Page:The Economics of Unemployment.djvu/150

to account for the size and the nature of the phenomena of trade depressions. There is only one sort of maladjustment of economic forces adequate in nature and magnitude to explain the actual phenomena, viz. a normal tendency to apply to the production of capital-goods a proportion of the aggregate productive power that exceeds the proportion needed, in accordance with existing arts of industry, to supply the consumptive-goods which are purchased and consumed. In other words, if there exists a normal tendency to try to save and apply to capital purposes an excessive proportion of the general income, we have a valid explanation of the actual phenomena of fluctuations and depressions.

Now in the wide disparities of income between the rich and poor, and in the large elements of unearned and unneeded income which fall to the former class, we discover the required tendency to chronic over-saving, i.e. the virtually automatic accumulation of income which exceeds the customary or desired expenditure of those whose felt wants are fully satisfied. Under such conditions it is certain that the proportion between spending and saving must get out of gear, and that more production will be applied to producing larger increases of plant, raw materials and other capital goods, than are capable of full and regular use in furnishing consumable goods to consumers.

The economic checks commonly adduced, viz. the falling rate of interest as a check upon excessive saving, and the fall of prices as a stimulation of increased consumption, are both inadequate. Neither operates until the trouble has attained considerable momentum,