Page:Manual of Political Economy.djvu/42

Rh Contents. xxxi Chapter XIV. Of Over-Production or Excess of Supply, Malthus, Chalmers, and Sismondi feared over-production, and, there- fore, affirmed that some moral restraint ought to be exercised with regard to the accumulation of capital— Over-production has two meanings ; it may either signify that commodities produced cannot be sold at remunerative prices, or it may signify that commodities are produced which are really not wanted — Over-production in its first signiHcation will cause the profits of a particular trade to be low: the trade is then said to be dull or depressed, but such depression can only be temporary — The Lancashire Cotton Trade would have exhibited this first kind of over-production, if the American Civil War had not occurred — This excessive supply of cotton goods would not be wasted ; they would be readily purchased, if sold at sufficiently low prices— The accumulation of capital may reduce profits, but never causes more commodities to be produced than can be consumed — If capital continues to be accumulated, the wages of labourers would be increased — As an extreme case, it may be supposed that wages are so much increased, that all the wants of the labourer are satisfied ; if, then, his wages are still further Increased, he will shorten his hours of toil pages 489 — ^494 Chapter XV. The Gold Discoveries. The annual supply of gold was trebled by the discoveries in Australia and California — The expectation that this increased supply would cause a great fall in the value of gold was not fulfilled — There was only a moderate decline in its value, and during the ten years ending 1883 it was thought by some that in consequence of a falling-off in the supply of gold, accompanied by an increased demand, there was a rise in its value — The disadvantages which result to a country from a variation in the value of the substance which it uses as money — Difficulty of estimating the change in the value of ffold by a com- parison of prices at different periods — It is probable that there was a rise in general prices after the gold discoveries of about 15 per cent. — This opinion was supported by the late Prof. Cairnes and by the late Prof. Jevons— The value of the precious metals is determined by the same laws which govern the price of agricultursd produce, but because mining is a more speculative industry than agriculture a decline in the value of gold and silver will not so rapidly lead to the abandonment of the least productive mines as a fall in the value of agricultural produce will throw the least fertile soils out of cultiva- tion — The absorption of the large additional supplies of gold, without producing a great fall in its value, affords conclusive evidence that the value of gold would have risen if these additional supplies had not been forthcoming — The increase of commerce consequent on free trade and the development of the railway system absorbed much of the new gold — There was also a large additional demand for silver : great quantities of silver were sent to India during the American civil war to purchase cotton and also for the construction of public works— As there was until 1870-80 but a slight increase in the annual supply of silver, the additional silver required for the East was to a Digitized by Google