Morgan, W. Scott. History of the Wheel and Alliance and the Impending Revolution . Ft. Scott, KS: J.H. Rice & Sons, 1891. [format: book], [genre: history; narrative; proceedings]. Permission: Northern Illinois University
Persistent link to this document: http://lincoln.lib.niu.edu/file.php?file=morgan.html

THERE is, perhaps, no greater mistake made than the theory contended for by some of our cross-roads politicians and hair-brained editors, that money has nothing to do with controlling prices; that the law of supply and demand alone fixes the price of every commodity. If these self-appointed political economists were to allow the scales of prejudice to fall from their eyes long enough to examine the true principles which underlie and govern commerce, they would learn that "price" is simply the expression of the relation that exists between money and commodities or articles of commerce; and that they are as relative to each other as one commodity is relative to another; and that both are governed by this same law of supply and demand. Were it possible to remove the influence which this law exercises over money, and allow its actions to effect only the commodities of the country, their theory might be tenable, and we would have a true "standard of value." This school of political economists — and strange to say it includes many respectable and intelligent advocates — affirm that if wheat, corn, or any other product of labor is plentiful that prices will be correspondingly low; that if there is a large output of all the commodities there will be a general fall of prices. But they utterly fail to see that money is subject to the same law; that if it is plentiful it is cheap; that it does not take so much of the different commodities nor so much labor to procure it;

and if money is scarce it is dear and requires more of the products of labor to obtain it. Money is said by some to be a measure of value. This is only true in part; for a dollar does not measure the value of bushel of wheat any more than the bushel of wheat measures the value of the dollar. But their values are relative to each other and are both fixed by the law of supply and demand. Neither can it be established that gold or silver, or both, is a standard of value; for their price is fluctuating and quoted in the markets the same as other commodities; the price being governed by the law of supply and demand.

The dollar is only the unit of expression in fixing the relative value between money and commodities. If wheat is plenty and money scarce it takes more wheat to obtain a dollar than if wheat was scarce and money plenty. And this condition does not rest upon the fact that a bushel of wheat will make more flour or satisfy more hunger than when plenty, but simply because the relative conditions existing between wheat and money are changed; both being subject to the law of supply and demand. It is rather strange that those who are so ready to apply the law of supply and demand to the present condition of prices, and cry over-production, are so loth to apply the same law to the present supply of money.

As has been urged in the preceding chapters, and for reasons that will readily appear to the intelligent reader, the relation existing between money and commodities should be kept as near equal as possible, and this is only possible by keeping the volume of money uniformly apace with the increase of population and production. The result would be stable, and approximately uniform prices. The writers of both schools of this branch of political economy, that is, the advocates of the metallic and the paper system concur in the fact that plenty of money

means cheap money as measured by the commodities of the country.

This is an open confession, that commodities measure the value of money, as well as that money measures the value of commodities. Hence, the importance of a fixed relation between the two.

Things are neither equal or equitable, when the holders of money, and evidences of debt which must be liquidated in money, have exclusive power to control and fix the relation between money, and commodities which must be parted with to secure money to pay those debts. And this condition does and will exist so long as the holders of this indebtedness have control over the issue of the money, or over any considerable portion of it. This condition is based upon the inequitable theory, that the creditor has the right to say to his debtor, "You must give me two bushels of wheat, corn, oats, or two pounds of cotton, beef or pork, where you only contracted to pay me one." It may be building up a nation of "grandeur and pomp," and "increasing our credit abroad," but, it is wrong to root the grandeur of the nation in the poverty of the people.

Over-production is impossible so long as the wants of the human family are unsupplied. Rather call it under consumption. It is the proper term. The product of one thing creates a demand for another, inasmuch as the producer desires to exchange it for something else which he needs. This creates a demand for a medium of exchange and means of transportation. Medium of exchange and facilities for transportation are the two principal agents of distribution. These agents should exist in proportion to production. A proper system of distribution will overcome so-called "over-production."

It is to these two agents that the future statesman

must address his attention if he would overcome and relieve the distress everywhere prevailing. With the proper means of distribution production will be stimulated, but instead of producing wide-spread distress and poverty, as is claimed by some, would add to the wealth, the happiness and comfort of the producing classes. To have over-production is as impossible as to become too wealthy. We may have under-consumption by cutting off the means of transportation or having an inadequate amount of currency or medium of exchange, and the product of certain commodities may become gorged on account of a deficiency in the means of distribution, and that distress exist, which is felt in times of excessive drouth, which is produced, not by a scarcity of water, but by improper distribution of it.

To remedy this we must have what nature has provided in her economic system, compensating laws, or laws that will properly distribute that which has been produced. It is rather strange that it has never occurred to the advocates of over-production, that it is those who produce so much who are the real sufferers, while a rich harvest is reaped by those who provide and control the means of distribution. The farmer who produces large quantities of the cereals may suffer for want of the clothing and shoes of which the men who make them have large quantities on hand. And the men who make the clothing and shoes may suffer for the breadstuffs of which the farmer has plenty. But it is not on account of an over-production of these necessaries of life and comfort, but owing to excessive rates of transportation and want of a sufficient medium of exchange. There are two things which the future patriotic statesman will take into consideration.

