight when it is considered in other ways for instance, as affect- ing the cost of construction. Its effect in each particular structure under consideration is only in the proportion that the enhanced cost of the amount of iron used in that 212 RESUME 213 structure bears to the total enhanced cost of all the other materials and forces used and employed, such as labor, all kinds of construction materials, architects' fees, contractors' profits, freight, and a host of smaller things. A term we have used all through the latter part of this book, and which we explained at the start was used tentatively, is " Investment Construction." This is simply a name we selected to convey an idea. We might have said " extra construction," or "optional con- struction"; either term would have answered the pur- pose, but investment construction seemed more nearly to describe the particular class of construction we referred to. " Far-seeing investors," too, seemed to be a most appropriate name for the class of shrewd individuals who always make contracts for large amounts of construction when prices are very low, and who stop making such con- tracts as soon as prices make any material advance. There is no more question that such a class exists than there is that rich and poor exist. In fact, the very rich class is probably largely the result of the acts of this class of far-seeing, shrewd investors. We do not claim that this class is responsible for the entire volume of the con- structive contracts which bring booms; far from it, for the largest part of construction (as we have clearly de- monstrated) goes on in the most depressed times, as well as the most prosperous. We claim, however, and think we have fairly demonstrated, that enough additional construction is contracted for by this class in the low- priced period to carry the resultant demand for labor and materials far beyond the capacity of the country to fill on contract time, and that the making of this class of contracts falls off largely in volume as soon as prices make any considerable advance. To such an extent is this true that, when the construction they provide for is completed, there is not sufficient demand left to absorb the labor and materials available, and depression follows. We do not claim that all investment construction is made 214 INDUSTRIAL DEPRESSIONS at low prices, nor during the low-priced period: there are particular cases of legitimate investment construction that are planned and carried out at boom prices, which are profitable at the very start, because of special condi- tions. For example, a new invention, a discovery of any kind, a sudden and widespread demand for a particu- lar product, or other reasons, may justify construction, at times, which may result in so great a margin of profit that even the doubling of the price of construction would be a mere trifle. We saw an example of this in the plants constructed for the tremendous output of bicycles a few years ago; we have evidence of it now in the huge output of automobiles, and may see evidence of it soon in a surprising output of aeroplanes. One can imagine also that some new labor-saving device, on which there was a very large margin of profit, might be put through regard- less of cost. But these are exceptions that can easily be explained, even when large contracts are made for them during periods when there are no contracts made for the class of construction that we include in this book under the term investment construction. What we include under the tentative term investment construction is that for which contracts are not entered into at all times. It is the class of construction which is entered into with the view of earning a moderate rate of interest for long periods of time, and a very small difference in the prospective rate of interest to be derived has a wonderful influence in loosening or tightening the strings to the long purses affected. It includes, chiefly, the great enterprises owned and paid for by the far-seeing ones who hold the strings to the great majority of the long purses of the country. That this class is a very large and powerful one, is not only evidenced by the boom itself, but by the further fact that, each time it takes hold, the industries of the country are lifted permanently to a higher plane. On page 108 will be found a table that demonstrates that this class has distinctly emphasized its existence on seven different occasions within the last sixty years. Let there be no RESUME doubt in the minds of any one about the existence of this class or of its great power. It exists as certainly as the spendthrift class exists. There is never a panic, when large amounts of valuable securities are sold for "any price they will bring," that this class of far-seeing ones is not found to have purses long enough to absorb all that is offered. It is wonderful how inexhaustible these purses are. No panic has ever discovered their size, and the strings to them loosen to low-priced securities and low-priced construction with equal facility. Let it be understood, also, that it has not been claimed in this book that all industrial depressions are the effect of high prices of construction. On the contrary, we have given descriptions of many that came from financial causes, and recognized the fact that some have come from war, pestilence, famine, bad legislation, political upheavals, and other great calamities; but when they came from such external causes, their origin is universally recognized and acknowledged. Many of these other causes, however, have been conspicuously before the public for centuries, and remedies have been applied which have mitigated their severity. Industrial depressions, caused by a de- rangement within the industries themselves, are a new malady, and no remedies have been discovered for them. This is not to be wondered at, for the industries, after an existence of secondary importance and magnitude for thousands of years, have suddenly increased to stupendous proportions, and the industrial maladies that have de- veloped with this sudden growth are many. Finance and commerce, which necessarily increased to keep pace with the industries, have also suffered from new maladies that have developed within these systems. Some of the mala- dies which have affected commerce have been exposed and measures taken to correct or alleviate their harmful effects the work of the Interstate Commerce Commis- sion is an instance of this. The government has also made extensive investigations to determine the most effectual way to correct or alleviate the maladies that 216 INDUSTRIAL DEPRESSIONS have developed in the financial system. But the indus- trial system has developed a malady that is particularly its own and direful in its effects. The reason nothing has been done to correct or alleviate its severity is simply because the disease has not been correctly diagnosed and understood. Government commissions, economic soci- eties, and individuals have sought to determine the cause of this mysterious malady, but all have failed, simply because all have made their investigations, partly or entirely, by the synthetic method, which allows the introduction of any and all fallacies. For instance, in this mysterious class of depressions, which we have shown result from purely industrial causes, a large share of the causes claimed for them have been purely agricultural, commercial, or financial. Of course, every depression that comes to any of the three systems last named must affect the industries secondarily, but to admit any of their causes to consideration in a search for the direct cause of the class of mysterious depressions which resulted from industrial causes only, must necessarily be fatal to the search. Then, too, the particular class of depressions in question always follow a boom, hence everything which occurs during a boom can afterwards be claimed as a cause of the depression, and get an apparent confirmation in the depression that follows. Thus the free use of the synthetic method of investigation has defeated all the efforts made to identify the cause of this serious class of depressions, and in consequence nothing has been done by the government, or any other agency, to correct or alle- viate their direful effects. This book, as far as possible, deals exclusively with the class of depressions which come as the effect of abnormally high prices of construction, and the fact that as little space as possible is given to all classes of depressions outside of that one must not be understood as an intimation that we claim that other depressions do not exist, nor that we claim that they have not in the past, or may not in the future, continue to bring disastrous seasons of depression to the industries, but that, RESUME 217 when they do, the cause will be known and recognized, as in the past. We recognize the due influence of everything which tends to increase or decrease the volume of the industries. We claim, however, that after a country has become chiefly manufacturing, no combination of favorable in- fluences has been strong enough to develop a boom, except on low prices of construction, and that after abnor- mally high prices develop, no combination of favorable influences has been strong enough to keep the boom going beyond the time necessary to complete the volume of extra construction made up of old, low-priced contracts. The necessities which come with war have at times pro- longed a boom, but only as long as those necessities continued. CHAPTER XX HOW CAN THESE MYSTERIOUS DEPRESSIONS BE PREVENTED? THE REMEDY remedy we suggest is the inauguration by the national government of a system for collecting and publishing monthly all pertinent information in relation to the existing volume of construction under contract for future months, and all pertinent information in relation to the capacity of the country to produce construction materials to meet the total demand thus indicated. As noted in various parts of this volume, particularly on page 122, it is the contracts for future construction in excess of the country's capacity to supply the materials to fill them that later on create the excessive demand for construction materials. It is this demand, which cannot possibly be supplied, that in turn carries prices up to figures which eventually check the volume of contracts for construction; thus bringing into action, unknown to the public, the microbe which in due* time results in industrial depression. Now it must be admitted that, should the producers of construction materials receive notice from a reliable source that all of the construction materials of a certain description that could be produced within a given time were covered by the volume of construction indicated by existing contracts, they would cease to make fur- ther contracts for such materials. It must be admitted, also, that, if they knew that there was a demand for a large additional quantity of such materials, they would increase their capacity in order to secure what they could of this offered business. It must also be admitted that, if the capacity were increased sufficiently promptly 218 THE REMEDY 219 and fully to supply the additional demand, there would be no such abnormal advances in the prices of these materials as have frequently occurred in the past. What the industries have suffered from most in the past is the lack of knowledge as to the volume of construction under contract for the future, and the capacity of the country to furnish construction materials in the future. What the industries most need, therefore, is monthly in- formation of the future demand for construction materials as far ahead as construction contracts are entered into, and monthly information of the capacity of the country to pro- duce construction materials as far ahead as the increase or decrease in capacity can be known. The statistics necessary to carry out the proposed plan should be gathered directly by a department of the national government, whether on the plan now pursued in gather- ing statistics of the crops, or through the recent act authorizing the government to call for reports from the corporations, is a matter which can be decided when the other details of the plan are determined upon. Some new laws, or amendment to present laws, might possibly be required to put the system into execution. It would not only be necessary to guard against sham building permits, and to require the initial information at the time building permits are taken out, but to require on each recorded contract monthly reports of the per- centage of work completed, and the percentage yet to be executed, hi order that any change in the volume of future demand, or any change in the capacity to produce, may be corrected in the monthly reports furnished to the public. It would be desirable to have the statistics as complete as possible, but it would not be necessary to include small construction enterprises, repairs, etc., nor would it be necessary to include statistics from remote sections; for after some experience an approximate estimate of the volume of the whole construction could be made from the statistics of the major part. 220 INDUSTRIAL DEPRESSIONS Among the large manufacturers, a very considerable amount of such information is already collected, in a private way, and is more or less widely disseminated by their salesmen and others. Moreover, for several years there has existed, at least among the iron and steel manu- facturers, an attitude of great frankness in furnishing such information to each other. It is probable that nearly every large manufacturer of