ABSTRACT
IT is well known that, when a boom is followed by a slump, the industries hit most severely are those engaged in making long-enduring products and particularly such of these as take a long time to manufacture. The reasons for this are plain. First, when the demand for the services rendered by a long-enduring product varies, the demand for new output of that product and, therefore, for work-people engaged in making it must vary in a much larger proportion, instead of, as with a quickly perishable product, varying in the same proportion. For with long-enduring products there is sure always to be an existing stock large relatively to the annual output, so that to increase the total stock sufficiently to add 10 per cent to its yield of service might well entail increasing the annual rate of output by 100 per cent; while, if 10 per cent less of total stock were wanted, there might for some time be no need to make good wear and tear, and so the demand for new output might disappear altogether. Secondly, if demand all round is increasing with population and capital in a fairly steady trend, the occurrence of a boom must itself directly generate a subsequent slump in respect of durable products, though it has no such tendency in respect of those which are immediately perishable. For, if the stock is augmented at more than the average rate in one period, it must be augmented at less than the average rate in another. A boom in effect snatches up for itself a part of the demand that would normally become operative at a later date. Conversely, of course, a slump, if it is not merely the reflex of a preceding boom, by hampering additions to stock now,
generates a need for enhanced additions presently. Thirdly, when a product takes a long time to make, the fact that a large amount of it, started in a preceding boom, is coming to completion may easily be ignored, so that its unlookedfor emergence startles people and discourages them from beginning work on any further new output.
