was done on a great scale throughout the country for every essential commodity.
Finally, when the conditions are set forth, it is especially easy for those in a given line of business to cooperate to push prices upward and thus greatly increase their profits. This also was done extensively for many commodities.
Based upon the first factor, the second, third and fourth factors have come in to accelerate advancing prices, each with reinforcing power. The tendencies above described, once started, are cumulative, and the enhancement of prices goes on with increasing velocity. The prices of foods are advanced; the employees must have higher pay because of the increased cost of food; the raw materials for manufactured articles are advanced; the manufacturer charges a higher price for his articles because he must pay more for his labor and an increased price for his raw materials. The jobber and the retailer did likewise. At each successive stage the advance of prices is made sufficient to cover the increased cost and an additional increment is placed on top. The cycle thus completed, is begun again with food, and the circle once more gone around. The second cycle completed, the conditions are right for a third cycle, and so on indefinitely, with the result that prices rose beyond all reason, like a spiral ascending to the sky.
Failure of Control by Supply and Demand
Under pre-war conditions, when the supply was equal to and often greater than the demand, the prices, if not adequately controlled, had been largely controlled by competition, except where there had been cooperation of purchasers or manipulators, or both, to control the market; but the facts presented show that under the war conditions the laws of supply and demand and competition adequately to control prices have broken down, for the simple reason that for every staple commodity the demand is ever greater than the supply.
It is not possible to give percentages of the extent to which the demand exceeds the supply for each commodity; but it is safe to say that the percentages upon the average are not large, probably not more than 20 per cent., and for scarcely any commodity more than 30 to 40 per cent. Thus for coal the demand for the current year over that of last year is 20 per cent, and the excess demand for this year over the production not to exceed 10 per cent.
However, the moderate excess demand, taken in connection with buying in advance of needs, of forestalling by speculators, and combination to control the market, has been sufficient to increase the prices of many essential commodities by 100, 200, 300, and even 400 per cent., and for certain articles greater amounts. It is therefore clear that there is no relation whatever between the excess demand and the increase of prices under the competitive system. An increase demand of one tenth or one fifth may increase prices two, four, or even five fold.
There is no reason to suppose that the excess demand will decrease in the near future; indeed it is probable that next year the demand for commodities will be greater than this year; and this situation of excess demand over the possible supply will almost certainly continue to the end of the war and possibly even longer. So long as the excess demand exists, if supply and demand are allowed to have full play, prices will continue to climb.
The situation above described in regard to an inadequate supply of essential commodities and their ever-increasing prices demonstrate that, under the war conditions, the laws of supply and demand and competition are insufficient to secure the neces-
