The Present Economic Crisis .... Decrease of Production and Fall of Prices

In describing the course of the crisis we must base our statements almost exclusively on English sources of information, owing to the absence of American statistical material. Judging by the information given by the Economist the crisis developed very slowly: capitalism tried to send the surplus of its goods to the world market: that is why the exports of the United States continued to increase up to October 1920 and the possibility of a greater economic catastrophe was averted by the organised action of the larger capital. Nevertheless the fall in the prices and unemployment attained really gigantic proportions

We have already given figures in regard to the dimensions of the reduction of production for the period from spring to autumn of 1920. In September the Economist says: “Trade and industry are most irregular.” In October “the number of annulled orders is increasing rapidly, the reserves in the stores, instead of diminishing, are increasing. The public refuses to buy,” In November the consumption of cotton fell lower than it had ever been since August 1914 (see the different numbers of the Economist). The crisis is greatly influencing the cotton industry. The textile factories are closing one after another. (The Times, December 23rd)

The crisis affected also the manufacture of automobiles, which had developed so greatly during the war.

The Ford enterprises of world-wide renown were closed at the beginning of the year because the storehouses contained ready but unsold automobiles to the value of 25 million dollars.

L’Information (December 20th 1920) thus depicts the general state of affairs just before the advent of the New Year:

“The Europeans are now experiencing a feeling of satisfaction at the thought that the United States, a country abounding in gold and products, the creditor of the whole world, the only country in which gold is in circulation – begins to suffer like all the other nations: but oh! the irony of fate! To suffer not from penury, but from its wealth. The United States are suffering at present from the acute decline of their commerce, which in connection with the approaching winter is revealing all the symptoms of growing intensity. The number of bankruptcies is increasing day by day, The Stock Exchange is demoralised. The export trade, so flourishing during the war is rapidly falling – true, with the exception of foodstuffs and raw materials; a catastrophic fall of the prices in all branches of public economy is causing the despair not only of the factory owner, but of the farmer as well. The crisis has especially exercised its influence over industry; the latter is, in its turn, weekly dismissing the workers and reducing production: in view of the diminution of orders not only in the country itself, but abroad also. Fabulous sums invested in interest-bearing papers at the rate of exchange of six months ago are not redeemable, as these papers do not find purchasers even at considerably reduced prices,”

The fall of the prices on the American market acquired great proportions in 1920. The general figures give the following picture:

We have no more symptomatic figures; but by the notices in the Times we are able to follow the course of the extremely rapid fall of the prices of separate goods:

These goods are noted down not according to a certain system but only in the order they are set down in the weekly reports from the Times. The figures show the stupendous fall of prices, especially in copper, iron and cotton.

The manufactured articles do not permit of such comparative statistics. But here also the fall in prices was at least the same, especially in the prices for clothes, shoes furniture etc., where the strike of the purchasers showed itself more acutely.

It is interesting that in face of such a colossal fall in prices, American capitalism displayed an extraordinary stubborn power of resistance. It is true, the number of bankruptcies was doubled but there were no crashes of banks or large capital enterprises. Some of the banks, it is true, were compelled to stop payment because the farmers refused to bring their produce to the markets at the diminished prices. The number of bankruptcies and the dimensions of the bankrupt concerns were approximately three times greater in the autumn of 1920 than in 1919 but we do not find here the gigantic crash which formerly generally accompanied such a fall in prices. The colossal organisation of American capital, the close contact between the banking and the industrial capital did not admit of any greater upheavals. As regards the petty trade and industry it must be specially marked that the prices fell much more slowly there than in the large trade.

According to the Federal Reserve Board Bulletin for January the prices for instance of foodstuffs fell in the United States in November, 1920: in the wholesale trade by 8½ per cent., in the retail trade only by 2½ per cent. This enabled the petty shopkeepers to get rid of their supplies without too great losses. But the whole burden of the crisis fell on the working class.