Supply and Demand | Page 6

our present wants, and even our future wants,
that many men toiled on monotonous tasks ten, twenty, thirty years ago.
And yet, of course, we should deceive ourselves if we supposed that
this was the motive of these men, that our welfare was the centre of
their heart's desire. We in our turn dedicate to the future, and often to a
distant future, an immense portion of our energies. Let any reader who
doubts this, study the statistics of the occupations of the people, and
reflect on how long a period must elapse before the labors of this trade
or that can fulfil their ultimate function. How long would the period be
in the case of a man making bricks, which will later be employed in the
erection of a factory, where machinery will be made, to equip an
electrical generating station designed to supply, over a period of many
years, light, heat, and power to people living in a remote Continent? A
longer time, it may be hazarded, than he is accustomed to look ahead.
Like the daily cooperation of living men, this cooperation of past,
present and future is essential to the well-being of mankind, and yet it
is undesigned and unorganized. As private individuals, men do, indeed,
deliberately provide for their own future, and for that of their kith and
kin: as the directors of businesses, they try to forecast the trend of
demand. But such conscious calculations and deliberate acts would
avail little if they stood alone. They are hardly more than the necessary
spokes in the great wheel which regulates the relations of past, present

and future. The hub of the wheel is an elaborate system of borrowing
and lending, essentially similar to the buying and selling of
commodities. The private individual in order to provide for his family
or for his old age "saves" and "invests." But what exactly does this
mean? It means that he transfers so much purchasing power, which he
might have spent on his personal pleasures, to some one else in return
for the expectation of receiving, year by year in the future, he and his
heirs after him, a certain smaller quantity of purchasing power. The
other party to the transaction will be, we may suppose, a business man
who enters into it because he sees the opportunity of a promising
industrial development, to undertake which he requires more
purchasing power than he himself possesses. And, because this
transaction is entered into, a smaller number of us will shortly be
engaged in making motorcars, or gramaphones, and a larger number of
us in making factories and machinery, which will later enhance the
world's productive power.
Many transactions of the kind take place daily in modern communities,
and their multiplicity gives rise to a mass of phenomena with which we
are all tolerably familiar. We recognize a short-loan market, a stock
exchange, a number of "markets" where lenders and borrowers are
brought together by the aid of various intermediaries, such as banks,
bill brokers, and stock jobbers, who correspond to dealers in
commodities. Between these different specialized markets, we are
aware of an interconnection so close and strong that we speak more
generally of a Capital Market, of which the stock exchange, the
short-loan market and so forth, are the component parts. Now, "market"
is a word which was originally used to denote a place where tangible
commodities were bought and sold; and the more closely we examine
the phenomena of the Capital Market, the more closely do we perceive
the profound resemblance between the mechanism of borrowing and
lending, and that of buying and selling. Corresponding to the price of a
commodity is the rate of interest (in the short-loan market we actually
call the rate of Discount "the price of money," and speak of money
being cheap or dear); and between the rate of interest, the demand for
and the supply of capital there exist relations precisely similar to those
between price, demand, and supply in commodity markets. Above all

there is the same strong prevailing trend towards an adjustment of
demand and supply.
This fundamental resemblance between two such apparently
incommensurable things as the buying of material commodities and the
borrowing of capital is highly significant; it is another instance of that
order in the economic world, of which the reader may now be growing
weary. But so difficult is it to see clearly and fully something which
one sees, as it were, every day of one's life, that a few more moments of
reflection on the special case of capital will be time well spent. Let us
revert then to our fantasy of a world socialist commonwealth; and
humbly submit another poser to its supreme executive. The question
this time will be whether some great constructional work, such,