EFFECT OF UNDER-CONSUMPTION
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where the demand is absolutely reduced, I can only reply
that it simplifies the argument and makes no real difference
in its validity. If we assumed the “saving” to be equally
distributed among all trades, then at the end of the year
all trades would be to a minor degree in the same condition
as the cotton trade is according to my illustration.
If savers were mad enough to continue this policy,
preferring the growing ownership of useless cotton-mills
to the satisfaction of consuming commodities, the process
might continue indefinitely, without reducing or affecting
in any way the aggregate employment of labour and
capital. It would simply mean that a number of persons
take their satisfaction in seeing new cotton-mills rising and
going to decay.
But it is conceivable that in the second year of oversaving,
the savers instead of continuing to pay people
to put up more mills might employ people to operate the
excess of cotton-mills, lending their money to buy raw
material and to pay wages. Cotton goods which ex
hypolhesi can find no markets are thus accumulated. If
the savers chose to take their pleasure in such a way,
they might go on indefinitely without the aggregate of
employment of capital or labour being affected. If they
continued this impolicy for a twelvemonth, we should say
that whereas in the first year they saved useless mills,
in the second year they saved useless cotton goods. In
neither the first nor the second year is there any net
increase or decrease of employment due to the new policy
of saving. In fact, assuming sanity of individual conduct,
affairs would work out differently. Admitting an attempt
to work the surplus mills, the actual overproduction of
goods could not proceed far. Let us assume savers to
