Page:The Economics of Unemployment.djvu/30

kept all our trades in full employment for some two years.

The immediate cause of the collapse which followed is no matter of dispute. It was the failure of effective demand. The withdrawal of governmental purchases and the satisfaction of the pressing neutral demand was not compensated by any sufficient revival of European and other foreign markets. The slackness in the export trades was communicated to other trades, and a general depression set in.

Now in this depression and its accompanying unemployment there are special factors which distinguish it from ordinary cyclical depressions. Always it is the failure of effective demand, or more strictly speaking the expectation of this failure, that slows down the machinery of industry. Though the capital and labour to make goods exist, goods will not be made if there is no belief in their sale at a profitable price. Effective demand consists in the offer of sufficient acceptable money for acts of purchase. Now the failure of effective demand on the part of would-be customers with needs to satisfy may be due, either to their failure to produce and sell their product, or to the unreliable character of the money they possess. Both causes contribute to the failure of effective demand to-day, especially of European demand. Many people who would like to buy our goods are not themselves producing enough goods wherewith to get money to pay for what we have to sell. Most of those who are producing cannot show us that the money which they are earning will purchase the required quantity of our money,