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-