iron and steel knows, at any time, approximately what tonnages have been con- tracted for by the other manufacturers, and at approxi- mately what prices. Most of the large construction contracts, both public and private, are made either by public letting, or at least to the lowest bidder, from a selected list of manufacturers, who have been asked to bid and have been furnished the plans and specifications on which to make these bids. Thus the tonnages under contract, and the amounts of construction contemplated each month, are pretty well known to many persons already. Even the prices at which the work has been let are made public, or can be approximated closely by those in the same line of business. These facts show the existing desire on the part of manufacturers to get what information they can to guide them as to the future, but it also shows how imperfect and useless information gathered by private means, and in such a manner, can be; for if such information had been of real value, the iron- and steel-producers would have run their plants to full capacity in the dull period of 1904, in which case we should not have been able to use the illus- tration we give on page 226, which illustration shows that even the manufacturers who possessed this information gained no idea from it of what the future had in store for them. If the manufacturers who possessed the informa- tion had suspected the truth and acted upon it, it would have benefited these few, but no national benefit would have resulted. To have produced such a result, it would have been necessary that the whole people should know what was coming. What could an army accomplish, THE REMEDY if only a small part of the individuals composing it were organized, officered, and drilled, while the great majority were permitted to act as each individual saw fit! The information needed can no more be gathered by private means than can the United States Census. Such infor- mation, to be effective, must be known to the whole people, and they must know that it is compiled from sworn statements made to the government. Anything less reliable and comprehensive than this would be of little value. The unfilled orders of the United States Steel Corporation comprise about one half of the unfilled steel orders of the country. The volume of these orders is the best indication we now have of what the future business of the country will be. But valuable as it is, it is entirely inadequate. What the country needs for its intelligent guidance is the whole volume of the unfilled orders of all the important products that enter into construction. The existing con- ditions of supply and demand of steel may differ widely from the existing conditions of supply and demand of other construction materials. A short supply in but one product may hold back the whole volume of construction. We need official information of the prospective supply and demand of all construction materials; not only how much of each is needed, but when it is needed; not only how much the signed contracts call for, but an official and expert estimate of what additional percentage will probably be required, for such current business as is usually executed without the preliminary of written con- tracts, as, for example, the work of repairs, replacements, and necessary enlargements. These, although small in each individual case, make up a large amount in the aggregate. This last-named class can be estimated very closely after a few years of experience. When the constructive business of the country is thus systematized, its aggregate results for a decade will be as different as the results of a trained and disciplined army are different from the results of a mob. When we attain INDUSTRIAL DEPRESSIONS this new basis, we will be on a foundation from which we can contend more successfully for our share of the outside trade of the world. Heretofore, our growth in many branches of the foreign trade has not been permanent. It was only when our prices were low that we could win any large share of trade in such commodities as pig iron, for instance; and when the next boom occurred, our prices advanced so much more than they did in the other manufacturing countries that our gain was entirely lost. This has occurred now repeatedly within the last fifty years. High prices are of no benefit to a country. The first producers to advance prices may get some benefit for a time, but it is not long. To advance the price of any product is almost certain to advance the price of the raw materials and labor which enter into that product. The wage-earners of the United States enjoy a greater amount of comforts than the wage-earners of other countries, not because of higher wages, but because they produce so much more per capita. On page 25 it was made clear that doubling the pay of producers did not double their comforts. The only way to double their comforts is to double products at the same pay. The shoemaker who could sell a pair of boots for $600 in confederate days, and was obliged to pay $20 for a cup of coffee, lived no better and enjoyed no more comforts than when he sold boots at $10 a pair. What the business of any country should strive to bring about is steady prices, and high prices are never steady. The remedy we have proposed should have a powerful influence in preventing abnormal advances in the price of construction materials. We have had ample experience to prove that it cannot be accomplished without some intelligent preparation. The effort made by the United States Steel Corporation to stop the advance in the prices of steel in 1901 was an evidence of a broad-minded spirit and a commendable purpose on the part of its management, but it was also evidence of how powerless even the greatest of all pro- THE REMEDY ducers is to combat natural tendencies. It was trying to prevent the natural result of an oversold market. The only possible way to prevent such a result is to prevent the cause. The remedy we propose will probably be only the first step; other improvements and advances will undoubt- edly follow. The industries to-day are as much in the dark as medical science was before the microbe of disease was discovered. That discovery simply furnished medi- cal science with a sound basis from which to make real progress. And, as a result, new remedies for physical diseases are now constantly being discovered. The remedy we propose for industrial depressions may be nothing more than a first step from a sound basis. When the system of collecting information of the volume of construction materials involved in signed contracts is established, the way may be opened for acquiring reliable data antedating signed contracts. Many of the con- structive enterprises that involve large quantities of materials are fully decided upon a long time before con- tractors are asked to bid upon them; of these the govern- ment could gather and publish information a long time before contracts are executed for them. Already a very successful business of this nature is carried on in New York and Chicago by private enterprise. The United States Department of Agriculture became vastly more valuable to the nation when, hi addition to its published statistics of the past, it gathered and published infor- mation on which reliable forecasts could be made of the future. The United States Department of Commerce and Labor is well fitted to gather and publish these reports which are so sorely needed by the industrial workers of the nation. The unfilled orders of the United States Steel Corporation necessarily do not reach the public until some weeks after the contracts are signed, while, as noted above, the data of the largest enterprises may be known weeks before contracts are signed. Let us analyze this matter, for it gives some idea how comprehensive and INDUSTRIAL DEPRESSIONS valuable these proposed government reports might be made. By referring to Appendix Q, it will be seen that the high point of unfilled orders of the United States Steel Corporation was, on December 31, 1906, 8,489,718 tons. It will be seen, also, that this was an accumulation from September 30, 1904, when it was but 3,027,436 tons; the quarterly gain and loss being as follows: Gain Loss To Dec. 31, 1904 1,668,767 " Mar. 30, 1905 901,357 " June 30, " 767,905 " Sept. 30, " 1,035,722 " Dec. 31, " 1,739,709 " Mar. 31, 1906 586,374 " June 30, " 209,123 " Sept. 30, " 1,127,295 " Dec. 30, " 552,834 Total Gain 7,025,684 1,563,402 Total Loss 1,563,402 Net Gain 5,462,282 In analyzing this, it must be borne in mind that the making of a contract for any large constructive enterprise takes time for each step. For instance, starting at the point where the plans and specifications are completed and handed to contractors with request for bids on the work, the contractor would first figure out the quantity of material the work would require; this might take from one to several weeks. He would then ask producers for bids on the materials; this would involve more time. When these bids were received, he would figure out what it would cost him to complete the enterprise; this would consume more time. To this he would add the profit he wished to realize, draw up his bid, and present it to the prospective owners, involving another lapse of time. Considerable time would be required by the prospective owner for consideration and comparison of the different bids. When these matters were adjusted, and the con- tract awarded, the successful bidder would proceed to THE REMEDY close his contracts with the material men. When this was done, the Steel Corporation would enter on its books such portion of the order as was received by it. The aggregate time required by these various negotiations would amount to several weeks. Now the gain of 1,668,- 767 tons on December 31, 1904, included all increase in the unfilled orders from September 30 to December 31, of that year, and as the Steel Corporation, at that time, published its unfilled orders but once hi three months, it was all the way from one day to ninety-one days after the contract was closed before the information reached the public. Now add the time consumed in this last act to whatever time may have been estimated for the five acts first described, and it will be observed that from the time of naming price on materials to the time of publication of the unfilled orders of the Steel Corporation is not a matter of weeks, but a matter of months.* The commencement of a boom is always marked by the closing of contracts for a large volume of construction; nearly everything under negotiation being affirmatively decided upon on account of the advancing tendency of prices. But mark the fact that they are almost univer- sally on the prices given a long time before. If prices were not thus held open, great confusion would result, for if the manufacturers of material were at liberty to put up their prices before the contract was awarded, each advance in price would require the whole proceeding described above to be set aside and all gone over again. The system proposed is entirely practicable, and would involve little or no extra trouble or expense to individuals. When, for instance, a contractor bids on constructive work, he must, for his own purposes, necessarily ascertain the amount of iron, steel, lumber, brick, lime, cement, etc., that will be involved in its execution, and hi what * Since above was written the Steel Corporation have commenced to report unfilled orders monthly instead of quarterly, which shortens the time of this one act two months, but still leaves the delay a matter of several months on large enterprises. INDUSTRIAL DEPRESSIONS months these materials will be required. Thus an accurate knowledge of the quantities and time of delivery of the materials for each contract could be furnished, at the time the building permit was applied for, without extra trouble or expense. Then, again, it is already customary to keep a record of the percentage of progress on all large constructive works. It is by such records that payments for completed work are made from time to time, or insurance is effected. Thus, this additional in- formation could be furnished from month to month, as the work progresses, without extra trouble or expense. The additional expense to the whole people through their government would be infinitesimal in comparison with the benefit it would be to the whole people. OBJECTS OF THE PROPOSED REMEDY The chief objects of the proposed remedy are: first^ to prevent contracts for construction being made beyond the capacity of the country to execute; second, to stim- ulate an increase in the permanent capacity to produce in time to meet and keep pace with any permanent in- crease in the prospective rate of consumption; third, to keep the producers advised of the future demand in order that they may not be liable to make the mistake of closing down their works and discharging workmen during temporary dull periods when there is a sure demand in the near future which will consume all they can accumu- late hi the dull period. ILLUSTRATION By referring to Appendix Z, it will be seen that there was a falling off in iron production, from a 19,500,000 tons-per-annum rate to a 12,900,000 tons-per-annum rate, in the three months from April to June in 1904. This was at a time when plans and specifications for con- struction were being matured, and for which contracts were soon closed, which would not only have absorbed all the iron and steel the country could have produced at THE REMEDY the 19,500,000 tons-per-annum rate during the next three and a half years, but would have absorbed a reserve stock of 13,000,000 tons in addition, had such a stock been in existence. This falling off in iron production occurred at a time when it was selling in the United States at an average of $12.50 per ton, and on the eve of an advance in price which did not stop until it reached $24.50 per ton. The iron-producers curtailed production because they did not know this large future demand was coming, and because they believed that an accumulation of iron would result in a decline in its price. But it needs no argument to show that, if it had been known that there was an assured demand in the near future which would be large enough to absorb all the reserve stock that could be accumulated, there would have been no fear that the temporary accumu- lation would cause a decline in prices, and the producers, instead of curtailing production, would have pushed pro- duction to the full capacity of their plants, which would have been a profit to them and a great relief to the country. EFFECT OF THE PEOPOSED REMEDY It needs no argument to convince that, if the manufac- turers of construction materials knew in advance that they had collectively contracted for all the materials they could collectively produce in any given time, it would result in their ceasing to make further contracts for that time until the capacity to produce was increased. The instinctive aversion to loss is the natural motive relied upon to insure this result. It needs no argument to convince that, if it were known that all the construction materials the country could produce for any given time were contracted for in ad- vance, and more construction was being offered, this knowledge would stimulate the producers to increase their capacity. The instinctive desire for gain is the natural motive relied upon to insure this result. 