"There were two other ways. The first was where the capitalist saved his profits while reducing the price of goods by taking the reduction out of the wages he had paid his employees. This was the method by which the reductions in price were very generally brought about. Of course, the process was one which crippled the purchasing power of the community by the amount of the lowered wages. By this means the particular group of capitalists cutting down wages might quicken their sales for a time until other capitalists likewise cut wages. In the end nobody was helped, not even the capitalist. Then there was the third of the three main kinds of reductions in price to be credited to competition--namely, that made on account of labor-saving machinery or other inventions which enabled the capitalist to discharge his laborers. The reduction in price on the goods was here based, as in the former case, on the reduced amount of wages paid out, and consequently meant a reduced purchasing power on the part of the community, which, in the total effect, usually nullified the advantage of reduced price, and often more than nullified it." "You have shown," said the teacher, "that most of the reductions of price effected by competition were reductions at the expense of the original producers or of the final consumers, and not reductions in profits. Do you mean to say that the competition of capitalists for trade never operated to reduce profits?" "Undoubtedly it did so operate in countries where from the long operation of the profit system surplus capital had accumulated so as to compete under great pressure for investment; but under such circumstances reductions in prices, even though they might come from sacrifices of profits, usually came too late to increase the consumption of the people." "How too late?" "Because the capitalist had naturally refrained from sacrificing his profits in order to reduce prices so long as he could take the cost of the reduction out of the wages of his workmen or out of the first-hand producer. That is to say, it was only when the working masses had been reduced to pretty near the minimum subsistence point that the capitalist would decide to sacrifice a portion of his profits. By that time it was too late for the people to take advantage of the reduction. When a population had reached that point, it had no buying power left to be stimulated. Nothing short of giving commodities away freely could help it. Accordingly, we observe that in the nineteenth century it was always in the countries where the populations were most hopelessly poor that the prices were lowest. It was in this sense a bad sign for the economic condition of a community when the capitalist found it necessary to make a real sacrifice of profits, for it was a clear indication that the working masses had been squeezed until they could be squeezed no longer." "Then, on the whole, competition was not a palliative of the profit system?"