Page:The Economics of Unemployment.djvu/26

Thus we perceive that modern industry testifies, by a quite undesigned coincidence of theories and practices, ca' canny, trusts, protection and imperialism, to the belief in a limited market.

It may be adduced as a summary of the situation that business men have generally accepted as an obvious truth the statement of the late Charles Booth that "our modern system of industry will not work without some unemployed margin, some reserve of labour." The 'function' of this unemployed margin was defined by a Departmental Committee of the Board of Trade, reporting in 1895, in the following terms:

In a period of contraction like the present time are many men who are out of work. They are industrially 'superfluous,' if so short a period as a year be taken as the unit, but over a period of seven years—which for shipbuilding appears to be about the period of the cycle—they are necessary, and were they lifted off the labour market in slack years there would not be enough men to execute the work when trade revived.

It thus appears that periods of contraction, with large bodies of superfluous labour, are not only inevitable but desirable, as providing the necessary elasticity of productive power! I am not here concerned with the accuracy of this judgment. I merely cite it as expressing the accepted view that the productive power of labour exceeds the quantity that is capable of full employment, except for a small proportion of each 'cycle.' I would add that the same judgment applies to the capital engaged in industry, the plant, machinery and other real capital. That, too, must stand idle or half employed during a large part of each cycle. So