228 INDUSTRIAL DEPRESSIONS On page 112, attention was called to the fact that con- tracts for construction are signed anywhere from several months to one or more years in advance of the time when the materials for their erection are required to be deliv- ered. Under the proposed system the knowledge of the future demand would be obtained by the government and given out for publication immediately after, or perhaps before, the contracts were signed, and thus the producers would have from several months to one or more years in which to enlarge their plants to meet and keep pace with the assured demand. The larger the construction cov- ered by the individual contracts, the longer the notice of future demand would probably be. It is quite obvious, therefore, that under the proposed system it would be quite practicable to make known any prospective increase in construction in ample time to build new plants, or enlarge existing ones, to meet any demand that might come. On the other hand, should the statistics at any time show that the contracts for construction were falling off, they would also reveal at what time in the future the actual construction would fall off, and this advance in- formation would enable the producers to avoid an un- necessary enlargement of their plants or an unnecessary accumulation of materials. As noted in other parts of this volume, it is the demand which comes for delivery of construction materials in excess of the country's capacity to supply it on contract time that causes the abnormal advance in prices. The effect is somewhat similar to a large volume of short sales on an exchange. Under the proposed system, the public would be kept constantly advised of the future monthly capacity to produce, of the total amount of con- struction materials under contract, and the full amount liable to be called for, as long a time ahead as contracts existed ahead. Consequently there would be no liability of short sales of construction materials for any period. Under these conditions, there would probably never THE REMEDY 229 again be an extreme instance of abnormal advance in the price of construction materials, nor any further violent checks to a maximum rate of construction, unless they came from war, financial panic, or some other external cause. In other words, the extremes of supply and demand would be neutralized. The nation's supply of construction materials would increase to meet a known future demand almost automatically, and as surely as if the whole matter was under the direction of one supreme head in which there existed a perfect knowledge of the future demand and the power to increase the supply in time to meet it. Up to the present time, the supplies for the industries of the country have depended upon as many heads as there were separate business organizations, all of them almost totally lacking in knowledge of what the future demand, or what the future supply, would be. The glaring absurdity of the industrial nations expect- ing to conduct their most important industrial affairs to the best interest of their citizens under such a total want of system is accentuated by their experience hi the past, and by contrasting it with the careful system pursued by individuals in conducting enterprises of even moderate magnitude. There is probably not a successful depart- ment store in existence that has not an elaborate and carefully conducted system for keeping advised of the prospective demand for goods, and the gathering of a supply to meet this demand when it comes; yet here is the constructive business of five great nations allowed to drift at random, without one solitary effort being made to ascertain what will be the aggregate demand or the aggre- gate supply for the great staples on which the regularity and prosperity of their whole industrial systems depend. The result has been nine great calamities. First came a long period, in which great numbers of idle breadwinners were consuming wealth and producing nothing. They were anxious to work even for minimum wages, and in many cases for barely sufficient to provide their families with the necessities of life. Notwithstanding this, the manu- INDUSTRIAL DEPRESSIONS facturers of these countries continued to discharge more workers, or to shorten the hours of those they retained, until the product of their factories was reduced to the small amount they could sell from month to month. These long periods were followed by short periods, in which the business of these countries suffered in con- sequence of not being able to obtain the materials the idle breadwinners might have produced in the first-de- scribed periods. As well might one of these nations attempt to assemble a great army and rely upon the head of each company or regiment to gather its own supplies. What a spectacle the important manufacturing and mechanical industries of five nations drifting at will for generations, without the first effort being made to in- augurate a system to regulate them! What a rich field of usefulness does this condition open to these govern- ments, and particularly to the Bureau of Commerce and Labor of our own government! There is nothing forced or unnatural about this pro- posed remedy. It amounts simply to keeping the coun- try advised of how much construction can be executed with the existing capacity each month in the future, and how much is under contract and liable to be demanded during these months. It leaves the citizen as free as ever to do what he chooses, but self-interest will prevent his taking contracts which cannot be executed, and self- interest will prompt an increase in capacity when the volume of assured construction justifies it. If some of the contractors or producers should take the risk, and continue to make contracts for any given period after the limit of capacity for that period was reached, the statistics of the following month would re- veal it, and, if this overcontracting were done to any con- siderable extent, it would be followed by an advance in prices, which would stimulate an increase in the capacity to produce until the supply and demand again became adjusted. If, on the other hand, the contracts for future-delivery THE REMEDY 231 materials for any given period should fall below the capacity to produce in that period, it would be followed by a decline in prices, and this in turn would have a ten- dency to stimulate the demand until the supply and demand again became adjusted. These fluctuations hi supply and demand for future- delivery materials would be affected under very small fluctuations in prices, because, as noted on pages 118 to 119, a large volume of the contracts for construction is checked before the advance in prices has reached as much as 10 per cent., and under the proposed system the advances in prices would be known as contracts were being signed, instead of several months or one or two years after they were signed. This advance information regarding the future volume of supply and future volume of demand would result in a natural adjustment of these two important elements to each other. The instinctive desire for gain would be as active under the new system as it is at present, but its operation and effects would be entirely different. Even if prices were abnormally low and the far-seeing ones were disposed to contract for an excessive amount of construc- tion, the builders and manufacturers would know when the capacity of the country was reached, and would refuse to make further contracts for the period already fully covered; whereas, in the past, in the absence of any such knowledge, they have been eager to accept such an ex- cessive amount of contracts as eventually to cause them embarrassment and loss. Thus the instinctive desire for gain would become the check to prevent overcontracting, instead of the incentive which in the past has caused the overcontracting. The overcontracting which has in the past been the cause of the abnormal advances in price of construction materials would thus be done away with, and, the cause being removed, the abnormally high prices would not again be reached. High prices being done away with, such violent checks to investment construction as have here- INDUSTRIAL DEPRESSIONS tofore resulted from this cause would be done away with. We should have no more such excessive fluctuations in the prices of construction materials, and greater uniform- ity in demand and supply would naturally result. The conditions which create booms and depressions are the two extremes of three different things, namely: demand, supply, and prices. If the two extremes of each of these three things were brought together, it would be like mixing an acid and an alkali, that is, the active qualities of each would be neutralized, and the six extreme conditions would thus give place to three normal condi- tions. The abnormal fluctuations in prices would be done away with, because of the advance knowledge of the future; for the same reason the supply would be increased to meet a reasonable demand, and the demand would thus be confined to the possible supply. It has been the absence of knowledge of the future conditions of supply and demand which has been respon- sible for the great irregularities in these two conditions. The furnishing of this knowledge of the future should therefore bring about such a perfect adjustment of these two conditions that booms and depressions, as far as they are the results of this particular derangement from within the industries themselves, would be substantially done away with. To restore prosperity, therefore, the low prices which stimulate investment construction must be reached, whatever those prices may be, and, to continue prosperity, the abnormal demand which causes high prices must be prevented. The proposed remedy will not only show the public to how low a level prices must drop to restore prosperity, but will show when that level has been reached, and thus do away with the danger of prices going so low as again to stimulate an excessive demand. The pro- ducers and consumers of the country will simply be work- ing in the light, instead of working in the dark, and the extremes of demand, supply, and prices will probably never recur to any abnormal extent. THE REMEDY 233 We do not claim that the remedy we have suggested will be a cure-all or panacea; perfection cannot be ex- pected in any of the business systems, but that is no reason we should not strive to gain a near approach to it. Old microbes and new must be expected to keep up their warfare in each of the systems. Fluctuations in the prices of construction materials will not be annihilated, but when the proposed remedy is well established they will undoubtedly be reduced to a minimum. The splen- did progress some cities and nations have made in ward- ing off or mitigating the ravages of pestilences has made it possible to build enduring cities. As a vivid object- lesson of how we may benefit by wise and effective efforts, we have the spectacle of the nations which still suffer from famine and pestilence, and the nations which do not. Wise and intelligent efforts bid fair to further the progress already attained in mitigating the evils of panics, wars, bad legislation, political upheavals, and other mala- dies. A different remedy has been required for each one of them. Improvement has come only as the people have discovered the logical remedies for each, and applied them. Weeds will develop without man's attention, but good crops never. Industrial depressions have grown to be a very great calamity; some of their causes cannot be overcome; but if the analysis described in this book has not led us astray, the most serious and disastrous of them can be very greatly alleviated, if not wholly over- come. APPENDICES TO INDUSTRIAL DEPRESSIONS INDEX TO APPENDICES A. (FIRST PART.) MONTHLY PRICES OP Pia IRON IN PHILADELPHIA FROM 1799 TO 1849. A. (SECOND PART.) MONTHLY PRICES OP Pia IRON IN PHILADELPHIA PROM 1842 TO 1910. A. (THIRD PART.) LOWEST AND HIGHEST PRICES OF SCOTCH PIG IRON IN NEW YORK FROM 1825 TO 1888. B. ALLEGED CAUSES OF DEPRESSIONS AS ELICITED BY COMMITTEES OP CONGRESS. C. ALLEGED CAUSES OP DEPRESSIONS AS GATHERED BY AGENTS OF THE UNITED STATES BUREAU OF LABOR. D. MONTHLY STATISTICS OP PIG IRON IN THE UNITED STATES FROM 1896 TO 1910. E. ANALYSIS OF AVERAGE PRICES OF PIG IRON IN UNITED STATES FROM 1896 TO 1910. G. TABLE OF SEVEN INDUSTRIAL DEPRESSIONS FROM 1825 TO 1886, AND EIGHT FROM 1887 TO 1910. H. RELATIVE RANK OP NATIONS IN ALL IMPORTANT AFFAIRS. (Compiled from MulhalFs Dictionary of Statistics.) L. DIAGRAM OF CONTRACTS FOR CONSTRUCTION AND EXECUTION OP CONTRACTS. M. WORLD'S PRODUCTION OF PIG IRON FROM 1500 TO 1910. O. RAILROAD MILEAGE OF THE UNITED STATES. P. BUILDING PERMITS OF FIFTY-SEVEN CITIES FOR YEARS 1906 AND 1907. Q. UNFILLED ORDERS OF THE UNITED STATES STEEL CORPORATION. Z. DIAGRAM OF PRODUCTION, CONSUMPTION AND PRICES OF IRON FROM 1800 TO 1910, ETC. 236 APPENDIX A (FIRST PART) AVERAGE PRICES PER GROSS TON OF CHARCOAL PIG IRON AT PHILADELPHIA FROM 1799 TO 1849 FROM REPORTS OF AMERICAN IRON AND STEEL ASSOCIATION The following table has been compiled from the Statistical Chart of Mr. William G. Nielson, and embraces the prices of charcoal pig iron from the beginning of the century to the time when anthracite pig iron became the standard for comparison. Until May, 1827, the following prices are for best pig iron; from May, 1827, to June, 1833, they are for an average of all grades; from June, 1833, to January, 1840, they are for gray iron; and from January, 1840, to the close of the table they are for No. 1 Foundry. After 1849 the standard of quotations was No. 1 anthracite foundry pig iron, hereafter given. Years Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec 1799 . 