Prosperity and Depression.pdf

N atnre and Causes of the ,CyclePart IIcases may have a strong incentive to save for the purpose ofrepaying debts to tradesmen which they have contracted. Sincethe real income of the working-class as a whole probably risesduring an upswing-especially in post-war cycles-it is possiblethat the tendencies to increased saving prevail, but it seems unlikelythat the increase in saving from this source can be of muchimportance.Among the propertied classes, the fluctuations in the proportionofincome saved are probably much more important, because theirincomes fluctuate more widely. They skim the cream off theboom and bear the brunt of the depression. Considering thattheir standard of living is much less flexible than their incomes, itappears plausible that they should'even dissave during the slumpand save ,considerably during the upswing and boom. This islikely to be accentuated by the fact that they are, to some extentat least, cycle-conscious. During good times, they save notonly for old age, children's education and inheritance, calamity,etc., but also to some extent against the eventuality of a slump.Business corporations pursue a policy of " dividend-stabilisation "by accumulating reserves out of net revenue in good times todisburse them in bad~It is true .that the bond-holding section ofthe propertied classis to some extent in a position analogous to that of wage-earnerswho find their real incomes diminishing during the upswing.This, however, is not likely to be, important in the earlier stagesof an expansion; and if we take capitalist-entrepreneurs, holdersof equity shares and holders of industrial bonds in the mass, therecan be no doubt that their real incomes greatly increase'during trteexpansion. Where there is a big national debt, the situation is alittle different. Here it is conceivable that the transference ofreal income from taxpayers (poor and rich) to rentiers (mainlyrich) will be considerably diminished during the upswing, andthis will counteract the redistribution of income in favour of therich which will otherwise take place at that time, and to someextent limit saving.Consideration ofpublic finance in a wide sense (including socialinsurance institutions), however, brings in a further element whichdecisively tips the balance in favour of increased saving. During