Page:The Economics of Unemployment.djvu/122

It was inevitable that at a time like this, when the disturbances of financial machinery are so grave and so widespread, there should spring up schools of thought which find in the defects of our credit system a complete explanation oi the industrial collapse. The most noteworthy of these schools is founded on the writings of Major Douglas. With a part of his diagnosis of the present trouble I find myself in cordial agreement. I agree with him in attributing trade depression to the failure of consumption, or effective demand, to keep pace with potential and actual production. The full product cannot be produced because, if produced, it could not be marketed at the price required under our actual system to make production profitable.

But Major Douglas and his followers give a different explanation of the failure of this effective demand from that which I should give. I trace this failure, not to any lack of the monetary power to purchase all the commodities that could be produced, but to the refusal of those in possession of this power of purchase to apply enough of it in buying consumables, because they prefer to apply it to buying non-consumables, in other words, to buying capital goods.