Prosperity and Depression.pdf

Nature and Causes of the CyclePart IIStructuralmaladjustmentsliketJ·We turn now to the second group of possibledisturbances which the expansion may bring about :viz., maladjustments in the structure of productionarising out of the fact that, in some industries, theselling-price of the product falls short of the costof production or, in other words, that demand isinsufficient to take up production at remunerative prices. Thereis no initial decrease in the total monetary demand for goods-i.e.,in the money stream; but the flow of goods does not correspondin all its ramifications to the flow of money and its divisions,and .therefore in some lines of production demand does notcover cost. The expectations of some people have been disappointed,which need not be offset by favourable surprises of others.Prima facie, it is not at all surprising that serious dislocationsin the structure ofproduction should make their appearance duringthe course of a general expansion, when far-reaching changesoccur in many parts of the production process. What we findduring an expansion are not slight adjustments on the margin ofproduction in this or that industry-in which connection it issafe to disregard indirect repercussions and to assume, if notperfect, at any rate approximately correct, foresight on the part ofthe producers. On the contrary, we find that far-reaching changesare under way: long-term investment is taking place in manylines : new commodities are being introduced (though the linebetween the introduction of " new" goods and the improvementof the quality of old ones is very hazy) : goods, the consumptionof which was so far confined to the upper classes, are being madeaccessible tor the consumption of the masses : new processes ofproduction are being put into operation : and all these changesmust profoundly influence iconditions of cost and of demand forany given industry. Consumers are induced to rearrange thesystem of their expenditure. Relative prices of the variousfinished products and of half-finished goods and factors ofproduction change.Is it so astonishing that, under these circumstances, seriousmaladjustments should develop in the industrial structure as theexpansion goes on? Without as yet being able to specify theexact nature of these maladjustments, it would seem highly