chapter  2
13 Pages


DURING the war, and for some time after, trade was prosperous and employment full, because there was an assured effective demand for all that could be produced. In other words, consumption kept pace with production, taking off without delay all that was produced. The full pace of this artificially stimulated production COllld not, indeed, have been maintained indefinitely. But, if this war-economy could have been converted into a peace econDmy operating at, say, four-fifths the full war pace, the fighters, absorbed into the working classes on a shorter working day, producing the housing, railway developments and other work of capital repair and extension, while public expenditure was maintained on a high-tax basis without further borrowing or inflation, there seems no economic reason (apart from political and social considerations) why effective demand for British products should have failed and depression supervened. The high level of wages and full employment for our workers would have enabled the size of the effective demand to compensate for the slack demand of foreign customers, as during the war itself. This policy could not, indeed, have continued indefinitely for this or any other highly peopled country.

For a considerable export trade is indispensable for a people who must buy half of their food and much of their materials abroad. But this signifies that a world-depression, or any other world-problem, cannot finally be solved for any single country on its separate national policy. Cyclical depressions are the gravest of international diseases, and demand an agreed diagnosis and a common line of treatment-industrial, commercial and fin~ncial.