36 36} 36 36 36i 36J 36i 36 36 36} 36} 36 1800 ... 36 36} 36 36 36} 36} 36} 36 36 36} 36 34 1801 ... 33 33* 33 33 33* 33} 31 32 32 32* 32* 32 1802 ... 32 32* 32 32 32 31* 30* 29 29 29 29 28 1803 ... 28 28 28 28 29 29 29} 29 30 30 30 30 1804 ... 30 30 30 30 30 30 30 30 30 294 29 29 1805 ... 29 29 29 29 29 29* 31 32 32 32* 33 33* 1806 ... 35 35* 35* 35* 35* 35* 35* 35* 35* 36 36* 37 1807 ... 37 37 37 37* 38 40 40 40 40 40 40 40 1808 ... 40 40 40 40 40 40 40 40 40 40 40 40 1809 ... 40 40 40 40 40 40 40 40 40 40 40 40 1810 ... 38 38 38 38 38 38 38 38 38 38 38 39 1811 ... 38 38* 41 43 45 45 45 45 45 46 47 47 1812 ... 47 1813 ... 47 47* 47 47* 47 47 47* 47* 47* 47 47 47* 47* 47* 47 47 47* 47 47 47* 47 47 46 1814 ... 45 45 45 45 45 45 45 45 45 46 48 52 1815 ... 55 55 55 55 55 55 54 52} 52* 52* 52 52 1816 . 52 50* 50 50 50 50 50 50 50 50 50 50 1817 ... 50 50 50 50 50 49 47 45 44 43 42* 42* 1818 . 42 42* 42 42* 42* 42* 42* 42* 12 42* 42 41 1819 ... 39 38 38 37} 35* 35 35 35 35 35 35 35 1820 ... 35 35 35 35 35 35 35 35 35 35 35 35 1821 ... 35 35 35 35 35 35 35 35 35 35 35 35 1822 ... 35 35 35 35 35 35 35 35 35 35 35 35 1823 . 35 35 35 35 35 35 35 35 35 35 35 36 1824 ... 37J 37* 37} 1825 ... 43 42} 43$ 1826 ... 45 45 45 1827 ... 47* 47* 47* 39 40 40 40 40 40* 41 f 42 44 47* 50 50 50 50 49 47 45 46} 47* 47* 47* 47* 47* 47 46 36* 35} 35 35 35 35 35 42 45 1 S* 1828 ... 35 35 35 35 35 35 35 35 35 35 35 35 1829 ... 35 35 35 35 35 35 35 35 35 35 35 35 1830 ... 35 35 35 35 35 35 35 35 35 35 35 35 1831 ... 35 35 35 35 35 35 35 35 35 35 35 35 1832 ... 35 35 35 35 35 35 35 35 35 35 35 35 1833 ... 35 35 35 35 35 40 40 40 40 40* 41 40 1834 ... 35 31 30 30 30 30 30 30 30 30 29 28 1835 ... 29} 29* 29} 30 30} 30 30 30 30 30* 30 31 1836 ... 32 32* 35 39 41 41} 41} 42 (5 47 49 50 1837 ... 51 \ 52* 52 51 49 47 42 39 35 34} 35 36 1838 ... 35 35} 35 34 31 31} 32 32 31 31* 31 3U 1839 ... 31 I 32 33 34 34 34 33* 33 33 32} 32 32" 1840 ... 32 32 31* 30} 30* 30* 30 29 29 29 29 29 1841 ... 29 29 29 29 29 28* 28 28 28 28 28 28 1842 . 29 29* 29 28* 28* 28* 28 27* 27 27* 27 27 1843 ... 28 29 29 28 28 26 25 25 25 25} 25 26 1844 ... 27 27 26* 26} 28 29* 29* 29* 29 30 29 30 1845 ... 30 29} 32 35 36* 35 33 32 30 30* 31 32 1846 ... 33 33 32* 32* 32* 31* 31} 30 29 30 29 30 1847 ... 30 30* 30 30 30 29} 29* 30* 33' 33} 35 34 1848 .... 34 32 30 29 29* 29 28 27 26 26 25 25 1849 .... 25 25* 25 25 25 24* 23} 23* 23} 24 24 24 237 238 APPENDICES APPENDIX A (SECOND PART) AVERAGE PRICES PER GROSS TON OF NO. ] I ANTHRACITE FOUNDRY PIG IRON AT PHILADELPHIA SINCE 1842 FROM REPORTS OF AMERICAN IRON AND STEEL ASSOCIATION Years Jan. Feb. March April May June July Aug. Sept. Oct. Nov. De< 1842 . . 27 27 26* 24* 25* 25 25 25 1844 . . 24 24 24 24 24 26} 26* 26 27| 28 27 26} 1845 . . 26 I 263 \ 27; 33* 34j \ 33 31 28 27 26] 28 28 1846 . . 28 28 28; 28 28; 28 29 26 27| t 27 28 28* 1847 . . 28 k 283 k 28; 29 29 28f 28 28 30 r 33{ 35 33} 1848 . . 31 28 27; 26} 26. 26* 25} 25 25 25 25 24 1 1849 . . 25 243 24; 24 23 23 22} 22 21 E 21} 20 21 1850 . . 21 21 20 i 20 J 20 20* 20 20 21 21 21 21} 1851 . . 21 22 22 22 21 21* 21 21 21 21 21 21 1852 . . 21 21 203 20} 20; 20* 20} 21' I 23 - 26} 27 28} 1853 . . 32 36 35j 35i 35 36 36 36 -36 37 37 36} 1854 . . 37 36 37 38 38 38 38 38 371 36 35 32J 1855 . . 31 29 27} 26} 26* 26 26* 26* 28 28 28 27| 1856 . . 27 27 27 28 28 27 27 27 27 26 26 26 1857 . . 26 26 26 27 27, 27 27 26 ; 26| 25i 23 23} 1858 . . 23 22 22 22 22 22 21 21 22 21 j 21 22 i 1859 . . 22 23 24 23 23 23 23 23 22j - 23 23 23, 1860 . . 23 23 23 22 22 22 22 22 22 22 22 22: 1861 . . 22* 21 21 21 21 20 19 18 18 18 18 1862 . . 20 20 20 21 21 22 24 24 24 25 30 31; 1863 . . 32 33 35 36^ 34' 33 32 31 33 35 41 43. 1864 . . 43 48 50 54* 57 57 69 73 72 1 63 61 59 1 1865 . . 58 53 50 45* 39 35 35 40 44 49 51 50; 1866 . . 50 49 46 41} 41 43J 46 47 48 48 49 49. 1867 . . 48 46 44 . 41 42 43 43 44 44. 44. 43 42, 1868 . . 38 36 37 38* 37 37 38 39 41 42 43; 1869 . . 42 40 41 40 39 t 40 41 41 !40 40 39 39. 1870 . . 36 t 343 34 33} 33 t 32 32 33 33 32 31 1871 . . 30* 30 34 35| 35 35' 35 36 36 37 37' : 1872 . . 37 40 47 40* 49 53} 51 52 \ 53 53 51 474 1873 . . 45* 48 48} 47} 46 45 43 43* 42 38 33 32* 1874 . . 32 32 32 32 31 1 f 31* 31 31 293 t 29 26 24 1875 . . 25 | 26 k 27 27 26 26 26 26 25 24 23 23* 1876 . . 23 23 23 22} 22 22 22 22 21 \ 21} 21 21} 1877 . . 20 20 20 19* 19 18 18 18 18j 18* 18 18 1878 . . 18 1879 . . 17 1880 . . 40 18 t 17 41 t 18* 18* 18 17 t 17f 18 18* 18 374 31 25 23 17 19 233 17 20 25 \ 17 i 24 23 \ 17 30 23 16* 17 28 30* 24 25 1881 . . 25 25* 26" 25 25 24 243 24 \ 25} 25* 25 26 1882 . . 26 26 25} 25* 25* 25* 25 25 fc 26 20} 26 25} 1883 . . 25 24 t 24 23* 22 21 2V 22 22 21 21 21 1884 . . 20 1885 . . 18 1886 . . 18 1887 . . 21 \ 20* 20* 20 18 18 18 18* 18} 183 21* 21 20 20 171 18. 20 20 \ 17 f 18 21 20 17 18 21 19* 19* 19* 19 17} 18 18} 18 18} 18} 19 19 21 21 20* 20 18* 18} 20 20* 1888 . . 21 20' 1 20} 19 18 18 18 18 18 18 18 18 1889 . . 18 18 18 17 17 17} 17} 17* 17* 17* 18* 19} 1890 . . 19A 19* 19: 1891 . . 17* 17* 17 1892 . . 17* 17 16. 1893 . . 14} 14} 14; 18 r 17 16 14 18 18 17* 17 16 15 \ 141 15 18 18 18 18 18 17* 17* 17* 17} 17 15 15 15 15 15 15 14* 14* 14} 13 18 17* 15; 13; 1894 . . 13} 13 13 r 12* 12* 123 F 12} 12} 12 12. 1895 . . 12 12 12 12 8 12 12 13 13' 14 143 14 13 1896 . . 13 \ 133 13j 13 12 r 12 12 12- 12 123 12} 12} 1897 . 12 12' 12 11 11 11 11 11 12 12 12 1898 . . 12 11 : iii 11 11 11 11 11 11 11} 11} 12 1899 . . 12 t 13 16 16 16 18 20 21 23 23; 25 25 1900 . . 25 243 23 1 23 22 20 17 17] 17 16 16 16* 1901 . . 16 16 16 16 16 16 15 15 15} 15$ 15 16} 1902 . . 17* 18 1 19} 20 21 24 24 243 243 24 24} 1903 . . 24 23' 233 22 21 20 19 18 173 16: 16 15{ 1904 . . 15 15 15i 15 15} 15| 14 15 15 16 16 17} 1905 . 17 18 18 18 17 17 17J 17^ 17 ' 18 19 1906 . . 19 19 19 19 193 19 19} 22j 24 25 26* 1907 . . 27 27\ 1 26} 26 26 i 25^ 23 22* 21] 20 J 19} 18} 1908 . . 18 18' 181 18 17 17 17 17 17j 17' 17* 17} 1909 . . 17 1910 . . 19 17 19 16^ ; IS: 16 r 18 16. 17 16 17 17 17* 18* 19] 16} 16* 16* 16] 19* 19* 16} 16 APPENDICES 239 APPENDIX A (THIRD PART) LOWEST AND HIGHEST PRICES OF SCOTCH PIG IRON IN THE NEW YORK MARKET FROM THE AMERICAN ALMANAC, EDITED BY A. R. SPOFFORD, LIBRARIAN OF CONGRESS, WASHINGTON, D.C. YEAB LOWEST HIGHEST YEA.B LOWEST HIGHEST TON TON TON TON 1825 $35.00 $75.00 1858 $22.00 $27.00 1826 50.00 70.00 1859 22.00 31.50 1827 50.00 55.00 1860 20.50 27.00 1828 50.00 55.00 1861 20.00 24.50 1829 40.00 55.00 1862 21.00 33.00 1830 40.00 50.00 1863 32.50 45.00 1831 40.00 47.50 1864 43.00 80.00 1832 40.00 47.50 1865 40.00 55.00 1833 37.50 47.50 1866 42.00 55.00 1834 37.50 48.00 1867 38.00 49.00 1835 38.00 42.50 1868 35.00 45.75 1836 38.00 62.50 1869 34.50 45.00 1837 40.00 70.00 1870 31.00 37.00 1838 37.50 55.00 1871 30.00 39.00 1839 37.50 45.00 1872 33.50 . 61.00 1840 32.50 40.00 1873 37.00 52.00 1841 32.00 37.50 1874 33.00 45.00 1842 23.50 35.00 1875 29.00 41.00 1843 22.50 32.00 1876 27.50 34.00 1844 30.00 35.00 1877 25.00 28.00 1845 30.00 52.50 1878 21.50 26.50 1846 35.00 42.50 1879 19.00 30.50 1847 30.00 42.50 1880 21.00 35.00 1848 25.00 37.50 1881 22.00 26.00 1849 22.50 27.50 1882 23.00 26.50 1850 21.00 24.00 1883 20.00 25.50 1851 19.00 25.00 1884 18.00 23.00 1852 19.00 31.00 1885 17.00 21.00 1853 28.50 38.00 1886 18.00 21.50 1854 32.00 42.50 1887 19.25 23.50 1855 26.50 37.00 1888 18.50 22.00 1856 29.00 37.00 1889 1857 28.00 37.50 "~ KEY TO APPENDICES B AND C REASONS FOR THE ELIMINATIONS MADE, AND LETTERS USED TO IDENTIFY EACH A. Occurred in one nation only, or not common to all five nations. (See page 73.) B. Exist continuously, or in prosperous times, as well as in depressed times. (See page 74.) C. Too unimportant to be responsible for mysterious industrial depres- sions in five nations contemporaneously. (See page 74.) D. Things which make or increase business, hence cannot be cause of depressions, which are a decrease in business. (See page 73.) E. Things which affect individuals but do not affect nations, hence not responsible for a great national depression. (See page 74.) F. Connected with financial affairs, financial derangements do cause industrial depressions, but when they do, it is known. They are not the cause of the mysterious depressions. (See pages 71 and 72.) G. Subjects of special treatment. (See page 73.) H. Conditions of depressions. They are the sum and substance of de- pressions, hence not the cause. (See page 76.) The figures 1 to 21 used in the second column of Appendices B and C, are referred to on pages 76 and 77. 240 APPENDIX B ALLEGED CAUSES OF DEPRESSIONS AS ELICITED BY COM- MITTEES OF CONGRESS FROM FIRST ANNUAL REPORT OF THE COMMISSIONER OP LABOR C. A ADMINISTRATION, change in the policies of C. B AGITATORS, undue influence of G. F BUSINESS ENTERPRISES, stoppage of, by panic C. F. D. B. A CAPITAL, influx of foreign F. D. B aggressive inroads of G. F. E. D excessive conversion of circulating, into fixed F. E. B centralization of F. E. C. B interests of, not identical with those of labor F. E. D. B small capitalists swallowed up by larger ones F.E.B manipulations of the money power F. E. D. B combinations of F undue accumulation of E. D. C. B CIGAR FACTORIES, tenement house *(13) CONFIDENCE, want of H (5) CONSUMPTION, under E. C. B. A CORPORATIONS, land grants to E. B CORRUPTION, in municipal governments F CREDITS, expansion of G CRISIS, commercial F. A CURRENCY, contraction of F. D. A inflation of F. A agitation of F. A fluctuations of F. A depreciation of F. A deficient volume of the F withdrawal of, from circulation for specu- lation F. A inflation of the, followed by contraction F. A destruction of the F. A faulty legislation regarding F. A conversion of the government, into interest- bearing bonds F. E. A losses of creditors during the depreciation of, and of debtors during the appreciation of F. E losses of workingmen by goods rising sooner than their wages during the depreciation of, and wages falling before goods during the appreciation of * Figures used in this column are referred to on page 76. 