factors, besides the discrepancy between the nominal and real rates of interest, that give to business a temporary or specious profitableness, and tend to encourage speculative over-production. But the influence of the rate of interest resembles so closely that resulting from immigration, that Professor Fisher's explanation is of especial service in the present discussion.

The rate of interest represents the payment which the entrepreneur makes for one of the great factors of productions-capital. The failure of this remuneration to keep pace with the price of commodities in general leads to excessive profits and over-production. The payment which the entrepreneur makes for one of the other factors of production-labor-is represented by wages. If wages fail to rise along with prices the effect on business, while not strictly analogous, is very similar to that produced by the slowly rising rate of interest. The entrepreneur is relieved of the necessity of sharing any of his excessive profits with labor, just as in the other case he is relieved from sharing them with capital. It would probably be hard to prove that the increased demand for labor results in further raising prices in general, as an increased demand for capital results in raising prices by increasing the deposit currency. But if the demand for labor results in increasing the number of laborers in the country, thereby increasing the demand for commodities, it may very well result in raising the prices of commodities as distinguished from labor, which is just as satisfactory to the entrepreneur. This is exactly what is accomplished when unlimited immigration is allowed. As soon as the conditions of business produce an increased demand for labor, this demand is met by an increased number of laborers, produced by immigration.

In the preceding paragraph it has been assumed that wages do not rise with prices. The great question is, is this true? This is a question very difficult of answer. There is a very general impression that during the last few years prices have seriously outstripped wages. Thus Professor Ely says, "Wages do not usually rise as rapidly as prices in periods of business expansion." R. B. Brinsmade stated in a discussion at the last meeting of the American Economic Association that "our recent great rise of prices is acknowledged to be equivalent to a marked reduction in general wages. Whether this idea is correct, and if correct, whether ་ Ely, Outlines of Economics, p. 268.

998

• Bulletin of the American Economic Association, April, 1911, p. 253.

this effect had transpired in the years immediately previous to 1907, cannot be definitely stated. The index numbers of wages and prices given in the Statistical Abstract of the United States, for 1909 (p. 249), seem to show that during the years 1895 to 1907 money wages increased about pari passu with the retail prices of food, so that the purchasing power of the full-time weekly earnings remained nearly constant.

But whether or not money wages rose as fast as prices in the years from 1900 to 1907, one thing is certain, they did not rise any faster. That is to say, if real wages did not actually fall, they assuredly did not rise. But the welfare of the country requires that, in the years when business is moving toward a crisis, wages should rise; not only money wages, but real wages. What is needed is some check on the unwarranted activity of the entrepreneurs, which will make them stop and consider whether the apparently bright business outlook rests on sound and permanent conditions, or is illusory and transient. If their large profits are legitimate and enduring, they should be forced to share a part of them with the laborer. If not, the fact should be impressed upon them. We have seen that the rate of interest fails to act as an efficient check. Then the rate of wages should do it. And if the entrepreneurs were compelled to rely on the existing labor supply in their own country, the rate of wages would do it. Business expands by increasing the amount of labor utilized, as well as the amount of capital. If the increased labor supply could be secured only from the people already resident in the country, the increased demand would have to express itself in an increased wage, and the entrepreneur would be forced to pause and reflect. But in the United States we have adopted the opposite policy. In the vast peasant population of Europe there is an inexhaustible reservoir of labor, only waiting a signal from this side to enter the labor marketto enter it, not with a demand for the high wage that the business situation justifies, but ready to take any wage that will be offered, just so it is a little higher than the pittance to which they are accustomed at home. And we allow them to come, without any restrictions whatever as to numbers. Thus wages are kept from rising, and immigration becomes a powerful factor, tending to intensify and augment the unhealthy, oscillatory character of our industrial life. It was not by mere chance that the panic year of 1907 was the record year in immigration.

Against this point of view it may be argued that the legitimate

expansion of business in this country requires the presence of the immigrant. But if business expansion is legitimate and permanent, resting on lasting favorable conditions, it will express itself in a high wage scale, persisting over a long period of time. And the demand so expressed, will be met by an increase of native offspring, whose parents are reaping the benefit of the high standard of living. A permanent shortage of the labor supply is as abhorrent to Nature as a vacuum. Expansion of any other kind than this ought to be hampered, not gratified.

