284.  One of the natural and almost inevitable consequences of competition is the production of a supply much larger than the demand requires.  This result 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 works himself and is assisted by his own family, or by a few journeymen—­and where a variety of different articles is 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 middlemen or factors, persons possessing some capital, who, whenever the price of any of the articles in which they deal is greatly reduced, purchase it on their own account, in the hopes of selling at a profit when the market 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 flywheel in equalizing the market price. 285.  The effect of over-manufacturing upon great establishments is different.  When an over supply has reduced prices, one of two events usually occurs:  the first is a diminished payment for labour; the other is a diminution of the number of hours during which the labourers work, together with a diminished rate of wages.  In the former case production continues to go on at its ordinary rate:  in the latter, the production itself being checked, the supply again adjusts itself to the demand as soon as the stock on hand is worked off, and prices then regain their former level.  The latter course appears, in the first instance, to be the best both for masters and men; but there seems to be a difficulty in accomplishing this, except where the trade is in few hands.  In fact, it is almost necessary, for its success, that there should be a combination amongst the masters or amongst the men; or, what is always far preferable to either, a mutual agreement for their joint interests.  Combination amongst the men is difficult, and is always attended with the evils which arise from the ill-will excited against any persons who, in the perfectly justifiable exercise of their judgement, are disposed not to act with the majority.  The combination of the masters, on the other hand, is unavailing, unless the whole body of them agree, for if any one master can procure more labour for his money than the rest, he will be able to undersell them.