241 APPENDICES F. B suspension of specie payments F overissue of irredeemable paper money F. A distrust of paper money F. A disturbed value of gold and silver F. A resumption of specie payment F. A changing the measure of the value of money F. A fraud of the finance system F. A borrowing depreciated money by government and individuals F. A demonetization of silver F. A remonetization of silver F. A issue of greenbacks F. A refunding act F. A passage of resumption act in 1875 F. C solution of the labor question turns entirely on the circulation of F DEBTS, contraction of E. A contraction of large foreign, prior to 1874 H (1) DEMAND, want of F. A DEPRESSION, prolonged by want of fixed policy for return to specie payment E. C. B DESTITUTION, caused by sickness G. E. C. B. A EDUCATION, lack of E. C. B common school, not practical G. E. C. B too exclusively intellectual E. C. B indifference to E. C. B defects of system of B want of technical training B want of industrial schools B economic ignorance D. B ELECTRICITY, great utilization of the power of H (7) EMPLOYMENT, want of E. D. B EXTRAVAGANCE, induced by credit E. D. B of dress D. B in government expenses G. E. D. B FASHIONS, in dress, devotion to C. B FOOD, adulteration of C. B. A FRANCHISES, government not receiving enough for E. C. B GIRLS, want of training of, for future duties G. D. B. A GOODS, importation of G. D. C. B IMMIGRATION, immigration of Chinese F. E. C. B. A INCOME TAX, repeal of the F. B INDEBTEDNESS, national and other E INDOLENCE, instinctive and widespread E. B INDULGENCES, harmful E. C. B INTEMPERANCE F. E. C. B INTEREST, too high rates of D. B INVENTION, the great development of B KNOWLEDGE AND WEALTH, lack of material C. B LABOR, inefficiency of E. C. B thriftlessness of C. B lack of interest of the laborer in his work C. B lack of combining power of D. A too small wages to C. B unadjustment of E. D. C. B competition of APPENDICES 243 D. C. B too many hours of C. B handicapped by legislation H. C. B surplus of, in cities E. C. B unjust taxation of G. E. C. B coolie G. E. C. B convict E. C. B female E. C. B child E. C. B cheap imported E. C. B want of economy of C. B interests of, not identical with those of capital C. B improvident and misdirected efforts of labor- ing classes E. C. B social differences between the laboring classes and capitalists E. C. B neglect of laboring men by the aristocracy E. C. B. A LAWS, bankrupt E. C. B. A conspiracy E. C. B. A land E. C. B. A navigation E. C. B. A patent E. C. B. A trustee E. C. B. A relative to the guardianship of children E. C. B. A want of homestead exemption E. C. B LEGISLATION, class B faulty E. C. B privileged C. B withholding franchise from women B MACHINERY, improper use of D. B labor-saving B MISCALCULATION F. B MISMANAGEMENT, financial C. B. A MONOPOLY, land E. C. B. A telegraph E. C. B. A news E. B. A railroad F. E. C. B interest D. C. B invention F. C. A NATIONAL DEBT, paying the, before the develop- ment of the industries of the country C. B NECESSARIES OF LIFE, speculation in the H (8) NON-PRODUCERS, too many G. F PANIC OF 1873 E. C. B PASSES, free E. D. C. B PRODUCE EXCHANGE, fluctuations in E. D. B PRODUCTION, planless D over E. D. C. B PRODUCTS, competition of, in market E.C.B PROFITS, unequal division of F. E. B RAILROADS, speculation in B. A pools of E. C. A war rates of E. C. B excessive freight rates of E. D excessive building of C. B. A land grants to 244 APPENDICES F. A fictitious values in C. B. A reformed system of G REACTION F. C. B REVENUE, faulty collection of E. C. B SANITARY CONDITIONS, bad F SPECULATIVE ERA, collapse from F. E. D. C. B SPECULATION D. B STEAM, great utilization of the power of D. C. B STIMULATION, artificial F. E STOCKS, watered F. D. B. A SYSTEMS, monetary E. D. C. B competitive E. C. B. A educational E. C. B contract D. C. B government contract E. D.C. B truck F. B credit F. D. B. A national banking B. A political, perversion of B wage F. B. A financial, erroneous E. C. B social, erroneous G. C. B. A TARIFF, protective C. B. A restrictive G. C. B agitation of E. C. B improperly adjusted E. C. B unjust discrimination of G. E. C changes of G. E. C. B TAXATION, indirect E. C. B needless E. C. B unequal E. C. B over, of land E. C. B over, of labor E. C. B under, of incomes E. C. B under, of capital E. C. B bonanza farms escaping E. C. B capitalists escaping E. C. B TELEGRAPH, high rates of E. C. B TOBACCO (15) VALUES, expanded G. F WAR, absorption of capital by G. F destruction of property during E. C. B WORK, piece APPENDIX C ALLEGED CAUSES OF DEPRESSIONS AS GATHERED BY AGENTS OF THE UNITED STATES BUREAU OF LABOR FROM FIRST ANNUAL REPORT OF THE COMMISSIONER OF LABOR F Acts that startle money-lenders, causing them to withdraw funds and refuse loans C. B. A ADMINISTRATION, change of G. D. C AGRICULTURAL PRODUCTS, low prices for F. C. B APPRENTICE SYSTEM, abolition of the F BANKS, failure of F. A fear of adverse legislation relative to F. E. D too liberal lending by F. B. A BANKING SYSTEM, erroneous E. B BUSINESS, lack of comprehension of details of E. D. B CAPITAL, absorption of, by corporations E. D. B aggressiveness of E. C. B attitude of, versus labor F. E. B concentration of, in banking and discount- ing centers, instead of geographical ones F. E. D. B concentration of small interests in larger ones F. E. B dead, invested in railroads F. E. D. C. B farming on borrowed G. F. E. D. B. A presence of foreign F. E. C. B relation between, and labor lost E. C. B syndicates and pools formed by capitalists and manufacturers to control labor F timidity of F. E. D. B too much, invested in manufactures F. E. D. B too much, invested in railroads E. C. B. A CASTE, absence of E. D. C. B CHILDREN, employment of E. D. B COMPETITION * (13) CONFIDENCE, want of B. A CONGRESS, unfavorable and reckless legislation in F. E. C CORNERS E. D. C. B CORPORATIONS, creation of large E. C. B monopoly of E. C. B natural resources of the country in the hands of F. E. D CREDITS, extended commercial F. E. D. B CREDIT SYSTEM G. E. C. A CROPS, small F. A CURRENCY, agitation of the silver question F. A coinage of the silver dollar F. A contraction of the * The figures placed in this column are referred to on page 76. 245 246 APPENDICES F. A decrease of gold F dishonest F. A distrust of the silver dollar F. A faulty financial system F. A inflation of the F. B. A not increased in proportion to the uses F. A overissue of paper money F scarcity of F. A uncertain value of the silver dollar F. A uncertainty of the future monetary standard F. A unequal value of gold and silver F want of, to pay the debts of the country when due H (2) DEMAND, decrease of home C. A DEMOCRATIC PARTY IN POWER G DEPRESSIONS ARE MENTAL DISEASES H (11) ECONOMY, enforced, of the laboring people H (12) increased, public and private E. D. C. A want of, by the working people C. B. A EMIGRATION, lack of, to the public lands G. E. C. B. A EDUCATION, too much, and indiscriminate G. C. B. A ELECTIONS, presidential E. C. B ENTERPRISES, investments in unproductive E. C. B GOODS, inattention to quality manufactured E. C undervaluation of, at custom-houses G GOVERNMENT, want of confidence in H (9) IDLENESS, enforced C. B. A IMMIGRATION, too much, of the poorer class E. C. B IMMORALITY D. C. B. A IMPORTATION OF WHAT SHOULD BE MANUFAC- TURED AT HOME E. D. C. B INDUSTRIES, establishment of, before required (21) INDUSTRIAL SYSTEM, erroneous E. D. B INDUSTRIAL PLANTS, enlargement of F. E. C. B INTEREST, high rates of, charged the producing F. C. B LABOR, attitude of, versus capital F. E concentration of, in cities D. C. A foreign contract E. C. B inadequate means for distributing the pro- ceeds of G. E. D. C. B prison H. (10) surplus of E. C. B unequal distribution of wages among differ- ent classes of E. D. C. B LAND, cultivating too many acres of, with too little labor G. B LAWS, natural E. C. B labor G. E. D. C. B LIVING, extravagant E. C. B false manner of E. C. B variation in the cost of D. B MACHINERY, labor-saving F. E. D. C. B MARGINS, dealing in F. E. C. B MARKETS, manipulation of, by speculators H (3) want of foreign APPENDICES 247 H (4) want of, for home products E. D. C. B MANUFACTURES, efforts of manufacturers to supply the inordinate fancy and demand of the public for splendid articles D increase of E. C. B MONOPOLY, land G. D OVERPRODUCTION C t PARTY POLICY, exaggerating the effects of C 1 PAUPERS, importation of C POLITICAL CAMPAIGNS, reaction after A POLITICAL DISTRUST (14) PRICES, inflation of (18) reduction of, to cost of production (19) PRODUCTION, uneven (16) variation in the (20) want of adjustment between, and con- sumption G PROSPERITY, reaction from H (6) RAILROADS, decreased building of D overbuilding of F. D too much capital invested in G. F. E. C RENTS, higher D. C. A REPUBLICAN PARTY, extravagance of F. E. C. B SECURITIES, selling valueless F. E. C. B SPECULATION, engaging in, rather than pro- ductive industries D STEEL, introduction of Bessemer G. C STRIKES E. C. B. A TARIFF, abuse of system of, among importers G. C. B discussions of the G. C. B. A discussions on the, in Congress C. B. A excessive G. C. A fear of Congressional action relative to the G. C. A high, protective C. A legislation on the G. C. A low rate of C. A mode of collecting duties on imported ma- chinery - C. A protective policy of the G. C. A reduction of the G. C. A revision of the E. C. A unequal duties of the C. A unjust E. C. A want of proper construction of the E. C. A want of proper protection G. E. C. B. A TAXATION, enormous E. C. B. A unequal E. C. B TONNAGE DUTIES, manner of determining E. D TRADING, the overdoing of D. C. B TRAFFIC, liquor H (15) UNDERCONSUMPTION G. D WAGES, reduction of (17) variation in the rates of E. C. B WAGE SYSTEM, failure of the G WAR E. D. B WEALTH, consolidation of APPENDIX D STATISTICS OF PIG IRON IN THE UNITED STATES FROM 1896 TO 1910 INCLUSIVE DATB Actual Production of Pig Iron for the Month Total Stocks in Furnace and Warrant Yards on the first of each Month Annual Rate of the Month's Production Annual Rate of the Month's Consumption 1896 January . . . February . . March 903,189 808,300 857,681 662,754 772,899 817 463 10,663,462 10,193,989 10,125 493 9,341,722 9,659,221 9 530 365 April 825,253 867 057 10,068,085 9 757 699 May 817 869 892 960 9 656 126 9 336 220 June . . 757 701 919 618 9 243 957 8 497 989 July . 729 142 981 782 8 608 580 7 543 208 August September . October .... November . December . . 1897 January . . . February . . March . 584,536 499,350 523,005 563,284 694,059 749,952 687,652 784685 1,070,563 1,133,824 1,186,374 1,155,301 1,110,601 1,141,699 1,251,848 1 281 863 6,901,296 6,092,070 6,174,838 6,872,211 8,194,734 8,830,080 8,964,035 9 239 037 6,142,164 5,461,470 6,547,714 7,408,611 7,821,558 7,508,292 8,603,855 8 913 237 April 743 409 309 013 9044 g04 8 921 265 May June July 738,571 712,380 711 299 ,319,308 ,282,976 257 072 8,696,073 8,667,290 8 374 977 9,132,056 8,978,138 8 625 261 August September . October November . December . . 1898 January . . . February . . March April May . 786,866 823,449 922,959 962,586 1,015,879 1,004,568 941,716 1,041,950 1,001,486 998,766 ,236,215 ,212,837 1,099,397 1,016,422 990,861 ,042,882 ,085,900 ,108,955 ,098,151 ,083,688 9,265,890 10,018,624 10,867,093 11,711,703 11,961,154 11,827,981 12,275,941 12,268,120 12,184,743 11,762,020 9,546,426 11,379,904 11,862,793 12,018,435 11,336,903 11,311,766 11,999,280 12,397,768 12,358,299 11,957,476 . -".wj June 928 924 067 400 11 301 912 11 774 928 July 930 868 027 982 10 %0 220 11 129 792 August .... September . October .... November . December . . 921,993 908,297 1,009,418 1,009,719 1,064,000 1,013,851 946,248 845,925 781,334 705,372 10,355,725 11,050,948 11,885,078 12,284,910 12,527,738 11,166,961 12,254,824 12,660,180 13,196,454 13,076,750 248 APPENDICES 249 DATE Actual Production of Pig Iron for the Month Total Stocks in Furnace and Warrant Yards on the first of each Month Annual Rate of the Month's Production Annual Rate of the Month's Consumption 1899 January . . . February . . March . . 1,068,180 872,200 1,076,936 659,621 608,462 544,075 12,576,962 11,369,750 12,680,047 13,190,870 12,142,394 14,259,811 April 1,075,543 412,428 13,085,772 13,850,424 May 1,104,158 348,707 13,000,570 13,615,462 June 1,094 991 297 466 13,322 397 14 119 962 July 1,115,801 231 003 13,137,510 13 561 206 August September . October . . . November . December . . 1900 January . . . February . . M^arch 1,172,810 1,185,669 1,283,909 1,300,487 1,314,334 1,295,149 1,188,320 1 307 044 195,695 165,883 153,006 139,028 133,499 142,781 173,523 205 689 13,808,874 14,325,635 15,116,997 15,822,594 15,475,218 15,249,335 15,490,600 15 389 391 14,166,618 14,480,159 15,284,733 15,888,942 15,363,834 14,880,431 15,104,608 14 982 807 April 1,291,359 239,571 15,711,529 15,059,149 May 1,313 071 293 936 15,460 357 14 360 833 June 1,248,394 385,563 15,188,796 13 664 736 July 1,109,778 512,568 13,066,739 11,640,875 August .... September . October .... November . December . . 1901 January . . . February . . March 1,016,902 958,959 959,933 969,038 1,089,247 1,196,724 1,159,420 1,291,748 631,390 728,432 781,250 740,679 656,920 626,092 648,039 609,356 11,970,199 11,667,329 11,302,434 11,789,969 12,825,005 14,090,460 15,113,868 15,209,289 10,808,695 11,033,513 11,789,286 12,795,077 13,194,941 13,827,096 15,578,064 16,374,681 April 1,319 227 512 240 16 050 562 16 710 598 May June 1,375,293 1,307,229 457,237 427,170 16,192,964 15 904 614 16,553,768 16,013,382 July 1,314,666 418,106 15,479,129 15,614,165 August September . October November . December . . 1902 January . . . February . . March 1,335,135 1,341,066 1,462,150 1,390,800 1,322,646 1,459,325 1,284,520 1,487,159 406,853 386,441 359,396 294,626 240,059 220,023 161,183 129654 15,720,133 15,942,490 17,215,642 16,921,400 15,573,090 17,182,375 16,744,650 17 510 093 15,969,877 16,267,030 17,992,882 17,576,204 15,813,522 17,888,455 17,122,998 17 807 609 April May 1,516,789 1,574,410 104,861 95,141 18,454,243 18 537 413 18,570,883 18,654,535 June July 1,484,520 1 476 707 85,381 82 102 18,061,660 17 387 036 18,101,008 17 456 348 August .... 1,498,416 76,326 17,642,640 17,582,820 250 APPENDICES DATB Actual Production of Pig Iron for the Month Total Stocka in Furnace and Warrant Yards on the first of each Month Annual Rate of the Month's Production Annual Rate of the Month's Consumption 1903 September . October .... November . December . . January . . . February . . March April 1,442,944 1,510,577 1,469,447 1,561,681 1,518,889 1,420,180 1,637,083 1 650 540 81,311 75,410 79,892 100,159 109,940 133,699 169,615 171 348 17,555,822 17,785,824 17,878,274 18,387,605 17,883,696 18,513,061 19,275,337 20 081 570 17,626,634 17,732,040 17,635,070 18,270,233 17,598,588 18,082,069 19,296,133 20,137,010 May 1 751 084 166 728 20 617,599 20,138,031 June 1,721 854 206692 20,949,227 20,233,439 July . . 1,611 229 266 341 18,970,927 18,104,119 1904 August .... September . October November . December . . January . . . February . . March 1,612,740 1,599,669 1,474,679 1,092,321 904,779 971,097 1,230,387 1 485 892 338,575 409,375 515,811 619,621 711,816 759,421 759,383 734 947 18,988,608 19,462,634 17,363,154 13,289,911 10,653,046 11,465,212 15,528,334 17,543,112 18,139,008 18,185,402 16,117,434 12,183,571 10,081,786 11,465,668 15,821,566 18,202,380 April 1,599 018 680008 19,508,010 19,513,230 May 1,570 057 679 573 18,536,802 17,444,574 June 1,316 657 770 592 16,063,218 14,918,526 1905 July August .... September . October . . . November . December . . January . . . February . . March . 