(227.) One of the natural and almost inevitable consequences of competition is the production of a supply far larger than the demand requires. This usually arises periodically; and it is equally important, both to the masters and to the workmen, to prevent its occurrence, or to foresee its arrival. In situations where a great number of very small capitalists exist,—where each master himself works and is assisted by his own family, or by a few journeymen,—and where a variety of different articles are produced, a curious system of compensation has arisen which in some measure diminishes the extent to which fluctuations of wages would otherwise reach. This is accomplished by a species of middle-men or factors, persons possessing greater or less capital, who, whenever the price of any of the articles in which they deal is greatly reduced, purchase it at a low price on their own account, in the hopes of selling it at a profit when the market for it is better. These persons, in ordinary times, act as salesmen or agents, and make up assortments of goods at the market price, for the use of the home or foreign dealer. They possess large warehouses in which to make up their orders, or keep in store articles purchased during periods of depression; thus acting as a kind of fly-wheel in equalizing the market price.

(228.) In the greater establishments, the effect of over-manufacturing is different.