There is one other way in which immigration, as it exists at present, influences crises. In considering this, it will be well to regard the crisis from the other point of view-as a phenomenon of underconsumption. Practically all production at the present day is to supply an anticipated future demand. There can be no over-production unless the actual demand fails to equal that anticipated. This is under-consumption. Now the great mass of consumers in the United States is composed of wage earners. Their consuming power depends upon their wages. In so far as immigration lowers wages in the United States, or prevents them from rising, it reduces consuming power, and hence is favorable to the recurrence of periods of under-consumption. It is not probable, to be sure, that a high wage scale in itself could prevent crises, as the entrepreneurs would base their calculations on the corresponding consuming power, just as they do at present. But a high wage scale carries with it the possibility of saving, and an increase of accumulations among the common people. It is estimated at the present time that half of the industrial people of the United States are unable to save anything. This increase in saving would almost inevitably have some effect upon the results of crises, though it must be confessed that it is very difficult to predict just what this effect would be. One result that might naturally be expected to follow would be that the laboring classes would take the opportunity of the period of low prices immediately following the crisis to invest some of their savings in luxuries which hitherto they had not felt able to afford. This would increase the demand for the goods which manufacturers are eager to dispose of at almost any price, and would thereby mitigate the evils of the depressed market. It is probably true that the immigrant, under the same conditions, will save more out of a given wage, than the native, so that 'Streightoff, The Standard of Living, p. 24.

it might seem that an alien laboring body would have more surplus available for use at the time of a crisis than a native class. But the immigrant sends a very large proportion of his savings to friends and relatives in the old country, or deposits it in foreign institutions, so that it is not available at such a time. Moreover, our laboring class is not as yet wholly foreign, and the native has to share approximately the same wage as the alien. Without the immense body of alien labor, we should have a class of native workers with a considerably higher wage scale, and a large amount of savings accumulated in this country, and available when needed.

On the other hand, it may be argued that if the desire to purchase goods in a depressed market should lead to a large withdrawal of cash from savings banks and similar institutions, it might tend to augment rather than alleviate the evils of a money stringency. There seems to be much force to this argument. Yet Mr. Streightoff tells us that in a period of hard times the tendency is for the poorer classes to increase their deposits, rather than diminish them.10 On the whole, it seems probable that a large amount of accumulated savings in the hands of the poorer classes would tend to have a steadying influence on conditions at the time of a crisis, and that by preventing this, as well as in other ways, immigration tends to increase the evils of crises.

In closing, it may be interesting to note what are the elements in our alien population which respond most readily to economic influences in this country, and hence are mainly accountable for the influences we have been considering. As stated above, the annual reports of the Commissioner General of Immigration give very complete data as to the make-up of the incoming and outgoing streams by years. Thus in the fiscal year 1908 there were 782,870 immigrant aliens and 141,825 nonimmigrant aliens admitted. Of the nonimmigrant aliens, 86,570 were individuals whose country of last permanent residence and of intended future residence, were both the United States; that is, they were alien residents of this country who had been abroad for a brief visit. These are the birds of passage in the strictest sense, in which we shall use the term hereafter. In the same year there was a total exodus of 714,828 aliens, of whom 395,073 were emigrants and 319,755 nonemigrants. The former class includes those who have made their fortune in this country and are going home to spend it, and those who have failed, and are going home broken and discouraged a very large Streightoff, The Standard of Living, p. 111.

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number in this panic year. The latter class includes aliens who have had a permanent residence in the United States, but who are going abroad to wait till the storm blows over, with the expectation of returning again-true birds of passage outward bound. There were 133,251 of these. The balance were aliens in transit, and aliens who had been in this country on a visit, or only for a short time. In 1909 there were 751,786 immigrant aliens and 192,449 nonimmigrant aliens. Of the nonimmigrants 138,680 were true birds of passage according to the above distinction-a large number and almost exactly equal to the number of departing birds of passage in the previous year. The storm is over, and they have come back. The departures in that year numbered 225,802 emigrant and 174,590 nonemigrant aliens. These numbers are considerably smaller than in the previous year, but are still large, showing that the effects of the crisis were still felt in the early part of this fiscal year. The number of birds of passage among the nonemigrant aliens, 80,151, is much smaller than in the previous year. In 1910 there were 1,041,570 immigrant aliens and 156,467 nonimmigrant aliens. In the latter class, the number of birds of passage, 94,075, again approximated the corresponding class among the departures of the previous year. The departures in 1910 were 202,436 emigrant aliens and 177,982 nonemigrant aliens, of whom 89,754 were birds of passage. This probably comes near to representing the normal number of this class. A careful study of these figures confirms the conclusion reached above. While a crisis in this country does undoubtedly increase the number of departing aliens, both emigrant and nonemigrant, and eventually cuts down the number of arrivals, the total effect is much smaller than is usually supposed, and taken in connection with the fact that the stream of arrivals is never wholly checked, the influence of emigration in easing the labor market is absolutely trifling.

Comparing the different races in regard to their readiness to respond to changes in economic conditions, it appears that the Italians stand easily at the head, and the Slavs come second. In 1908, in the traffic between the United States and Italy, there was a net loss in the population of this country of 79,966; in 1909, a net gain of 94,806. In the traffic between this country and Austria-Hungary there was a loss in 1908 of 5,463; in 1909 a gain of 48,763. In the traffic with the Russian Empire and Finland there was a gain of 104,641 in 1908 and a gain of 94,806 in 1909. This shows how unique are the motives and conditions which con