Prosperity and Depression.pdf

Chap. 3 T h~·· Over-investment Theories~Itis difficult to find concrete examples which illustrate this·proposition,since in actual fact the situation is usually very complex.Countries do not usually specialise solely inthe production of consumers'goods, capital equipment, or· raw materials, etc. Still, theeconomic equipment is usually deficient in various directions,though protectionist policy has done much to diversify national productionand lesseninternationalspecialisation. Onthe whole, industrialcountriesare at thesame time exporters ofcapital. Therefore,itis natural that capital movement should take place chiefly throughthe shipment of machinery, railroad and electrical equipment, etc.Theoutstandingexample ofcapital movements taking place throughthe import of foodstuffs, other articles of consumption and rawmaterials is Germany in the post-war and post-inflation periodthatis, from 1924 to 192.8.It is hoped that these remarks give an idea of the almost endlessmultiformity of the international complications, and at the sametime of the possibility of analysing each ofthese innumerable caseswith the help of a few principles, and of understanding them asspecial cases which can be brought under the general doctrine.§ 9. CONCLUDING REMARKSThe most valuable and original contributions of the monetaryover-investment theory are (1) the analysis ofthe maladjustment inthe structure ofproduction brought about by the credit expansionduring the prosperity phase of the cycle and (2.) the explanationof the breakdown as consequent on that maladjustment. But ouranalysis has also shown that the theory is not in all respects com..plete. The claim to exclusive validity is open to doubt. It is alittle difficult, for example, to understand why the transition to amore roundabout process of production should be associated withprosperity and the return to a less roundabout process a synonymfor depression. Why should not the original inflationary expansionof investment cause as much dislocation in the productionof consumers' goods as the subsequent rise in consumers' demandis said to cause in the production of investment goods?11 ct. Durbin: The Problem 01 Credit Policy, 1935 ; Bresciani-Turroni,U The Theory of Saving" in Economica, May 1936; pages 175 and 176.