Page:The Economics of Unemployment.djvu/59
shrinking money incomes are almost entirely absorbed in maintaining the customary standard of living, and the surplus of saving almost entirely disappears. So for a considerable time a period of what from the standpoint of normal industry is under-saving ensues. In every period of depression saving is diminished more than spending. This applies not only to the wage earners whose total contribution to the general fund of saving is never very large, but to the propertied and employing classes, whose large automatic savings are to a large extent virtually cancelled by a trade depression.
While, therefore, I do not deny that a lowering of prices eventually helps to bring about an adjustment between supply and demand for commodities and a consequent renewal of industrial activity, I cannot accept Sir W. Beveridge's complacent view of the efficiency of this remedy. "The real standard of consumption," he writes, "is raised by a lowering of money prices. The balance between the demand for commodities and the supply is reached. No doubt the adjustment takes time and may only be accomplished with a certain amount of friction and loss."[1] Now, since this time-lag and the 'friction and loss' involved represent the actual damage of unemployment, I cannot accept the view that falling prices constitute a satisfactory check or remedy, or that its tardy wasteful operation proves that "the right adjustment comes about naturally through economic forces." The occurrence of the trouble testifies to wrongness of adjustment.
- ↑ Unemployment, p. 63.