ABSTRACT
SINCE THE Great Depression of the 1930’s there has been a growing feeling in Britain and the United States that the advanced economies of these nations may be confronted with not only cyclical mass unemployment but also with chronic depression or “secular stagnation.” 1 This feeling has found formal expression in the thesis that mature capitalistic economies are incapable, under laissez faire, of continuously maintaining such a high level of employment as is warranted by technical conditions. The policy counterpart of this thesis has been evidenced by the perceptible shift of emphasis from monetary policy to fiscal policy in general and from “pump priming” to “compensatory spending” in particular. The stagnation thesis has been dismissed as a “bogey” by some and discounted as an overstatement by others. 2 Without entering this controversy we shall content ourselves with treating the hypothesis of “secular stagnation” as a part of formal analysis, so that we may be in a better position to minimize or avoid the danger of such devastating chronic mass unemployment as we experienced between 1929 and 1939.