1,145,716 1,178,558 1,369,684 1,474,290 1,510,303 1,648,309 1,810,019 1,624,328 1 973 441 865,983 916,456 894,172 818,548 767,943 701,654 603,900 571,634 543 065 13,526,838 13,914,588 16,710,148 17,406,124 18,425,694 19,460,690 21,311,516 21,174,426 23,235,796 12,921,162 14,181,996 17,617,636 18,013,384 19,221,162 20,633,738 21,703,508 21,517,104 23,530,612 April May 1,956,819 1,994 017 518,497 541 918 23,807,959 23,477,947 23,526,907 22,648,459 June . . 1,824 480 611,042 22,197,840 21,198,540 July . . . 1,780,219 694,317 20,960,646 20,089,506 1906 August .... September . October .... November . December . . January . . . February . . March 1,870,110 1,901,064 2,057,023 2,018,901 2,046,000 2,068,893 1,904,032 2 165,632 766,912 738,766 655,893 551,552 460,460 No official re- ports made. (See Footnote page 179) 22,019,042 23,129,633 24,219,784 24,563,301 24,090,000 24,359,526 24,820,417 25,498,587 22,356,794 24,124,109 25,471,876 25,656,405 No official re- ports made. (See Footnote page 179) APPENDICES 251 DATE Actual Production . of Pig Iron for the Month Total Stocks in Furnace and Warrant Yarda on the first of each Month Annual Rate of the Month's Production Annual Rate of the Month's Consumption April 2,073,222 25,221,354 May 2,098,740 24,711,021 June 1,970,733 23,997,267 July . 2 013 402 23 706 176 August .... September . October .... November . December . . 1907 January . . . February . . March April May June 1,926,736 1,970,962 2,196,818 2,187,665 2,235,306 2,205,607 2,045,068 2,226,457 2,216,558 2,295,505 2,234 575 I 22,685,741 23,979,978 25,865,725 26,616,582 26,318,899 25,969,229 26,658,922 26,214,717 27,000,771 27,010,052 27,337,301 1 July . . 2,255 660 cf 26,558,547 August 2,250 410 ft 26,496,758 September . October . . . November . December . . 1908 January . . . February . . March .... 2,183,487 2,336,972 1,828,125 1,234,279 1,045,250 1,077,740 1,228 204 -2 o 3 J 03 s 26,565,743 27,505,942 22,242,161 14,532,631 12,295,090 12,849,222 13,983,134 ade (See footnote April 1,149 602 s 13,849,962 a May 1,165 688 9 14,047,812 June 1,092 131 o 13,556,850 July 1 218 129 0> 13 827 062 August September . October November . December . 1909 January . . . February . . March April 1,359,831 1,418,998 1,567,198 1,577,854 1,740,912 1,797,560 1,707,340 1,832,194 1,738,877 No official r 14,879,992 16,371,284 17,668,650 18,863,244 19,926,190 21,160,875 22,256,240 21,619,680 21,156,130 H 1 z May June July August .... September . October November . December . . 1,883,330 1,930,866 2,103,431 2,248,930 2,385,206 2,599,541 2,547,508 2,635,580 22,174,845 23,599,440 24,744,445 26,479,290 29,020,055 30,524,585 30,952,000 31,033,030 252 APPENDICES DATS Actual Production of Pig Iron for the Month Total Stocks in Furnace and Warrant Yards on the first of each Month Annual Rates of the Month's Production Annual Rates of the Month's Consumption 1910 January . . . February . . March . 2,608,605 2,397,254 2 617 949 1 g 30,714,020 31,249,840 30 827 535 April 2 483 763 30,219 080 o May 2 391 180 f-C T-H 28,142 230 *H 1 1 June 2 265 478 27,563,340 B, July 2,148,442 25,296,325 2 <*3 August .... September . October .... November . December . . 2,106,847 2,056,275 2,093,121 1,909,780 1,777,817 24,806,495 25,917,830 24,644,800 23,235,535 20,896,980 O APPENDICES 253 cjj^^oit^ J3-<2 ^22*^ * * edi-(Npt>;0 C4^|C4 t^OOON PQO CJqqN ) O O< *H1 ' I rH M O5 O 00 t"- 1C 14 3*3 u3oqiNio w ,_| co ocqop CO(N(NOJt^ -^OlO NO^OOt> COINCOSOO !R -3 No. 1 Foundry Bessemer, Pitts No. 2 Foundry Gray Forge, Ci No. 2 Foundry 254 APPENDICES SSStScs cc 2 CO CO <* CS --< CCioCO -I (NCSCS.-ICS -i' 8SSS8 S. CSCSCS i-i-( -< ' O 00 IOOOC5IO ^ 00 ^ ^ "1 9 ^ M . O^CO tf5COiOCS-l 2 c$;88 2 SS8SS 88 8888 lOiOiOCSO ' r-l dC^CSCSM 2^! SE888 S58S8S "5 O id (N O' t ICOOOO iO_jO o; Soooo cs cs o o 10 10 o *G qqqo ^^o qt^cscso i> cd id id cs o CO N CO M t>; ooo o o o 10 C3 q t^ cs rj< i COCO0OOOiO O CO >OOOOO O ._. O OO5OCS" ji-HOOt^; ^OS^. CS ?5 CV ?'^1 "^ COOrJJ qcOiOi-- CO t 1 * O l> ff. i-* 5 ui co c4 10 ^ ^3 ladelphia ago ati ingham I; s j = l : ri fl i^il pH^O'Scq bsbob gS-g P--2 1*111 H a, 3o : . blbGb : ^ S ? -S .-S ' bl bo b Bill niii ir Pe Av o g Totals Percentage ab Average Price J3 blbGb nn a>cs j^cs S d d tals age e Pri APPENDICES 255 8OOU5O O r-liOt^O GO oi 06 os 10-^ co Q'OO'O'O 5 OJ OOO>OO O O "OOOiOO O qc^ioos(N os oj co rt< CN co l>; COgqt>- OO'CiCOOq 00 .Q t>- O O S5 S r^- OO^OJ -J c^tjp-* uicoeoi-Joi co^ici t^tot^coco* oc ^ o *'dHt>Icf iO iO O O 1O O OOOOO cooqNq ci j I-H qt>;^q>5 t> CD CO CO s ! *C eO ^d ss^i^^ t- 50 ^ 8>OiOOP O O OCOOO O-* oo o - ^^5 0>i OOl>t^COlN 00 t "5 oooo-o osocct^o ^ f-j O r* W t*^ CO ^j ^* C^ w. J w v u j n j ^^ j^ cir^co^co coooI> O <)CCOCCO ^flO"^ ^222^ i/ 9o u ' W500O"5O 00 t^ (NM-COO CO.-0 OJt^OO-^Tjt eOnntO rH i-l rH i^ i-( 00 i-l OOO"5O O -OOO O OO O S -5 i-l CO -<0>COOOa r*N CO 00 00 IOOCOO i-tO5t>-OO S 5S8! CC GC 00 O -^ 8S8S CO O CO CO ^ O M ^O5 O O (N.' CO t-^ * (N 10 eo - 1 5jT o ooooc4 g 5, ooo TJ< a co SS8S8 S^S bc4b'-iN C4C4C4C4C1 ^-^^^^ oo-- -J2222 g' ^R SS888 Sg88 00 O5 00 "^ CO SOOU5W5 O OiOMN O5. APPENDIX G TABLE SHOWING THAT EACH ABNORMAL ADVANCE IN THE PRICE OF PIG IRON HAS BEEN FOLLOWED BY AN INDUSTRIAL DEPRESSION Lowest and highest prices of Scotch Pig Iron in New York from 1825 to 1882, taken from the American Almanac Edited by AINSWORTH R. SPOFFORD, Librarian of Congress Years of Depression up to 1886, taken from the First Annual Report of the United States Commissioner of Labor, published in 1886, page 290 Lowest Highest Year Low High .... $36.00 $76.00 1825 114% advance Depression . . Low 50.00 50.00 50.00 40.00 40.00 40.00 40.00 37.50 37.60 70.00 55.00 55.00 55.00 50.00 47.50 47.50 47.50 48.00 1826 1827 1828 1829 1830 1831 1832 1833 1834 High 38.00 38.00 42.50 62.60 1835 1836 86% advance Depression . . Low 40.00 37.50 37.50 32.50 32.00 23.50 22.50 70.00 55.00 45.00 40.00 37.50 35.00 32.00 1837 1838 1839 1840 1841 1842 1843 High .... 30.00 30 00 35.00 62.60 1844 1845 133% advance Depression . . Low 35.00 30.00 25.00 22.50 21.00 19.00 19.00 42.50 42.50 37.50 27.50 24.00 25.00 31.00 1846 1847 1848 1849 1850 1851 1852 High 28.50 32.00 38.00 42.60 1853 1854 123% advance Depression . . 26.50 29.00 28.00 22.00 22.00 20.50 37.00 37.00 37.50 27.00 31.50 27.00 1855 1856 1857 1858 1859 1860 257 258 APPENDICES Lowest Highest Year Low $20.00 $24.50 1861 21.00 33.00 1862 32.50 45.00 1863 High 43.00 80.00 1864 300% advance 40.00 55.00 1865 (Depreciated 42.00 55.00 1866 Currency) Depression . . 38.00 49.00 1867 35.00 45.75 1868 34.50 45.00 1869 31.00 37.00 1870 Low 30.00 3900 1871 High 33.50 61.00 1872 103% advance Depression . . 37XX) 52.00 1873 33.00 45.00 1874 29.00 41.00 1875 27.50 34.00 1876 25.00 28.00 1877 21.50 26.50 1878 Low . 19.00 30.50 1879 High 21.00 36.00 1880 84% advance 22.00 26.00 1881 Depression 23.00 26.50 1882 21.00 25.00 1883 18.00 20.50 1884 17.75 18.25 1885 18.25 20.00 1886 20.50 21.50 1887 18.00 21.00 1888 17.00 19.25 1889 Short Depression caused by Baring XTr 18.00 19.90 1890 Bros, financial diffi- INO Great culties of Novem- U _ Change 17.50 17.75 1891 uer. in Prices QTirl 15.00 17.50 1892 Short Depression ana consequently X 13.75 15.00 1893 caused by Silver Coinage panic. no Depressions (June.) Short Depression from Industrial Causes 12.50 13.37 1894 caused by depletion of Gold Reserve. (April.) Short Depression 12.00 14.50 1895 caused by Vene- zuela Proclamation. (December.) Short Depression 12.50 13.50 1896 caused by threaten- ing of Gold Basis. (July.) 11.75 12.75 1897 APPENDICES Lowest Highest Year Low $11.25 $12.00 1898 High 12.12 25.00 1899 122% advance Depression . . 16.00 25.00 1900 Low 15.60 16.25 1901 High 17.50 24.87 1902 60% advance Depression . . 15.87 24.00 1903 Low 15.00 17.62 1904 17.25 19.00 1905 19.00 26.50 1906 Hieh 18.87 27.50 1907 83% advance Depression caused by Financial Panic. Depression . . 17.00 18.75 1908 (October 1907.) Beginning of Depres- sion caused by High Cost of Construc- tion. 16.50 19.50 1909 16.00 19.50 1910 260 APPENDICES 9 8 g2 'G S'-fc U 3 1 11 g.s Hi! 1? SI Ss 1's 11 s-l SP s| KJ 2^ a 5 - oo.2 sjsj i 1 11 8) S-l 8s S' " " " o s Rank Various APPENDICES 261 1 a ,-3 fl w 11 la ss W =1 = 0=0 002 CO. Rank 2 Various 262 APPENDICES 2 H gs~ | I OOg 003 rf'S C0 8| S| S| g ^ oo o 1 IS' !E "=' III | III o c8 ^ I .M CO "ro CcPQ O C3 ;| -| 2 d S| -3 ^02 < - s Rank | H o>2 Various APPENDICES 263 -2 Q >S II m sfBJ il s s| il sf ci is iS als s s s s i * * O'S COoi oq.9 cq^J oqjj i>- O, N M ^3 ^s ^w -2 * lj-8 I ? a Rank 2 Various 264 APPENDICES .So . &l IJ IM 3 3 a SJ< feij.2 g><*o> 11 $55 2 " 5 a So 3 So--' >T}<0> Jfi ag s 1 i"S p S . U j 8- 1 1 8* 1 81 Sri IP - s sj g til so oo8 " -2 t^-13 3 -4 - --' ca o2 GO - " - ooJ m -j ^ * ' o a 2K *-" s '' 3 - s - 8s S3 8f 8 a Sg 8| 8p 8| ^ 2* 3| ^^ eo'53 o a ^f 8| 5| 3 - - & ! a 1 I I 1 'I cS I 3 Rank <*sn-iovoi>oo 2 Various APPENDICES 265 j vJ rt ^ o< a ^ ' g . g s'S 8f 8S fei 5? 8^ MM OP ^ o-a < o 5 1 i si si 2 Rank J MM Various 266 APPENDICES i 8.2 D ***W URfiini * *** VLJ ' CQ > s s^ s 00 "^ ^g tl tf si rH Oi "S S| H 73 5 PQ ii i 4i ct r K a fe- 1 60 02 1 02 >1 af si 1 1 1 1 02 t-H ^ o ,H 3 a wg <5 W > \\ I I I I ^ ^P Si 1 s'J 1111 5 1 w NO t. oo o> 2 Various APPENDIX L DESCRIPTION OF DIAGRAMS * Appendix L contains two diagrams. They are placed one above the other for the purpose of illustrating the effect of high and low prices upon the volume of construction. As usual, the quantity of pig iron consumed is used as the gauge of the quantity of construction. DIAGRAM OF PRICES The single line (P) in the lower diagram represents the average fluctua- tion in prices of the four principal grades of iron in the five chief iron markets of the United States, the details of which are shown in Appendix E. The lowest average price ever reached was in July, 1897. For the pur- poses of description, this price will be called "ZERO," and the line P represents the percentage of fluctuations above zero, during this period of fifteen years. DIAGRAM OP CONSTRUCTION The space between the irregular line F F and the base line B B repre- sents the actual monthly consumption of iron up to November, 1905, after which date it represents the estimated consumption. (See footnote, page 179.) This space we call "Approximate Construction Rate." The space between the lines C C and the base line B B represents the average volume of construction which goes on all the time, in depressed times as well as in active times, and is what we have designated as "neces- sity construction." The space between the line A A and the line C C represents the highest practical limit of the extra construction which creates the booms; being the highest rate reached during a boom, when all the available labor is employed, the reserve stocks of materials are exhausted and the rate of construction is limited to the rate materials can be produced. This we call "practical capacity." The line D D represents the approximate rate at which contracts for construction are made. The spaces G,G,G, represent approximately the amount of construction materials included in these contracts, in excess of the capacity of the country to produce them on contract time, and the spaces H,H,H, represent the time in which this excessive construction is carried to completion. It will be observed that the contracts for construction which resulted in the boom of 1899 were made chiefly during the low-priced periods of 1897 and 1898; that, as soon as prices advanced materially, the contracts for construction fell off rapidly, and that the excess construction contracted for, as per space G, kept actual construction up to the maximum height until July, 1900, when actual construction dropped to the necessity basis within three months. Then during the low-priced period of 1901, the chief volume of contracts was made, which resulted in the boom of 1902 and 1903. Then during the low-priced period of 1904 and 1905, the chief volume of contracts was made, which brought the boom of 1906 and 1907. These three illustrations are typical of what has occurred just before each boom in the five industrial nations, ever since these nations became large industrial producers. 