As I said in Part 1, Veblen and Hobson have a lot to say about the problems associated with machine production; particularly with respect to over supply. Here are the essentials of their message:
- machine production leads to over supply and increased inventories because demand cannot consume the goods fast enough.
- high inventories lead to unemployment since too many products are being created.
- this would be happening in first world nations since they have the best machines and highest productive capacity
- corporations with these machines dominate their business sector and build up huge cash reserves that must find investment with high returns – the money cannot just sit in a bank. The Fed will not guarantee $10 billion in an account; rather, only up to half a million dollars is guaranteed.
- the oil sector with excess funds cannot find a market to invest their reserve cash because all lucrative sectors are using machines. Oil cannot invest in steel, nor railroads, nor coal. The entire economy is floating in excess cash – although the average citizen is crushed due to unemployment.
- the only solution is to find overseas markets in “lesser developed nations”, were the excess money can be used in plant investment. Overseas markets are also a dumping ground for excess production in the first world.
- the problem is that the USA is not alone in this search. So is Russia, Germany, England, France, etc. The only result is war as nations fight to find outlets for excess cash reserves and over stocked inventories.
This scenario is also outlined in the novel 1984 when Winston reads about the Party’s ideology on world domination and control. The book also states that as war breaks out in search of open markets in which to dump products, the war itself serves a purpose in that war is the perfect engine for chewing up excess inventories.
Furthermore, as oil related inventories in the USA currently remain high, Europe is experiencing a glut in gasoline. All the oil producing nations are under strain right now due to cut backs in oil production. Saudi Arabia would like the price of oil to rise because that would give their IPO a higher opening stock price. On the other hand, poor nations that have oil would like to produce more barrels because that means more revenue, even though it is at a lower price. Mean while the USA has not cut back its production levels.
So, if full scale war does break out in the Middle East, I doubt that the cause will be to find markets for dumping oil. Although, the war may indeed serve as a type of incinerator for burning up excess inventories. Of course no one wants to see that; but, what other solutions have nations ever found? Peaceful Coexistence? Where do we go from here?