Prosperity and Depression.pdf

Nature and Causes of the CyclePart IIGovernments; secondly, on technological opportunities to invest,the nature of the "new combinations" which have becomeavailable, etc. ; and, thirdly, on the amount and direction ofconsumers' demand. Compare, on the one hand, a boom fedand propelled by armament demands and public constructionssuch as is in progress at the .present time in various countries,where the share of.the capital-goods industries in the increase ofproduction as a whole is exceptionally great, and, on the otherhand, one which relies more on current consumption for privatepurposes.Clearly all these circumstances may be such that the physicallimits of expansion of production are first reached either in thecapital-goods industries or in consumers' goods industries; orthe bottle necks may be distributed in any other fashion.Now, when a number of industries to which others are sogeared that their sales vary with the rate of the expansion of theformer reach the limit of expansion, a serious setback in the latteris the consequence.If we say that an industry has reached the limitsMonopolistic bf expansion, we must interpret this in a broadrestrictions way. It does not mean that it is physicallyabsoonsupplY lutely impossible to increase production; but itof factors. means that cost of production rises so much as tomake a further increase of production unprofitable.This rise in cost may be due to the exhaustion of the supply ofparticular means of production. Complaints about a scarcity ofthis or that type of skilled labour in this or that industry becomefrequent in the later phases of any boom. It is, however, clearthat this scarcity and the brake which it puts on the expansionof output can be due to other factors than the exhaustion of thereserve of unemployed. Two of these factors may be mentioned(to which we have already had occasion to refer) : viz., a rise inwages due to increased monopolistic pressure by trade unionsand an all-round decrease in efficiency.There is no doubt that the attitude of labour organisationsstiffens during the upswing of the cycle. To be sure, moneywages will rise ev~n under a regime of perfect competition in thelabour market. But it is equally- certain that the bargaining