267 APPENDIX M THE IRON PRODUCTION OF V Long Ton Long Ton Metric Ton Metric Ton Metric Ton Metric Ton Metric Ton Great Britain United States Germany France Belgium Austria- Hungary Russia 1500 6,000 5,000 12,000 1700 12,000 10,000 22,000 1740 20,000 i.obb 18,000 26,000 1790 68,000 30,000 30,000 40,000 1800 190,000 40,000 40,000 60,000 1806 1807 1808 1809 1810 1811 243,851 250,000 55,000 46,000 85,000 1812 1813 1814 300,000 100,000 1815 1816 1817 1818 325,000 114,000 1819 112 500 1820 400,000 110,000 90,000 140,000 1821 1822 1823 1824 1825 455,166 581,367 195,588 139,642 1826 1827 1828 1829 1830 1831 1832 690,000 703,184 "680,000 130,000 142,000 180,000 191,000 200000 126,006 217,000 220,000 224,000 225000 35,000 80,000 102,952 1833 1834 700,000 236,000 260,000 1835 294 000 172,009 1836 1,000,000 308,000 1837 331 000 1838 347,000 1839 1,248,781 350000 1840 1841 1,396,000 290,000 170,000 350,000 377,000 73,000 140,000 185,000 1842 1,099 138 215000 399 000 1843 1,215,350 422,000 1844 1,999,608 171,000 427,000 1845 1,512,500 438,000 134,563 187,260 1846 765000 522,000 1847 1,999,508 800,000 591,000 1848 1849 800,000 650,000 205,000 472,000 414,000 1850 1851 2,250,000 563,755 402,000 570,000 445000 144,452 140,000 227,555 1852 1853 2,701,000 500,000 522,000 660000 1854 3 218 154 657 337 771 000 1855 3,218,151 700,159 849,000 294,270 268,637 1856 1857 3,586,377 3,659,477 788,515 712,640 923,000 992,000 1858 3,456 064 629,548 871,000 268 APPENDICES APPENDIX M THE WORLD BY NATIONS Metric Ton Metric Ton Metric Ton Long Ton Figured at Long Ton Sweden Spain Italy Canada World's Production 37 000 60,000 60000 104 000 92,000 157,000 110,000 278,000 130,000 460,000 180,000 616,000 65,000 270,000 1,010,000 105,000 20,000 10,000 62,000 1,585,000 130,000 40,000 2,774,000 130,000 40,000 4,468,000 270 APPENDICES THE IRON PRODUCTION OF Long Ton Long Ton Metric Ton Metric Ton Metric Ton Metric Ton Metric Ton Year Great Britain United States Germany France Belgium Austria- Hungary Russia 1859 3,712,904 750,560 864,000 1860 3,826,752 821,223 "536,000 898,000 319,934 310,000 335,255 1861 3,712,390 653,164 966,000 311,000 1862 3,943,469 703,270 1,090,000 356,000 1863 4,510,044 846,075 812,600 1,156.000 392,078 1864 4,767,951 1,014,282 904,700 1,212,000 449,875 1865 4,825,254 831,770 988,200 1,203,000 470,767 299,432 1866 4,523,897 ,205,663 1,046,900 1,260,000 482,404 1867 4 761,023 ,305,023 ,113,600 1,229,000 423,069 1868 4,970,206 ,431,250 ,264,400 1,235,000 435,754 1869 5,445,757 ,711,287 ,413,000 1,380,000 534,319 1870 5,963,515 ,665,179 ,391,100 1,178,000 565,234 400,666 359,531 1871 6,627,179 ,706,793 ,536,700 859,000 609,230 393,352 359,253 1872 6,741,929 2,548,713 1,988,400 1,217,000 655,565 459,657 399,253 1873 6,566,451 2,560,963 2,240,600 1,381,000 607,373 534,508 384,221 1874 5,991,408 2,401,262 1,906,200 1,415,000 532,790 494,055 380,219 1875 6,365,462 2,023,733 2,029,400 1,448,000 540,473 463,163 427,182 1876 6,555,997 2,868,961 1,846,400 1,435,000 490,508 400,426 441,433 1877 6,608,664 2,066,594 1,932,700 1,506,000 470,488 387,630 398,238 1878 6,381,051 2,301,215 2,147,600 1,521,000 518,646 434,250 417,239 1879 5,995,337 2,741,853 2,226,600 1,400,000 389,330 404,162 432,636 1880 7,749,233 3,835,191 2,729,000 1,725,000 608,684 464,234 448,411 1881 8,144,449 4,144,254 2,914,000 1,886,000 624,736 543,640 469,476 1882 8,586,680 4,623,323 3,380,800 2,039,000 726,946 611,739 498,400 1883 8,529,300 4,595,510 3,469,719 2,069,430 783,433 698,856 481,679 1884 7,811,727 4,097,868 3,600,612 1,871,000 750,812 734,346 509,519 1885 7,415,469 4,044,526 3,687,434 1,630,648 712,876 714,784 527,536 1886 7,009,754 5,683,329 3,528,658 1,516,574 697,110 760,000 532,104 1887 7,539,518 6,417,148 3,907,364 1,507,850 755,781 719,980 612,447 1888 7,998,969 6,489,738 4,337,421 1,683,349 826,984 704,530 683,315 1889 8,322,824 7,603,642 4,524,558 1,722,480 847,000 790,227 740,067 1890 7,904,214 9,202,703 4,685,451 1,970,160 781,958 855,822 926,471 1891 7,406,064 8,279,870 4,641,217 1,897,000 684,126 921,846 1,004,861 1892 6,709,255 9,157,000 4,937,461 2,057,258 753,268 940,646 1,070,800 1893 6,976,990 7,124,502 4,986,003 2,032,567 760,296 982,247 1,148,923 1894 7,427,342 6,657,388 5,380,038 2,069,000 818,597 1,072,357 1,332,489 1895 7,703,459 9,446,308 5,464,501 2,003,868 829,234 1,127,673 1,454,325 1896 8,563,209 8,623,127 6,372,575 2,339,537 959,414 1,612,069 1897 8,796,465 9,652,680 6,864,405 2,484,191 1,034,732 1,868,671 1898 8,631,151 11,773,934 7,215,927 2,534,427 979,101 1,427,246* 2,222,469 1899 9,305,319 13,620,703 8,142,017 2,567,388 1,036,185 1,467,663 2,710,972 1900 8,959,691 13,789,242 8,381,373 2,669,966 1,001,872 1,472,695 2,889,789 1901 7,928,647 15,878,354 7,860,893 2,388,823 764,180 1,496,347 2,831,680 1902 8,679,535 17,821,307 8,529,810 2,404,974 1,069,050 1,216,500 2,592,918 1903 8,935,063 18,009,252 10,085,634 2,840,517 1,216,500 1,428,158 2,453,958 1904 8,562,658 16,497,033 10,103,941 2,974,042 1,283,190 1,454,803 2,978,352 1905 9,592,737 22,992,380 10,813,979 3,028,089 1,290,400 *1, 560,000 2,977,981 1906 10,149,388 25,307,191 12,098,551 3,266,580 1,354,033 *1,575,000 2,618,977 1907 10,114,282 25,781,361 12,839,593 3,532,233 1,405,374 *1, 823,761 2,776,327 1908 9,289,840 15,936,018 11,813,511 3,344,145 1,182,311 1,952,750 2,751,000 1909 9,664,287 25,795,471 12,917,653 3,544,638 1,632,350 1,947,300 *2,817,000 1910 10,216,745 27,298,545 14,793,325 4,032,459 1,803,500 1,990,684 *2,956,000 APPENDICES 271 THE WORLD BY NATIONS (Continued) Metric Ton Metric Ton Metric Ton Long Ton Figured at Long Ton Sweden Spain Italy Canada World's Production 185 019 50000 7,300,000 266 620 9,250 000 9,300,000 9,250 000 10,400 000 11,575,000 300 338 70 000 11,900000 298 761 12,500 000 339 409 13,925,000 345 720 14,675 000 327 852 13 500 000 350 539 13,675 000 352 467 13 475 000 344 536 13,675 000 340 858 14,118 000 342,547 13,950,000 405,713 85939 21 000 17,950 000 430 042 114 394 27 800 19,400 000 398,945 120 064 24 778 20,750,000 422 647 139 920 24 306 21,000000 430,534 126,269 24 778 19,475,000 464 737 159 225 15 991 19,300 000 442,457 156,204 12,291 20,386,000 456,625 188 634 12 265 22,171 000 457,052 212,116 12,538 23,575,000 420,665 197,874 13 473 25,345,000 456,103 179,782 14,346 19,439 27,157,000 490,913 278,460 11,930 21 331 25,718,000 485 664 211 436 12 729 37 896 26,474 000 453,421 234,563 8,038 49,953 24,813,000 462,809 223,798 10 329 44 791 25,600,000 462,930 206,452 9,213 37,829 28,871,000 488,400 246,326 60030 Japan China India Mexico 30,500,000 530 891 146 940 8393 53 796 32,700 000 531,766 113,492 68,755 23,652 35,500,000 497,727 295 840 19 218 94 077 19 631 40,841 348 518,263 289,315 23,990 86,090 40,087,616 528,375 296,858 15 819 244,976 24,495 28,805 39,968,511 506,825 506,825 528,525 518,967 604,789 615,778 563,300 443,000 604,300 350,284 380,000 294,000 315,635 382,309 355,240 430,000 420,000 425,000 43,335 75,279 89,340 140,818 133,158 135,296 80,000 147,000 343,600 319,557 265,418 270,942 468,003 541,957 581,146 563,672 677,090 740,210 32,435 36,515 112,328 190,375 38,945 42,919 147,217 *161,020 *162,000 15,805 38,873 38,770 32,314 50,622 61,148 66,409 74,000 130,000 36i756 40,978 47,042 47,000 40,000 38,000 39,350 35,933 21 ',550 26,554 4,229 25,319 16,238 16,615 58,859 45,000 43,495,847 46,368,000 45,291,937 54,034,508 58,689,556 60,179,960 48,174,788 60,365,780 65,607,788 From various sources, including Mulhall's Dictionary of Statistics, American Iron and Steel Association, James Watson & Co., Glasgow, Iron Age, and various foreign author- ities. *Estimated. APPENDIX O RAILROAD MILEAGE OF THE UNITED STATES Years Miles Built Miles in Operation Years Miles Built Miles in Operation 1830 23 1871 7,379 60,301 1831 72 95 1872 5,870 66,171 1832 134 229 -1873 4,097 70,268 1833 151 380 1874 2,117 72,385 1834 253 633 1875 1,711 74,096 1835 465 1,098 1876 2,712 76,808 1836 175 1,273 1877 2,274 79,082 1837 224 1,497 1878 2,665 81,747 1838 416 1,913 1879 4,809 86,556 1839 389 2,302 1880 6,711 93,262 1840 516 2,818 1881 9,846 103,108 1841 717 3,535 1882 11,569 114,677 1842 491 4,026 1883 6,745 121,422 1843 159 4,185 1884 3,923 125,346 1844 192 4,377 1885 2,975 128,320 1845 256 4,633 1886 8,018 136,338 1846 297 4,930 1887 12,876 149,214 1847 668 5,598 1888 6,900 156,114 1848 398 5,996 1889 5,162 161,276 1849 1,369 7,365 -U890 5,915 167,191 1850 1,656 9,021 1891 4,844 172,035 1851 1,961 10,982 1892 3,656 175,691 1852 1,926 12,908 -*893 4,143 179,834 1853 2,452 15,360 1894 2,899 182,733 1854 1,360 16,720 1895 1,895 184,628 1855 1,654 18,374 1896 2,053 186,681 1856 3,642 22,016 1897 2,163 188,844 "1857 2,487 24,503 1898 2,026 190,870 1858 2,465 26,968 1899 3,466 194,336 1859 1,821 28,789 1900 4,628 198,964 1860 1,837 30,626 1901 3,324 202,288 1861 660 31,286 1902 4,965 207,253 1862 834 32,120 1903 6,169 213,422 1863 1,050 33,170 1904 6,690 220,112 1864 738 33,908 1905 5,084 225,196 1865 1,177 35,085 1906 5,565 230,761 1866 1,716 36,801 ^1907 6,188 236,949 1867 2,249 39,250 1908 3,654 240,603 1868 2,979 42,229 1909 3,475 244,078 1869 4,615 46,844 1910 3,918 247,996 1870 6,078 52,922 First Annual Report Com. of Labor, p. 68. Statistical Abstract U. S. 1908, p. 248. 272 APPENDIX P BUILDING PERMITS OF FIFTY-SEVEN CITIES, 1906 AND 1907* Cities 1906 1907 Percentage of Gain or Loss between 1906 and 1907 Gain Loss Baltimore 8,611,708 2,132,469 2,684,399 8,686,030 64,822,030 1,458,105 12,972,794 2,231,742 6,911,190 717,187 7,000,996 13,275,250 2,761,023 1,048,680 1,012,790 2,181,306 3,732,915 5,530,971 10,765,480 1,242,138 5,116,917 18,158,540 811,828 9,713,284 9,466,150 4,346,767 1,121,653 2,840,212 3,018,890 10,411,328 5,563,437 6,439,580 1,964,079 2,448,598 8,411,000 59,093,080 2,729,345 15,888,407 1,700,490 7,737,062 653,503 6,349,604 14,226,300 2,483,735 1,077,745 1,343,125 2,053,755 4,026,970 5,787,556 9,611,922 1,063,055 3,032,548 13,304,696 719,015 10,771,244 10,006,485 4,957,999 1,295,112 2,078,044 2,804,882 9,543,520 4,710,523 87 22 11 7 2 32 9 5 18 6 14 15 6 39 25 7 8 3 8 23 8 9 10 6 10 14 47 26 11 26 7 8 15 27 2 25 19 10 13 Birmingham .... Bridgeport Buffalo Chicago Cambridge Cleveland Chattanooga .... Cincinnati Davenport Denver. . Detroit. . Duluth Evansville Fall River Grand Rapids . . . Hartford Indianapolis .... Kansas City .... Little Rock Louisville Los Angeles Manchester Milwaukee Minneapolis .... Memphis Mobile Nashville New Haven Newark New Orleans .... Manhattan 126,075,565 65,066,325 28,889,090 91,722,799 64,150,107 21,648,874 Brooklyn Bronx New York Omaha 220,030,980 4,273,050 40,711,510 1,077,471 15,116,252 177,521,780 4,536,643 36,659,655 1,500,192 13,145.311 Philadelphia .... Patterson Pittsburg . . ' From Chicago Contractor. 273 274 APPENDICES Cities 1906 1907 Percentage of Gain or Loss between 1906 and 1907 Gain Loss Reading . 1,631,245 6,175,499 1,069,737 29,938,693 9,537,449 1,111,550 56,574,844 2,075,075 11,980,488 3,710,859 1,073,397 3,313,261 2,249,355 827,408 4,696,970 3,032,855 12,414,457 2,939,403 2,224,833 1,499,550 6,752,615 1,667,563 21,893,167 9,750,000 1,951,471 34,927,396 2,423,849 13,573,270 5,778,876 1,125,825 4,222,282 4,183,800 1,233,832 3,400,665 9,985,425 9,890,464 3,068,896 2,486,861 9 55 2 75 16 14 56 5 86 49 228 4 11 8 27 38 27 27 21 Rochester St Joseph St Louis St. Paul San Antonio .... San Francisco . . . Scranton Seattle Spokane South Bend Syracuse Salt Lake City . . Topeka Toledo Tacoma Trenton . . Washington Worcester Wilkesbarre Totals 667,032,499 580,492,196 APPENDIX Q UNFILLED ORDERS OF UNITED STATES STEEL CORPORATION Year * Date * Tonnage Average Monthly Rate of INCREASE Average Monthly Rate of DECREASE 1901 1902 December 31 January February . . . 4,497,794 40,553 40,553 March April 40,553 40,553 May 40,553 June 40,553 July 1 4,741,993 33,671 August 33,671 September 33,671 October 1 November. . . 4,843,007 168,082 168,082 1903 December 31 January 5,347,253 168,082 21,155 February 21,155 IMarch 21,155 April 1 5,410,719 248 047 248,047 June 248 047 July 1 4,666,578 312 613 August 312 613 September 312 613 October 1 3,728,742 171 206 1904 November December 31 .... January 3,215,123 307,279 171,206 171,206 February March 31 4,136 961 307,279 307,279 April 314 895 May .... 314 895 June 30 3,192,277 314 895 July 54947 August 54,947 September 30 October 3,027,436 556 256 54,947 November December 31 .... 4,696,203 556,256 556,256 *From official Reports of the U. S. Steel Corporation. 275 276 APPENDICES Year * Date * Tonnage Average Monthly Rate of INCREASE Average Monthly Rate of DECREASE 1905 January 300452 February 300*452 Marck 31 5,597,560 300,452 April O^ QfiS May. . 255 968 June 30 4 829 655 255 968 July .. 345 241 August September 30 October 5,865,377 345,241 345,241 579 903 November 579,903 1906 December 31 .... January 7,605,086 579,903 195 458 February 195 458 March 31 7,018,712 195 458 April 69 708 May 69708 June 30 6,809,589 69708 July . 375,765 August 375 765 September 30 .... October 7,936,884 375,765 184 279 November 184,279 1907 December 31 .... January. 8,489,718 184,279 148 620 February 148 620 March 31 8 043 858 148 620 April 146 660 May 146 660 June 30 7 603 878 146 660 July . 392 957 August 392 957 September 30 October 6,425,008 392,957 600,152 November 600,152 1908 December 31 .... January 4,624,553 600,152 286,403 February 286 403 March 31 3 765 343 286 403 April 150 489 May. 150 489 June 30 3 313 876 150,489 July 36033 August 36033 September 30 October 3,421,977 36,033 60,517 November 60,517 1909 December 31 January 3,603,527 60,517 20,310 From official Reports of the U. S. Steel Corporation. APPENDICES 277 Year * Date * Tonnage Average Monthly Rate of INCREASE Average Monthly Rate of DECREASE February 20310 March 31 3,542,595 20,310 April 171,781 May 171,781 June 30 4,057,939 171 781 July . 246,298 August 246 298 September 30 October 4,796,833 246,298 376 733 November 376,733 1910 December 31 .... January 5,927,031 376,733 174,839 February 174,839 March 31 5,402,514 174,839 April 381,573 l^ay 381,573 June 30 4,257,794 381,573 July 31 3,970,931 287,763 August 31 September 30 October 31 3,537,128 3,158,106 2,871,949 433,803 379,022 286,157 November 30 ... December 31 .... 