Page:The Economics of Unemployment.djvu/82

We have seen how the large manufacture of cheap credit during a period of prosperity leads to over- trading, i.e. the production of surplus stocks of goods which turn out to be immediately unsaleable at cost prices and which are only got rid of during a long period of depression and under-production due to their existence. This over-trading, or production of excessive stocks, is promoted by abundant credit, not merely because that credit increases the quantity of purchasing power, so raising prices, but because it is primarily applied to stimulate the production of capital-goods without any corresponding stimulation of consumption. This criticism is not met by urging that the credit enables employers to give fuller employment at rising wage-rates, so increasing the effective demand for consumables by labour. For the credit first operates to throw an increased proportion of the productive power of labour and capital on to the production of non-consumables, raw materials, fuel, etc., the advance of these primary products towards the condition of finished consumable commodities being usually held up by congestion in the mills or warehouses or in the dealers* hands when the boom has reached its height and depression is in sight. For a time free credit does put more money into the workers' pockets. But it does not proportionately raise consumption. For the rising margin of profits on an expanding trade, taken in conjunction with the wage-lag, means a larger share of the expanding income for capital and a smaller for labour. And this means, as we have recognised, a larger proportion of saving to spending, of production to