Prosperity and Depression.pdf

Nature and Causes oj. the CyclePart IIIn ,both cases, we can distinguish between two"Accidental" types 'of disrupting or mitigating forces-viz.,and" organic" those which arise quite independently ofthe processrestraining of expansion or contraction which they interruptforces. and those which are usually or necessarily broughtabout by. the process of expansion or contractionitself. In other words, an expansion or contraction may beinterrupted on the one hand by an accident such as changes inthe harvest due to weather conditions, influences from abroad(other than such as are induced by the contraction or expansionitself), spontaneous. shifts in demand, etc., or it may on the otherhand itself give rise to maladjustments in the economic system(counter-forces) which tend to check and reverse the very process(i.e., the expansion or contraction) by which they were broughtabout. These maladjustments or counter-forces may be veryvarious : they may be of a monetary or non-monetary character:they may be treated as the inevitable consequence ofany expansionor contraction, or as dependent on circumstances not necessarilyto be found in every expansion and contraction.Most cycle theorists have tried to prove that the second typeof restraining forces is all-important. Indeed, they usually acceptthe existence of such forces as a dogma, at 'least so far as theexpansion is concerned. If this can be definitely established, thecyclical movement is in'a higher degree an essential attribute ofourpresent economic system l than in the first case. We shall investigateboth possibilities. For, even if the second hypothesis canbe proved to be correct-if, that is to say, a process of expansionor contraction cannot go on for ever because it generates forceswhich will counteract and ultimately reverse it-it is none theless important to show that it may be brought to an end by certainaccidental factors, before those forces come into operation. Ananalogy will make this clear., It is true that every man must die1 The term"cycle" carries with it the suggestion that it is a coherentwhole in the sense that one phase necessarily grows out of the other.We have used the term in the less ambitious meaning of a mere alternationof prosperity, and depression, leaving it open whether one phase is theinevitable outcome of the preceding one, or whether the connectionbetween the successive phases has to be conceived as less rigid.