The Natural Economic Order/Part IV/Chapter 5 D
D. The Manufacturer
Sales, sales, that is what we manufacturers want; steady, assured sales, with long-term orders in advance. For industry is dependent on regular disposal of the product; we cannot dismiss our skilled hands the moment sales begin to slacken, only to engage new, unskilled labour shortly afterwards. Nor can we go on producing at random for stock, when regular orders are not forthcoming. Give us then sales, steady sales and efficient public institutions to facilitate the exchange of our products (medium of exchange, post, telegraph etc.); the difficulties of technical execution can be left to us. Regular sales. cash payment, and a stabilised price-level — the rest we can contrive for ourselves.
Such were our wishes when the introduction of Free-Money was being discussed, and our wishes have been fulfilled.
For what is a sale? It is the exchange of goods for money. And whence the money? From the sale of goods, the movement is circular.
Free-Money forces its holder to buy: it constantly reminds him of his duty as a buyer through the losses it causes him if he neglects to buy. Purchase therefore at all times and under all possible circumstances follows on the heels of sale. And when everyone is obliged to buy as much as he has sold, how can sales slacken ? Free-Money, then, closes the monetary circuit.
Just as the wares represent supply, so money now represents demand. Demand is no longer a straw to be blown about by any breeze of rumour or politics. Demand no longer depends on the will of buyers, bankers, speculators; for money has now become the very embodiment of demand. The possessors of money are now kept under discipline; money holds the possessor of money like a dog on a lead.
And this is only fair. For we producers or possessors of wares are no better off. We do not control the supply of our products, we are forced by their nature to offer them for sale. The nature of our products - the stench they emit, the room they take up, the risk of their catching fire, the decay they are subject to, their fragility, the change of fashions and a thousand other circumstances - imposes upon us the necessity of selling them immediately after their production. The supply of wares is under an inherent material constraint, so is it not just that the demand for wares, the supply of money, should be under a similar constraint?
It was a courageous act to answer this question in the affirmative by the introduction of Free-Money. Up to then the buyer alone had been considered, now at last it has come to be understood that sellers, also, have certain wishes and that buyers' wishes can be fulfilled only at the expense of sellers. What a time it took to arrive at this simple truth!
Under Free-Money, when sales slacken and prices decline, the explanation is no longer given that too much work has been done, that there has been overproduction. We now say that there is a shortage of money, of demand. Whereupon the National Currency Office puts more money in circulation: and since money is now simply embodied demand, this forces prices up to their proper level. We work and bring our wares to market - that is supply. The National Currency Office then considers this supply and puts a corresponding quantity of money on the market - that is demand. Demand and supply are now products of labour. There is now no trace of arbitrary action, of desires, hopes, changing prospects, speculation, left in demand. We order just the amount of demand that we require, and just this amount is created. Our production, the supply of goods, is the order for demand, and the National Currency Office executes the order.
And Heaven help the controller of the Currency office if he neglects to do his duty! He cannot now, like the administration of the old Banks of Issue, entrench himself behind platitudes about having to satisfy "the needs of commerce". The duties imposed on the National Currency Office are sharply defined and the weapons with which we have equipped it are powerful. The German mark, formerly a vague, indefinite thing, has now become a fixed quantity, and for this quantity the officials of the Currency Office are held responsible.
We are no longer the sport of financiers, bankers, and adventurers; we are no longer reduced to wait in helpless resignation, until, as the phrase used to be, "the state of the market" has the creation and improved. We now control demand; for money, supply of which is in our power, is demand - a fact which cannot be too often repeated or too strongly emphasised. We can now see, grasp and measure demand — just as we can see, grasp and measure supply. Much produce — much money; less produce — less money. That is the rule of the National Currency Office, an astonishingly simple one!
With the money reform, fixed orders have become so plentiful that full employment is assured for months in advance. Merchants tell me that buyers now prefer possession of goods to possession of money; they do not now postpone a purchase up to the moment the thing is needed, but give their orders whenever they happen to possess money. In every house there is a special store-room, and the purchase of Christmas presents, for example, is not deferred till Christmas Eve, but made whenever an opportunity occurs. That is why Christmas goods are now bought throughout the year, and why my toy factory receives orders all the year round. The former rush and scramble at Christmas has been replaced by a steady sale of Christmas articles from January to December. And it is the same with every industry. A man needing a winter coat does not wait for the first snowfall, but orders it whenever he has the money, even though the temperature may be a hundred in the shade. For the money in the purchaser's pocket, just like the cloth on the tailor's shelves, is something that must be got rid of. The new money gives its possessor no peace: it makes him smart and itch and tingle, reminding him incessantly that the tailor has nothing to do and would be pleased to receive orders for the coming winter even though the suit should be paid for in money still worse than Free-Money. For there is no money so bad that it is not better than unsaleable cloth.
This remarkable change in the behaviour of buyers has made commercial establishments to a large extent superfluous; for when buyers provide themselves with goods for some time ahead and no longer insist on immediate delivery, the merchant does not need to stock the goods. He keeps a sample collection and his customers give him their orders. The merchant collects orders and delivers the goods direct from the railway station when they arrive. In this way he can of course sell them cheaper.
The disappearance of shops, where formerly everything could be obtained for immediate use, forces even the most dilatory buyers to consider in advance what goods they may need, so as to secure them at the right time by an early order. Thus Free-Money has brought us at length to the point where the estimate of the need for goods is not made by merchants but by the buyers themselves - to the very great advantage of all concerned. Curiously enough, it was the merchant who formerly estimated the consumers' needs in advance, so as to be able to give his orders; and it is clear that he often miscalculated. The consumer now estimates his own needs, and as he obviously knows his own needs and means better than the merchant knows them, errors are less frequent.
Thus the merchant has become a mere exhibitor of samples, and the manufacturer is sure that the orders which the dealer hands him reflect not merely the latter's personal opinion about the demand for goods, but the immediate demand of the consumers, their real need of commodities. The orders now provide him with an unmistakable expression of the changes taking place in the taste and needs of the people, so he is able to adapt his factory to these changes. Formerly, when orders reflected merely the dealer's personal opinions, sudden new departures, so-called changes Of fashion, were an ordinary occurrence.
In this respect, again, free-money has solved many of my difficulties.
But if the manufacturer's work is so greatly facilitated, if he need only be a technical expert and not at the same time a merchant, surely his profits must be unfavourably affected. There is no lack of able technicians and if the commercial management of an industrial enterprise presents so few difficulties, every able technician will become an able manufacturer. By the laws of free competition the manufacturer's profit must be reduced to the level of a technician's salary - an unpleasant result for many manufacturers whose success was mainly due to their commercial ability. With Free-Money, creative power has become unnecessary in commerce, for the difficulties which called for the comparatively rare and therefore richly rewarded commercial talent have disappeared. And someone must benefit by the reduction of the manufacturer's profit. Either goods must become cheaper, or, to put it the other way about, wages must rise. There is no other possibility.