ABSTRACT
Steindl explained the depression in the interwar period by the inability of the economy “to adjust to low growth rates because its saving propensity is adapted to a high one” (Steindl 1979, p.1). The argument was laid out in Steindl (1952). In the process of capitalist development, he argued, previously competitive industries become oligopolized. This change in competitive conditions puts upward pressure on the profit margin and makes the profit margin less responsive to changes in demand conditions. An increase in the profit margin may provide the trigger for reduced demand and a reduction in growth rates; the insensitivity of the margin to lower demand and the emergence of unwanted excess capacity potentially turn the downturn into secular depression or stagnation. The economy, in his terminology, becomes “mature”, where maturity is defined “as the state in which the economy and its profit function are adjusted to the high growth rates of earlier stages of capitalist development, while those high growth rates no longer obtain” (Steindl 1979, p.7).
