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THE PROBLEM OF THE UNEMPLOYED
capital unemployed in our manufactures, if we find them
wastefully employed in our distributing industry, it can only
mean an undue diminution of consumption, or, in other
words, an attempt to establish as “ savings ” a larger
number of forms of capital than are economically required
to assist in maintaining current or prospective consumption.
These results of over-saving are not, of course, made
manifest at once. So long as the over-saving is being
stored in new plant or machinery and so long as this
new plant is engaged in turning out increased supply of
goods, there is no reduction of employment and no fall
of general prices. It is when the admitted glut of goods
checks further investment and over-saving can find no
vent that prices fall, production is slackened and unemployment
shows itself.
The failure to give proper recognition to the obvious fact
that the quantity of serviceable forms of capital at the several
stages of production is absolutely limited by the rates at
which consumable goods are drawn out of the industrial
machine, arises from the refusal to consider industry from
the social organic standpoint. Because an individual or
a class of individuals can “save” without any other limit
than that imposed by the necessity of living, it has been
wrongly supposed that the same rule holds good of a
whole community. This blind individualistic conception
of industry was aided by the recognition of the moral
and material value which attaches to the exercise of
effectual thrift by individual members of a society, and
which within the limits imposed by the aggregate consumption
must be recognised as necessary and beneficial to
society. Although the famous dictum of Adam Smith
that “ the study of his own advantage naturally, or rather
