i  14  the  problem  of  the  unemployed

It  is  the  business  manager  who  directly  determines  to
reduce  the  employment  of  capital  and  labour  in  a  period
of  depression,  and  the  conjoined  action  of  business
managers  thus  causes  “  unemployment.”  But  what  drives
managers  to  this  resolve?  Does  the  real  impulse  come
from  the  financial  or  from  the  industrial  side  ?  The
immediate  force  which  operates  on  managers  dictating
this  policy  is  “falling  prices.”  When  “general  prices"
fall  below  a  certain  point,  they  make  it  “  not  worth  while
to  go  on  producing”  and  production  is  checked  with  the
result  of  “unemployment.”
It  is  then  to  the  phenomenon  of  “falling  prices”  we
must  turn.  Prices  are  the  real  link  of  connection  between
the  industrial  and  the  financial  side  of  a  business.  At  first
sight  this  will  seem  an  admission  of  the  dominance  of
finance,  for  we  associate  prices  more  closely  with  the
money-medium  than  with  the  articles  which  are  the
objects  of  exchange.  But  when  we  definitely  face  the
crucial  question,  How  is  a  price-change  brought  about?
we  shall  find  that  the  directly  operative  force  belongs  to
the  industrial,  not  to  the  financial  side.  It  proceeds  from
an  alteration  in  the  relation  between  the  quantity  of
production  and  the  quantity  of  sales  effected  in  a  given
time.  If  production  increases  while  there  is  no  increase
on  the  side  of  sales,  the  congestion  of  goods  weighs  down
price  as  surely  as  if  the  operation  were  of  the  nature  of
a  mechanical  balance.  On  the  other  hand  if  production
remains  the  same  or  is  reduced,  while  the  number  of  sales
effected  in  a  given  time  is  larger  than  before,  a  rise
of  prices  is  effected.  No  seller  and  no  trade  reduces
prices  so  long  as  it  is  possible  to  sell  all  that  can  be
supplied  at  former  prices.  The  only  possible  ira-