The first is, to stimulate production by encouraging labor. The second is, to provide the proper means of distribution. On these two points the greatest writer of

the age, Victor Hugo, says: "For various reasons we can not discuss here, from the theoretical point of view, the questions raised by socialism, and we limit ourselves to an indication of them. All the questions which the socialists proposed — laying aside cosmogonic visions, reverie, and mysticism — may be carried back to two original problems, the first of which is, to produce wealth, and the second, to distribute it. The first problem contains the question of labor, the second, the question of wages; in the first, the point is the employment of strength, and in the second, the distribution of enjoyments. From a good employment of strength results public power, and from a good distribution of enjoyments, individual happiness. By good distribution we mean, not equal, but equitable, distribution, for the first quality is equity. From these two things, combined public power abroad and individual happiness at home, results social prosperity, that is to say, man happy, the citizen free, and the nation great.

"England solves the first of these two problems — she creates wealth admirably, but distributes it badly. This solution, which is completely on one side, fatally leads her to these two extremes, monstrous opulence and monstrous misery; all the enjoyments belong to the few, all the privations to the rest — that is to say, to the people, and privileges, exception, monopoly and feudalism spring up from labor itself. It is a false and dangerous situation to base public power on private want, and to root the grandeur of the state in the suffering of the individual; it is a badly composed grandeur, in which all the material elements are combined, in which no moral element enters. Communism and the agrarian law fancy that they solve the second question, but they are mistaken. Their distribution kills production, and equal division destroys emulation and consequently labor. It is a distribution made by the butcher who slaughters what he divides.

Hence it is impossible to be satisfied with these pretended solutions, for killing riches is not distributing them. The two problems must be solved together in order to be properly solved; the two solutions demand to be combined and only form one. If you solve but the first of these problems you will be Venice, you will be England; you will have, like Venice, an artificial power; like England, a material power, and you will be the wicked rich man; you will perish by violence, as Venice died, or by bankruptcy, as England will fall, and the world will leave you to die and fall, because it allows everything to die and fall which is solely selfishness, and everything which does not represent a virtue or an idea to the human race. Of course it will be understood that by the words Venice and England we do not mean the peoples, but the social constructions, the oligarchies that weigh down the nations, but not the nations themselves. Nations ever have our respect and sympathy. Venice, as a people, will live again; England as an aristocracy, will fall, but England, the nation, is immortal.

"Solve the two problems, encourage the rich and protect the poor, suppress misery, put an end to the unjust exhaustion of the weak by the strong; bridle the iniquitous jealousy which the man still on the road feels for him who has reached the journey's end. Adjust mathematically and paternally the wage of the laborer, blend gratuitous and enforced education with the growth of childhood, and render science the base of manhood; develop intelligence while occupying the arms, be at once a powerful people and a family of happy men; democratize properly, not by abolishing, but by universalizing it, so that every citizen without exception may be a land owner, an easier task than it may be supposed; in two words, know how to produce wealth and to distribute it, and you will possess at once material greatness, and moral greatness, and be worthy

to call yourself France. Such was what socialism, above and beyond a few mistaken sects, said; this is what it sought in facts and stirred up in minds; they were admirable efforts and sacred attempts." — Victor Hugo in Les Miserables, pp. 547, 548.

In treating of the cause of the "present universal derangement of commerce and industry," the Silver Commission says:

"The real cause of the present universal derangement of commerce and industry must be ascertained before the proper remedy can be devised. The causes assigned are various and contradictory. Many of them never had any existence in fact. Others are inadequate or absurd in themselves, or by reason of being confined to narrow localities or special interests, cannot have proved a mischief which reaches all places and all productive interests.

"Over-production is one of these alleged causes, although food, clothing, houses, and everything useful to mankind are, and probably always will be, in deficiency, as compared with the needs of them. The constant effort of the human race is, and ought to be, to multiply production.

"The aggregate effective demand for products, that is to say, the aggregate demand accompanied with the ability to purchase, always increases with production. Supply and demand mean substantially the same thing, and are nothing but two faces of the same fact. Every new supply of any product is the effective basis of a new demand for some other product. The capacity to buy is measured exactly by the extent of production, and there is practically no other limit to consumption than the limit of the means of payment. Over-production of particular things may occur, but that is soon corrected by the loss of profits in producing them. Over-production in the general

and in the aggregate is impossible. The contrary opinion will be held only by those who will regret the discovery of the steam engine, the spinning-jenny, and the sewing and threshing machines, and who believe that while mankind have the skill to devise methods of increased production they have no capacity to provide for the distribution of the products of industry.

"Production is the sole and only source of wealth, and in fact is but another name for wealth. Over-production must therefore mean superabundant wealth, and the idea that either superabundant wealth or the facilities for producing it can be the inciting cause of rapidly spreading poverty is repugnant to the common sense of mankind. All reputable authorities concur in treating the idea as the idlest of fancies, and wholly unworthy of serious notice." — Report of Silver Commission, pages 117, 118.

It would seem useless to continue the discussion of this branch of our subject further. To say that over-production is the cause of "hard times," is to say that the people are too industrious; that they could make a better living if they did not work so hard; that they have raised so much they are starving to death, and manufacturing so many clothes that they are compelled to go naked. It is a little strange that those who claim that the law of supply and demand alone fix the price of products and attribute low prices to over-production, are frequently heard to make use of that other common expression, "there are none so far from market as those who have nothing to sell," and the author has himself heard a speaker attribute the "hard times" to both causes in the same speech.

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