Prosperity and Depression.pdf

Chap. 5 Under-consumption Theories 12.7On the contrary, for reasons which have been touched upon in anearlier passage, it would seem rather that the rate of saving fallsin the later phase of the boom.5• But it has been argued by many writers­Valuable and the argument may be said to represent a· newaspects ofthe version of the under-consumption theory-that. under- the end of the boom comes when the fruits of theconsumption new processes which have been initiated with thetheory. help of voluntary and forced saving during theupswing begin to emerge. The crisis is broughtabout, not by a sudden rise in the rate of saving (i.e., a fall in thedemand for consumers' goods) but by a rapid rise in the rate ofoutput (i.e., in the supplY of consumers' goods). This theory,which is the direct opposite of the shortage-of-capital explanationof the breakdown, merits cJose examination and will be discussedin the next section.6. Another valuable version of the under-consumption theoryis the doctrine that the failure of wages to rise rapidly enoughduring the upswing-more explicitly, the lag of wages behindprices-is the cause of excessive profits, which in turn entail adangerous credit inflation and eventually engender serious disturbanceof existing relations culminating in a crisis. This theorywill be discussed in §4 ofthis chapter.§ 3. INSUFFICIENCY OF CONSUMERS' DEMAND VERSUS SHORTAGEOF CAPITAL AS THE CAUSE OF THE COLLAPSE OF THE BOOMSo far we have encountered, and discussed, theCapital following answers to the question why the cumulashortageversus dve process of expansion always comes to a more orinsuflicienfY less abrupt end : Disturbances from outside theof consumers' economic system; insufficiency ofthe money supply;demand. shortage ofcapital in the sense ofa vertical maladjustmentof the structure of production; horizontalmaladjustments; a general rise in "cost" and decline of efficiency.The hypothesis with which we have now to deal is the exactcounterpart of the shortage-of.capital theorem. It is important