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the whole credit cycle will, on the average, be as follows:

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It is not to be supposed that things go as regularly as is here stated; sometimes the cycle lasts only nine, or even eight years, instead of ten; minor bubbles and crises sometimes happen in the course of the cycle, and disturb its regularity. Nevertheless, it is wonderful how often the great collapse comes at the end of the cycle, in spite of war or peace or other interfering causes.

91. How to avoid Loss by Crises. Now, these bubbles and crises are very disastrous things; they lead to the ruin of many people, and there are few old families who have not lost money at one collapse or another. The working-classes are often much injured; many are thrown out of employment, and others, not seeing why their wages should be reduced, make things worse by strikes, which, after a collapse, cannot possibly succeed. It is most important, therefore, that all people-working-people, capitalists, speculators, and all connected with any kind of businessshould remember that very prosperous trade is sure to be followed by a collapse and by bad trade. When, therefore, things look particularly promising, investors should be unusually careful into what undertakings they put their money. As a general rule, it is foolish to do just what other people are doing, because there are almost sure to be too many people doing the same thing. If, for instance, the price of coal rises high, and coal-owners make large profits, there

are certain to be many people sinking new mines. Such a time is just the worst one for buying shares in a coal-mine, because, in the course of a few years, there will be a multitude of new mines opened, the next collapse of trade will decrease the demand for coal, and then there will be great losses in the coal business. This is what has happened in the last few years in England, and the same thing has happened over and over again in other trades, As a general rule, the best time to begin a new factory, mine, or business of any kind, is when the trade is depressed, and when wages and interest are low. Mining, building, or other work can then be done more cheaply than at other times, and the new works will be ready to start just when business is becoming active and there are few other new works opening.

This rule, indeed, does not apply to the schemers, speculators, or promoters, as they are called, who start so many companies. These people make it their business to have new schemes and shares to offer just when people are in a mind to buy, that is, during a bubble or time of excited trade. They take care to sell their own shares before the collapse comes, and it is their dupes who bear all the loss. “A prudent man,

A therefore, would never invest in any new thing during a mania or bubble; on the contrary, he would sell all property of a doubtful or speculative value, when its price is high, and invest it in the very best shares or government funds, of which the value cannot fall much during the coming collapse. The wisest men have been deluded during manias; and in the Library of the Royal Society is shown a letter from Sir Isaac Newton requesting a friend to buy shares for him in the South Sea Company, just at the moment when the South Sea Bubble was at its worst. Let people take warning by Sir Isaac Newton, and never speculate in a thing because other people are doing the same; then these bubbles and collapses will be prevented, or will become much less disastrous. Credit cycles will go on until the public learn to look out for them, and act accordingly. Business men must become bold during depressed trade, careful during excited trade, instead of acting exactly in the opposite way. It is only a knowledge of these credit cycles which can prevent them, and this is the reason why I have said so much about them in this Primer.


THE FUNCTIONS OF GOVERNMENT. 92. Functions mean performances (Latin, fungi, functus, to perform), and the functions of government mean those things which a government ought to do, --the duties which it undertakes to perform, or the services which it may be expected to render to the people governed. These functions are commonly divided into two classes

(1) The necessary functions.

(2) The optional functions. The necessary functions of a government are such as it is obliged to undertake; thus it must defend the nation against foreign enemies, it must keep the peace within the country, and prevent insurrections which might threaten the existence of the government itself; it must also punish evildoers who break the laws, and try to become rich by robbery ; it must also maintain law courts in which the disputes of its subjects can be fairly decided, and set at rest. These are far from being all the necessary functions.

The optional functions of government consist of those kinds of work which a government can execute with advantage, such as providing a good currency, establishing a uniform system of weights and measures, constructing and maintaining the roads, carrying letters through a national post office, keeping up a national observatory and a meteorological office, &c. The optional functions are in fact very numerous, and there is hardly any end to the things which one government or another has provided for the people. It would be a most important work, if it were possible,

to decide exactly what undertakings a government should take upon itself, and what it should leave to the

free action of other people; but it is impossible to lay down any precise rules upon this subject. The characters and habits and circumstances of nations differ so much, that what is good in one case might be bad in another. Thus in Russia the government makes all the railways, and the same is the case in the Australian States; but it does not at all follow that, because this is necessary or desirable in those countries, therefore it is desirable in England, or Ireland, or the United States. Experience shows that though the English Post Office is very profitable, the Postal Telegraphs cannot at present be made to pay. There can be no doubt that it would be altogether ruinous to put the enormous system of English railways under the management of government officers. Each case has thus to be judged upon its own merits, and all that the political economist can do is to point out the general advantages and disadvantages of government management.

93. The Advantage of Government Management. There is often immense economy in having a single establishment to do a certain kind of work for the whole country. For instance, a weather office in London can get daily telegraphic reports of the weather in all parts of the kingdom and many parts of Europe; combining and comparing these reports it can form a much better opinion about the coming weather than would be possible to private persons, and this opinion can be rapidly made known by the telegraph and newspapers.

The few thousand pounds spent by the government yearly on the meteorological ffice are inconsiderable compared with the services




which it may render to the public by preventing shipwrecks, colliery explosions, and other great disasters and inconveniences which often arise from our ignorance of the coming weather. It is certainly proper then to make meteorological observation one of the functions of government.

Great economy would arise, again, if an establishment like the post-office were created in Great Britain in order to convey small goods and parcels. At present there are a great number of parcel companies, but they often send a cart a long way to deliver a single parcel. In London some half a dozen independent companies send carts all over the immense town; each of the chief railway companies has its own system of delivering parcels, and the larger shops have their own delivery vans as well. Thus there is an enormous loss of horse power and men's time. If a government postal system undertook the work, only one cart would deliver goods in each street, and as there might be a parcel for almost every house, or sometimes several, there would be an almost incredible saving in the distance travelled and the time taken up. This illustrates the economy which may arise from government management

94. The Disadvantage of Government Management. On the other hand there is great evil in the government undertaking any work which can be fairly done by private persons or companies. Officers of the government are seldom dismissed when once employed, or, if turned away, they receive pensions. Thus when the government establishes any new work, it cannot stop it without great expense, and the work is usually carried on whether it is done economically or not. Then again, government officers, knowing that they will not be dismissed without a pension, are commonly less active and careful than men in private employment. For the work which they do they are paid at a higher rate than in private establishments.

It is therefore very undesirable that the Government

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