STATIC STATE AND THE TECHNOLOGY OF ECONOMIC REFORM 31 
will offer to work for less than the artificially established wage. 
If they are permitted to do so, they will break the wage scale. If 
prevented, still worse consequences follow. 
The mass of unemployed labor creates, for example, what is 
sometimes called an industrial reserve army, that is, a surplus 
of unemployed labor which can be employed only in times of 
extraordinary business activity, or during a business boom. This 
labor reserve is one of the things that make a business boom 
possible. Its absence would make a business boom impossible 
(more of this later). But a business boom is necessarily followed 
by a period of inaction, and this means an acute condition of 
unemployment with an acute desire to secure employment on 
any terms by considerable numbers of men. Only the most 
drastic procedure can then preserve the artificial wage scale. 
If there were no industrial reserve army a general business 
boom would scarcely be possible. It is made possible by the fact 
that every industry can expand indefinitely without greatly 
increased cost. So long as each industry can buy increasing 
quantities of raw materials without raising the price, get increas- 
ing quantities of working capital without raising the rate of 
interest, and increasing quantities of labor without raising wages, 
there is no effective drag to prevent a business boom. We have 
already had enough experience to show that a rising rate of 
interest operates as a drag, and our federal reserve system is 
making good use of this instrument,—a rather ineffective one, 
it is true, but the best one that is available. It is ineffective 
because the capital cost is not the principal cost in business 
expansion. A much more effective drag would operate if wages 
promptly advanced in a time of potential boom. Wages would 
promptly advance if there were no industrial reserve army. If 
that were the situation, then when each and every industry was 
trying to expand, they would merely be trying to hire laborers 
away from one another, and this would put such an effective drag 
on undue expansion as to be prohibitive. But where there is a 
large industrial reserve army, each and every industry can expand 
without such advance in wage rates by merely drawing on the 
labor reserve. Unless other new forms of increasing cost can be 
found to operate as repressants in time of expansion, these alter- 
nating periods of employment and unemployment will exist to the 
general disadvantage of labor. In short, the attempt to raise