THE THEORY OF MODERN WELFARE 217
the cost of production of the goods and leave something appreciable over as a profit. It is a question of prices and earnings. The difficulty is that not enough of a product can be disposed of at fair prices to warrant the running of the mills at their full capacity, or running them at a rate near enough to their capacity to yield a fair profit. Or, to turn the proposition about, as business men are in the habit of doing, there is more of an output offered than will be carried ofiE at a fair price, — such a price as will afford fair or ordmary profits on the investment and the running espensea. There is too large a productive capacity; there are too many competitive producers and too much industrial apparatus to supply the market at reasonable prices. The matter reduces itself to a question of fair prices and ordinary profits.'
If there is a large volume of outstanding credit obligations, that will complicate the situation. There is always a considerable amount of interestbearing securities outstanding, and the claims of these securities have to be satisfied before dividends can be paid on stock, or before profits accrue to industrial ventures which have issued the securities. These fixed charges, together with others of a like kind, narrow the margin from which profits are derived and increase the handicap which a season of dull times brings to the business
Ct Smut, Studitt in Sconomtet, oh. VU.
r218 THE THEORY OF BUSINESS ENTEBPEI8E fl men in charge of induatry. At the same time ^M fixed charges preclude shutting down, except at a sure and considerable loss. The business men involved are constrained to go on, and in the absence of wide combinations in industry they are fl constrained to go on at such competitive prices aa H to preclude reasonable profits. H
The question of fair prices and reasonable H profits has some reference to current rates of in- ^