Over-production and under-consumption;

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VOL. X I V (QUARTERLY) NEW YORK, JULY, 1931 No. 3
Over-Production and Under-Consumption
OVER-PRODUCTION in most of the
basic commodities is a fact. The cause
of the over-production is a matter of opin­ion.
The Great War is said to have de­pleted
the stores of these supplies. Re­placements
created heavy demands.
Prices rose. Production was stimulated.
Stocks increased. Effective demand failed
to keep pace. A glut resulted.
A purveyor of food estimates the number
of prospective customers. He calculates
the extent of their requirements. The qual­ity
of food needed is computed. The food
is placed in stock and made ready to be
served. If customers fail to appear in suf­ficient
numbers, there is a glut. Such food
as the purveyor, his family, employes,
friends, or other persons are unable to con­sume
becomes waste. As such it has only
salvage value.
In a situation of this kind, there is bound
to be a loss. The loss is a loss of capital.
The capital may be that of the purveyor.
It may be that of some one who supplied
the food on credit. A dearth of customers
will preclude the recovery of that capital,
except through the prolonged process of
future operations on a profitable basis.
The correction of conditions, such as
these, calls for a capital adjustment. Pur­veyors
who are caught in a jam of this
character, must either go out of business,
or take their losses and start anew. If they
have too much borrowed capital, bank­ruptcy
is inevitable, unless they are able to
make new credit arrangements. Where the
capital employed in the enterprise was his
own, the consequence is a deprivation to be
suffered by the unfortunate purveyor alone.
Just now the country is suffering from
under-consumption as well as over-produc­tion.
Figuratively speaking, the country
is on a spending-diet. The abnegation ex­tends
from additions and repairs to prop­erty
to social diversion, clothing, and
food. The psychological element of the
credit factor which, born of paper profits,
made for reckless spending is no more. In
its place, there is a fear complex, which is
routing money into the savings banks and
insurance companies. The temerity which
took money into the luxury fields, sent it
on along lines which, if not so genteel eco­nomically,
at least served to generate pur­chasing
power. The timidity which today
steers the money into the savings banks
only aggravates the existing maladjustment
by reason of limiting the further flow to
gilt-edged business units which already are
surfeited with funds and credit.
One guess is as good as another concern­ing
the ways and means of correcting the
present unsatisfactory condition in which
there is ample evidence of loss adjustment.