Massachusetts also gives us some enlightening material in its twenty-sixth annual report. But the results are so similar to those of New Jersey that a portrayal would but tend to repetition.

A very thorough investigation which brings out our problem in another light is found in the Iron and Steel Industry Report on Employment. The investigation took place in 1910, when the production of iron and steel was greater than any preceding year. However, constant complaints were heard from all classes of employees, skilled and unskilled, native and foreign, about the irregularity and terrible uncertainty that accompanied steel production. It appears the policy of the steel industry," continues the report, "is to operate to its fullest capacity during active demand, then during a decline in the market, shut down completely and wait an accumulation of orders or the development of better prices"7a vicious policy from the standpoint of the wage-earners. As a • Twenty-sixth Annual Report on the Statistics of Manufactures, Massachusetts,

1911.

'Report on the Conditions of Employment in the Iron and Steel Industry in the United States, Vol. III, Ch. VII, 1910.

• Ibid, p. 206.

7 Ibid, p. 207.

basis of study over one hundred plants with 90,757 employees were covered the report taking into consideration the five principal departments of steel production,-namely, blast furnaces, open hearths, bessemers, hand and mechanical rolling mills. A time unit of operation for each department was established. Then the ratio between the number of units of "actual operation" and the number of units of "full capacity" were compiled. Totaling the results of the five departments, we have:

10% 28% 25% 15% 9% 5% 3% 5%

Or, when placed on a basis of plant operation, we have:

Such statistics, however, do not make the appeal that personal experience does. As a boy reared in a steel-town under the black shadows and the dirty smoke of blast furnaces, I remember well the shattered hopes, the fears and the disappointments of the thousands of steel workers caused by irregular employment. What a gloom came over the inhabitants when the report went abroad, "The rail mill is to be shut down," or "The blast furnaces are to be 'out' for a year." This meant less "smoke and dirt," but it also meant less income to the workers who were ever ignorant as to the time such misfortune would fall upon them. Is it any wonder that they are becoming more dissatisfied, restless and disturbing? I should be greatly surprised, taking all things into consideration, if they acted otherwise.

It is natural to expect that blame of some sort will be placed upon capital and labor for this idle capacity and unemployment. But as the situation develops we are placing less blame on either side and are beginning to see that the evil is inherent in a system of industry run primarily for profit. And seeing this, we must look for changes in the system and methods of industry rather than to bitter criticisms of capital and labor, if we wish industrial progress. No! It will not do to attribute the great loss of output to strikes, lockouts

or other troublesome tendencies. These factors focus national attention and often center cruel blame, but the actual loss sustained by strikes, etc., in comparison with the total loss of possible output, is exceedingly small. For instance, in 1912, the New Jersey reports show a loss of less than 1 per cent due to strikes in proportion to the total loss through non-operation. A system of industry which has the establishment of price as its chief aim is bound to curtail output, far more than the occasional disturbance due to troublesome wage

earners.

8

What great changes must be made, what constructive policies advanced, in order to secure social efficiency! Two great trends in society today show developments which are bringing about a desire on the part of capital and labor to create a maximum of output. First, the growing tendency that the worker must be more than a wage-earner that he must become a part sharer in industry. Secondly, the greater government control and government regulation of the means of production which must result in an operation of industry for use rather than for profit. At present, to the workingman the distance is great between increased output and a corresponding increase in wages. He can see no connection between the twoand rightly so, for experience has taught him otherwise. But just so soon as he becomes a direct sharer in the output as a part ownerof the business, it changes everything. His interests become coupled with the business, not bulwarked against it. The padlocks of antagonism are broken. So also with capital; the more industry is looked upon as a social institution operated for the needs of the people, the more will intentional checks and limitations be condemned and prohibited. Employers, employees and the public are entering an era of social consciousness-an era characterized by justice for all. Social efficiency demands it!

8 Thirty-sixth Annual Report of Labor and Industries of New Jersey 1913, p. 310.

THE THEORIES ADVANCED IN EXPLANATION OF

ECONOMIC CRISES

BY E. M. PATTERSON, PH.D.,

Wharton School of Finance and Commerce, University of Pennsylvania.

A definition of an economic "crisis" is, like most other definitions, very difficult to construct. By way of introduction we shall quote a few chosen somewhat at random. Adolph Wagner, the German economist, expresses his idea by saying: "Crises imply the overwhelming and simultaneous occurrence of inability on the part of independent entrepreneurs to pay their debts." This is similar to the statement of John Stuart Mill: "There is said to be a commercial crisis when a great number of merchants and traders at once either have, or apprehend that they shall have, a difficulty in meeting their engagements." Professor E. D. Jones says: "A crisis is the sudden application of a critical conservatism to business transactions, leading to such a demand for liquidation as to cause a widespread inability among business men to meet their obligations." Senator Theodore E. Burton states: "The word crisis, if employed with entire accuracy, describes a period of acute disturbance in the business world, the prevailing features of which are the breakdown of credit and prices and the destruction of confidence. It has especially to do with the relations of debtor and creditor."

None of these definitions gives so clear an idea as does a brief description. Probably no one has ever pictured the crisis and the associated events more effectively than did Frederick Engels in his little volume Socialism: Utopian and Scientific.

As a matter of fact, since 1825, when the first general crisis broke out, the whole industrial and commercial world, production and exchange among all civilized peoples and their more or less barbaric hangers-on, are thrown out of joint about once every ten years. Commerce is at a standstill, the markets are glutted, products accumulate, as multitudinous as they are unsaleable, hard cash disappears, credit vanishes, factories are closed, the mass of the workers are in want of the means of subsistence, because they have produced too much of the means of subsistence; bankruptcy follows upon bankruptcy, execution upon execution. The stagnation lasts for years; productive forces and products are wasted and destroyed wholesale, until the accumulated mass of commodities finally