2,760,413 2,674,757 111,536 85,656 1 From official Reports of the U. S. Steel Corporation. INDEX INDEX Abnormal advances in prices of iron, ten periods of, 204 Abnormal decreases in prices of iron, ten periods of, 208 Abnormal prices, recurrence of, 205 Accumulation and production, 28 Advance in prices, cause of, 122 Advent of industrial depressions, 13-17 Agriculture, in U. S. in the nine- teenth century, 2-3; introduction of machinery in, 4, 6, 7; surplus products in U. S. up to 1845, 4-5; limit of, 95 Alleged causes of industrial depres- sions, 67, 71-78, 202 Analysis of industrial depressions, 82; of business, 95; of construc- tion, 106; of boom period prices, 120 et seq.', of the depression of 1834-35, 141; of 1846-48, 144; of 1855-58, 145; of 1865-70, 147; of 1872-76, 149; of 1882-85, 155; of 1890-97, 165 et seq.; of con- struction during 1904-07, 182; of building permits, 184; of de- pressions of 1900 and 1903, 198 Analytic reasoning, 90 Annual production of iron, 206 Antiquity of manufacturing, 2 Arnold, Thomas, 41 Average stock of iron carried, 87; of pig iron carried, 207 B Bad legislation, 70 Barometer of trade iron, 85 et seq., 212 Belgian business conditions in 1870- 73, 153 Benner's prophecies, 56 Birth of the manufacturing age, 7 Boom of iron production in 1899, 169 Boom periods, analysis of prices in, 120 et seq. Boom prices, cause of, 118; small profit in table, 119 Booms in iron market, 34 Booms, no uniformity in, 192 Building operations, 197 Building permits of 1907, 183 Bureau of Labor, established, 16; summary of work of, 75-78 Business influenced by price of iron, 85; analysis of, 95; the four great systems of, 97; uniformity of vol- ume of, 101 ; conditions in Europe in 1870-73, 151; revival of 1902, 173; of 1904, 179 Cairnes, Professor, 24 Capital, circulating and fixed, 58-62 Cause of abnormal advance in prices, 122 Causes of industrial depressions, 28, 159, 241-247; search for, 71, 80, 100; of strikes, 110 Circulating capital, 58-62 Civilization and labor, 52 281 282 INDEX Commerce, definition of, 23; limit of, 95; growth of, 96 Commodities not circulating cap- ital, 59 Comparison of corn crops, 45 Connection between iron production and industrial depressions, 83 Construction, analysis of, 106 et seq.; during 1904-07, 182; fluc- tuation of, 104, 110; table show- ing connected events, 114; high prices of, the real cause of de- pressions, 130; the key to pros- perity, 136; need of monthly knowledge of, 219; investment, 213 Construction materials, methods of buying, 112; supply and demand, 221 Construction revivals and low prices, 192 Contracts and construction, 182 Controlling force of all business, 137 Convict labor, 69 Coolie labor, 69 Corn crops of 1900 and 1901, 45 Crises, industrial, early theories concerning, 14-17 Crops as affecting industry, 43 Cycles of "ups and downs," 55 Cyclic delusions, 203, 2o7 D Decreasing cost of iron, 208 Definition of "panic," 18; of "in- dustrial depression," 19; of farm- ing, 22; of manufacturing, 23; of commerce, 23; of production, 22, 24; of reaction, 51 De Laveleye, Georges, 154 Delivery and demand, 115; future vs. immediate, 110 Delusions, cyclic, 203, 207 Demand and delivery, 115; ver- sus supply, 26, 32 Depletion of gold reserve, 162 Desire for gain the origin of all industries, 127, 137 Development of the U. S., 10 Differences of production, 41 Doyle, Sir Conan, 90 E Early theories of industrial crises, 13-17 Economic conditions of the nine- teenth century, 2; revolution in, 7 Economic tools, 64 Effect of the crops on the industries, 44 Elimination of alleged causes of industrial depressions, 73, 74 "Endless chain," the, 162, 164 Europe, industrial conditions in 1832-35, 143; industrial depres- sions in, 79 Events connected with construc- tion, 114 Evolution in occupations, 1 Exports of grains, 8 F Factory system, inauguration of, 5 Failure of governmental investiga- tions, 135 Falling prices, 73 Families and houses in 1900, 127 Farm machinery, introduction of, develops wealth, 7 Farming, definition of, 22 Finance, limit of, 95; growth of, 96 Financial difficulties of 1890-96, 164 Financial panics, 18, 21, 163, 165, 181 Final analysis of responsibility, 126 Fixed capital, 58-62 INDEX 283 Fluctuation of construction, 104, 110; in price of materials, cause of, 117 ' Foreign capital, 69 Fredericksen, N. C., 63 French business conditions in 1870- 73, 153 Furnace capacity (iron) of U. S., 206 Future vs. immediate delivery, 110 G German industries in 1870-73, 152 Gold, large exportation of, 67 Gold reserve, depletion of, in 1894, 162 Government investigations, failure of, 135 Great Britain, iron supply in 1853, 146; business condition in 1870- 73, 151; panic of 1890, 161 Great epoch of nineteenth century, 4 Growth of commerce, 96; of finance, 96; of the industrial system of the U. S., 99 Hamilton, Alexander, 3 f.n. High prices and accumulation, 29; and industrial depressions, 76, 79, 159, 202; retard consumption, 124; of 1899, 170; of iron bound to occur, 204; no benefit, 222; ver- sus low prices, 130, 217 Hill, James J., 46 Houses and families in 1900, 127 How to restore prosperity, 232 Human desire, no limit to, 26 Illustration of the proposed remedy, 226 Immigration, 69 Imports, large, 67 Inauguration of factory system in U. S., 5; railroads, 5; steam navi- gation, 5 Individual acts and national indus- tries, 125 Industrial conditions in Europe in 1832-35, 143 Industrial depressions, advent of, 13-17; causes of, 28, 159; and poor crops, 43; and presidential elections, 49-51; a mental dis- ease, 63; and the tariff, 66; al- leged causes, 67, 71-78; and high prices, 76, 79; search for causes of, 71, 100, 157; contemporane- ousness of, 80; analysis of, 82; iron production the barometer of, 82, 158; in Europe, 79, 143; the result of falling off of con- struction, 105; final analysis of responsibility for, 125; real cause of, 130; of 1900, 173; no uni- formity in length of, 192; rem- edy for, 218; tables illustrating, 257 Industrial development, maladies of, 12 Industrial maladies, efforts to dis- cover causes of, 15 Industrial revival and construction, 107; of 1835, 142 Industrial system of the U. S., growth of, 99 Industries, iron the foundation of, 89; of a nation, 125; the great stimulating motive of, 127 Information of unfilled orders needed, 221 Influx of foreign capital, 69 Introduction of agricultural ma- chinery, 4, 6, 7 Investment construction, 106 et seq., 213 284 INDEX Iron, influence of price of, on busi- ness, 85; average stock carried, 87, 207; the foundation of the industries, 89; famine of 1864, 148; ten periods of abnormal ad- vance, 204; of abnormal decrease, 208; annual production of, 206; decreasing cost of, 208; monthly prices of, in Philadelphia, 237, 238; prices of Scotch pig in New York, 239; statistics of, 248-252 Iron consumption of 1885-90, 160; of 1893, 161; of 1895-99, 162; of 1897, 163; of 1897-99, 168; of 1903,201; of 1904-07, 179, 181, 199 Iron market, booms in, 34; vagaries of, 36 Iron prices in 1836, 142; in 1854, 145; in 1864, 147; in 1873, 150; in 1879, 155; in 1897-98, 167; in 1899, 169; in 1900, 173; in 1904- 07, 179, 185; table illustrating prices from 1800 to 1910, 278 Iron production and industrial de- pressions, 82; table showing gains and losses, 108; tables showing production and consumption from 1800 to 1910, 278 Iron supply in 1854, 145; in 1864, 147; in 1872, 149; in 1879, 155; in 1897, 167, 169 Jevons, Professor, 14, 23, 25, 26 Juglar, Clement, 54 K Kent, Dr. William, 38, 206 Labor and civilization, 52; chief products of, 103 Labor Bureau, established, 16; report on causes of depressions, 245-247 Langton, William, 63 Laveleye, Georges de, 64 Laws suggested, 219 Legislation, unwise, 70 Limits of agriculture, commerce and finance, 95 Liquidation and adjustment, 110 Low prices of 1836, 142; of 1846, 145; of 1852, 145; of 1861, 147; of 1871, 149; of 1897-98, 167; of 1904, 177; versus high prices, 130, 217; and constructive revivals, 192 M Maladies of industrial systems, 12; efforts to discover, 15 Manufacturing, antiquity of, 2; definition of, 23; birth of age of, 7 Materials, time of demand for, 113; cause of fluctuation in prices of, 117 Maximum production and maximum sale, 193 Maximum prosperity, final analysis of, 211 Mental influence on industrial con- ditions, 63 Methods of buying construction materials, 112 Money, large transfers of, 68; ver- sus production, 25 Motive prompting all industries, 127 et seq. Mill, John Stuart, 24 Mills, John, 55, 63 Mulhall's Dictionary of Statistics, extracts from, 260 N Necessity construction, 106, et seq.; versus investment construction in 1904-07, 182 INDEX 285 Need of monthly information of construction demands, 219 Need of remedy, 196 New York Herald, 197 Nineteenth century, great epoch in, 4; economic revolution in, 8 No uniformity in stages of "ups and downs," 191 Object lessons of fluctuations of the industries in 1897-1903, 175 Object of the proposed remedy, 226 Occupations, evolution in, 1 Optional construction, 106 et seq. Orders unfilled, information needed concerning, 221 Origination of freight tonnage, 43 Overproduction, theory of, 22-42 Pareto, Vilfredo, 63 Panic of 1837, 142, 156; of 1857, 146, 156; of 1873, 150, 156; of 1890, 160; of 1893, 161; of 1901, 165; of 1907, 179, 181, 197 Panics, financial, 18-21 Periodicity, 54 Periods of revival and decline, 1896- 1903, 196 Piermez, M., 64 Pig iron, average stock carried, 207; monthly statistics concerning, 248-252; world's production of, 268 Poor crops and industrial depres- sions, 43 Predicting length of depressions, 191 Premiums for quick delivery, 121 Presidential campaign of 1896, 163 Presidential elections and industrial depressions, 49-51 Price, Bonamy, 15 Prices, effect of, on production, 29; cause of drop in, 117; and law of supply and demand, 117; cause of advance in boom periods, 118; causes of abnormal advance in, 122; of iron in 1836, 142; in 1854, 145; in 1864, 147; in 1873, 150; in 1879, 155; in 1897-98, 167; in 1899-1900, 173; in 1904-1907, 179, 185 Production, definition of, 22, 24; and accumulation, 28; surplus, 31; differences of, 41 Products of man's labor, 103 Profits in holding iron, 36 Proposed remedy, object, 222; il- lustration, 226; effect, 227 Prosperity, how to restore, 232 R Railroad earnings, 43; construction in 1833-35, 142; in 1836-37, 143; in 1871, 149; in 1882-85, 155; mileage in U. S., 272 Railroads first operated in U. S., 5 Reaction, 51 Real cause of industrial depressions, 130 Reasoning, analytic and synthetic, 90 Recurrence of abnormal prices, 205 Regulation of surplus production, 31 Remedy for industrial depressions, 218; illustration, 226; object, 226 Repeal of Silver Coinage Law, 161, 162 Responsibility for depressions, final analysis of, 125 Revivals of construction, 192 S Safety of storage of surplus iron, 38 Say, Jean Baptiste, 22 f.n. Scotch pig iron, prices of, in New York, 239 286 INDEX Scotland iron market booms, 35 Search for cause of industrial de- pressions, 71, 80, 81, 100 Seneuil, Courcelle, 63 Silver Coinage Law, 70; repeal of, 161, 162 Sinton, David, 34 Six industrial depressions from 1833 to 1887, 141 et seq. Small crops, 45 Smith, Adam, 124 Steam navigation, inauguration of, 5 Storage in times of plenty, 40 Strikes, causes of, 110; as factors of trade depressions, 197 Study of report of unfilled orders of the U. S. Steel Corporation, 186 Sun spots and industrial crises, 14 Supply and demand, 26, 32; illus- tration of law of, 116 Supply of economic tools, 64 Surplus production and regulation, 31 Synthetic reasoning, 91 Systems of business, the four great, 97 Tables illustrating: Profits in holding iron, 36, 37 Safety in storage of iron, 38 Origin of freight tonnage, 43 Corn crops of 1900 and 1901, 45 Farm products and volume of in- dustry, 49 Crop values and industrial vol- umes, 49 Presidential elections, 50, 51 Elimination of causes of financial depressions, 74 Contemporaneousness of depres- sions, 80 Wealth of the United States, 102, 103 Gains and losses in iron produc- tion, 108 Events attending construction, 114 Small profits from boom prices, 119 Periods of ups and downs in in- dustries of the U. S., 191 Ten periods of abnormal advance of prices of iron, 204 Ten periods of abnormal decrease in prices of iron, 208 Unfilled orders of the U. S. Steel Corporation, 224 Monthly prices of iron in Phila- delphia from 1799 to 1849, 237; from 1842 to 1910, 238 Lowest and highest prices of Scotch pig iron in New York from 1825 to 1888, 239 Alleged causes of depressions as elicited by committees of Con- gress, 241-244 Alleged causes of depressions as gathered by agents of the U. S. Bureau of Labor, 245-247 Monthly statistics of pig iron in U. S. from 1896 to 1910, 248- 252 Analysis of average prices of iron in U. S. from 1896 to 1910, 253 Seven industrial depressions from 1825 to 1886, and eight from 1887 to 1910, 257 Extracts from Mulhall's Diction- ary of Statistics, 260 Contracts for construction, and execution of contracts, 267 World's production of pig iron from 1500 to 1910, 268 Railroad mileage of the U. S., 272 INDEX 287 Tables (Continued) Building permits of fifty-seven cities for years 1906 and 1907, 273 Unfilled orders of the U. S. Steel Corporation, 275 Production, consumption and prices of iron from 1800 to 1910, 278 Talleyrand, 39 Tariffs and industrial depressions, 66 Temporary surplus production, 30 The Economist, London, 150 The Engineer, London, 150 Theories as to causes of industrial depressions, 13-17 Theory of circulating and fixed cap- ital, 60; of periodicity, 54; of overproduction, 22-42 Time of demand for construction materials, 113 U Underconsumption, 29 Underproduction, 42 Unfilled orders, information needed concerning, 221 Unfinished construction, study of, 183 Unheeded warnings, 201 United States, development of, 10; furnace capacity (iron) of, 206 United States Steel Corporation, attempts to check advancing prices, 117, 205; unfilled orders of, 186, 275 Ups and downs, cycles of, 55 Venezuela proclamation, 162 Volume of business, uniformity of, 101 Volume of construction, need of knowledge of, 219 W Wagner, Adolph, 14 Want of confidence in government, 70 Warnings, unheeded, 201 Wealth of the U. S., table of, 102, 103 Why prices drop near end of booms, 117 Wilson, General, 32 Wright, Hon. Carroll D., 16, 64, 143 -, LD 2lA-60m ; 7,'66 (G4427slO)4<6B Y.C U.C. BERKELEY LIBRARIES THE UNIVERSITY OF CALIFORNIA LIBRARY