Prosperity and Depression.pdf

Chap. 3 The Over-investment Theories 73accepted a purely monetary explanation, at least so far as the 192.9­1936 depression is concerned. 1It is significant that Professor SPIETHOFF, with his quite differenttheoretical background, has reached, so far as concerns the interpretationof the later phases of the upswing and of the situationwhich leads to the collapse, substantially the same result as thewriters of the monetary over-investment school and ProfessorCASSEL.The difference between the monetary and non­Stress on monetary over-investment theories concerns, asproduction of the names suggest, .the ·role of money and monetarycapitalgoods.. factors and institutions in bringing about the boomand the over-investment which leads to the collapseand depression. The theory of the writers of this group does notrun in monetary terms; they mention monetary forces, but relegatethem to a relatively subordinate role. It can, however, be shownthat they are compelled to assume an elastic currency or creditsupply in order to prove what they wish to demonstrate. Butmonetary factors are for them passive conditions which can betaken for granted rather than impelling forces.Both Professors SPIETHOFP and CASSEL emphatically assert thatthe business cycle is characterised by changes in the production ofcapital goods, especially of fixed capital equipment. The productionof consumers' goods does not exhibit the same regularity ofchange during the business cycle. Professo! SPIETHOFF makes thepoint that upswings have occurred during which consumption hasactually fallen. This was the case, according to him, in Germanyin the years 184'-1847/48, when the economic situation of theworking classes positively deteriorated because ofrising food pricesdue to a series ofcrop failures. 2 But, even ifno account is taken ofchanges in agricultural production, which are only remotelyconnected with the ups and downs of industrial production, " the1 See, e.g., The Downfall of the Gold Standard, Oxford, 1936. LikeMr. Hawtrey,he believes that" the economic development of post-wartimes has been so strikingly dominated by great monetary disturbancesthat trade cycles of the earlier kind are no longer applicable" (TheTheory of Social Economy, Vol. II, page 538).a See Spiethoff's article" Krisen" in the Handworle'Ybuch dey Staatswissenschalten,Vol. VI, 4th ed.~ Jena~ 192 5, page 49.