Page:The Economics of Unemployment.djvu/80

accompanied by a complete damping down of railway enterprises for several years.

It is natural that investigations into the history of trade fluctuations should fasten attention on these speculative excesses of investment and assign to them the causation of the subsequent depressions. If our analysis be correct, such excesses must occur. A creation of savings obviously superfluous for the formation of capital to supply goods for current home consumption must cause an increasing proportion of new savings to seek investment in undertakings at a distance which do not supply current consumption but fructify for supply of consumptive goods some years hence. It is only when business men and financiers begin to calculate whether the great anticipated increase of future consumption, upon which the investments are based, is likely to come off and reach an adverse judgment, that the folly and futility of the proceeding are unmasked, and the penalty is paid in a sudden slump in the home trades which had been supplying these capital goods for the export trade.

Under a better distribution of income, with a right adjustment between production and consumption, these excessive funds available for speculative investments abroad would not exist. This does not signify that home demands would absorb all savings. That would be a false and ill-directed economy for a progressive nation. But it would preclude these speculative rushes into foreign investment as the only outlet for congested home demands, and it would remove this important factor in the production of financial crises and industrial depressions.