The Economics of Consumption

By Charles S. Wyand | Go to book overview

CHAPTER 2
THE GROWING IMPORTANCE OF CONSUMPTION

The Consumption Paradox

During the depression years of the early nineteen thirties, owners of productive equipment throughout the United States went bankrupt vainly seeking a market for their wares in a world where many were starving and most were in want. The shoe manufacturer in Brockton saw his mill go under the hammer and his employees go hungry because it was impossible to sell footwear. The midwestern farmer tramped about in his bare feet, unable to dispose of his crops at a price that would make possible the purchase of shoes. Railway employees were on the relief rolls because they could not transport shoes to Kansas and foodstuffs to New England. Milk was dumped in rivers, and mile-long heaps of oranges rotted in the California sunshine, even though children everywhere were undernourished. The price of all meats soared while the Federal government paid farmers to restrict their production of cattle, sheep, and swine. People suffered in a world of plenty, largely because modern industry had become a highly organized and interrelated set of processes that functioned only when it was profitable1 to do so.

Other factors are, of course, involved in any attempt to explain so complex a phenomenon as a business depression.2 Fundamentally, however, such depressed periods are characterized by the curtailed use of productive equipment. The enterpriser will say that he wants to produce, that he has the facilities with which to produce, but that he cannot sell his goods. What he means is he is unable to dispose of his product at a price that will yield a profit. Where profit is impossible, production ceases.3 People may want

____________________
1
By profit is meant the net return to enterprise after deducting from the gross proceeds of an undertaking all expense for land, labor, and capital employed in the production of the value sold. Profit is not a factoral share specifically contracted for. It is a reward in excess of contractual wages, interest, rent, and represents a return for risk taken, or for wants appeased.
2
For an excellent and readable evaluation of the principal alleged causes of depressions, cf. Douglas P. H., Controlling Depressions, chs. 2, 3.
3
This is certainly true in the long run although many industries have operated at a deficit for periods of time varying from a few months to a few years. Such

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