Prosperity and Depression.pdf

80 AnalYsis of Theories Part Ilength of the depression depend very much on whether the boomhas collapsed with the great detonation of a crisis, financial panicand numerous bankruptcies, or whether it has come to an endgradually) without thunder and lightning-a point much stressedalso by Professor PrGou. Much depends also on the internationalsituation of the country. If the boom was financed from abroad,the consequences ofthe cessation of capital investments, accordingto Professor SPIETHOFF, will probably be less severe, because inthat case the capital-exporting country has to bear its share of thedifficulties and the capital-importing country is to that extentrelieved.The process ofcontraction also has a cumulative nature. Pessi..mism and reluctance to invest cause a shrinkage in the volume ofpurchasing power. Money is hoarded or used to finance lossesinstead of being invested and spent on producers' goods. Sincesavings are not invested, everything that increases the rate ofsaving(e.g., inequality in the distribution of income) has a depressinginfluence. (During the upswing the influence is quite the reverse.)Prices fall and this intensifies the prevailing pessimism. Thereare many other intensifying factors of an institutional nature-e.g.,reluctance to reduce prices, especially on the part of industriesthat are cartellised, and rigidity ofwages.The analysis of these factors, which intensify the depression,has, however, been carried much farther 1n recent years, especiallyby English writers belonging to various schools such as KEYNES,PIGOU, ROBBINS, ROBERTSON. At this point of SPIETHOFP'Sdescription the monetary aspects are somewhat neglected.§ 14. THE UPTURN (REVIVAL)According to Professors SPIETHOFP and CASSEL,Cost the revival is never brought about by an increaseadjus/ment..r in the demand for consumers' goods, but alwaysand new through increased investment. New investmentsinvestment are stimulated by the lowering of construction costopportunities. of capital equipment which ensues during thedepression as a result of reduction of \vages, fall inthe price of raw materials, reduction of interest cha~ges, adoption