Here is a summary, quoted here before:
"The course of American business activity never did run smooth. Nor has it ever run on orthodox lines. . . No completely satisfying explanation has ever been given, for instance, of the very sudden reversal of recovery in the autumn of 1937, long before it appeared to have reached its maturity. [Until recently, the received explanation was of a temporary interruption]. This theory appeared to be confirmed by the resumption of recovery twelve months ago. But since the beginning of 1939, this new recovery –or “re-recovery,” as the Americans call it—has faltered and given ground, long before it had attained the peak levels of 1937, let alone those of 1929. It is true that in the last few weeks there have been signs of a new improvement –a re-re-recovery, as it were— but it is too early to say whether they are prophetic or deceptive. And in any case there is no assurance that 1939’s improvement will go much further than 1938’s. There is prima facie evidence for the belief that each new peak is lower than the last.”
One is left, the paper infers, to fall back in despair on the doctrine that it is for Government to repair the deficiency in private investment in capital….[But] the justification for a permanent programme of public works can only be a permanent lack of private capital investment….
[This] 'permanent lack of private capital investment' is due to America being a ‘mature economy," because its population has ceased to grow.
“[But] If America is a “mature economy” because the growth of population is slowing down, how much more “mature” is Great Britain, where the growth of population has almost stopped?” It would be much easier, The Economist says, to accept the defeatist doctrine of a permanent insufficiency of private investment if any convincing attempt had been made to investigate and remove the barriers to profitability. Business complaints do not encourage this inquiry. Taxes are too high, “anti-business” attitude of the Administration, “lack of confidence.” The Economist was not persuaded by these arguments in 1939 --which suggests that their point is not to convince.
The Economist goes on to explain. The problem is the cost of investments. Specifically, wages are too high. As a consequence, payrolls are falling, for unemployment trumps increases. “The only remedy that has not been tried is a sustained attempt to lower the costs and encourage the expansion of the capital goods industry whose coma is, by common consent, the root cause of the laggardliness of the recovery.” Less money in the hands of buyers means more machine tools being produced to equip factories to supply buyers with the things they want."
On another line of argument, I think we can all, or most of us, come together in agreement that Geoffrey Crowther's prescription is not particularly attractive. No, no, we don't think that the solution to the current problem is a wage cut. Nor did it turn out to be the solution --in 1945. In the thirty year short term, it was never the solution. Of course, it does seem to have been the solution for the last forty, so there's that. Or not --it hasn't brought robust growth back, after all, and forty years is a good run.
So it is at least worth exploring the possibility that Hansen was right in 1939, wrong, or at least irrelevant, in 1945. In the six years between, things changed, not through wage cuts, but through the effects of World War II. There are a number of arguments against this, and this recap could be about many of them, but I am going to cut to the chase and single out one particular exogenous event, the Baby Boom.
Sure, we could have an argument. But I'm the one in the bind for in-store labour due to a shortage of teenagers, and I'm the one writing this blog. Now, it could be objected that however much the "trente annes glorieux" can be attributed to Keynesianism-Hansenism, Baby making's not in Keynesianism, unless someone has clipped the centerfold out of the editions of the General Theory?
|He jiggered up some orbital mind control lasers, as you do.|
“This simply reflects the high rate of marriage in the early years of the war, now well past its peak, and offers no evidence of any likely turn in the downward trend in the population, which depends, first, on the number of mothers-to-be, and, secondly, on the size of families. The number of marriages in the quarter actually fell lower than in any September quarter since 1917, which makes the maintenance of the number of births unlikely.”
No explanation is needed in June, because the fact that Britain has the highest number of babies in twenty years (5687,130 versus 1925’s record 843,405) can be turned into a joke about a shortage of rubber bottle nipples. (In other hilarious news, the Prime Minister has read Road to Serfdom and is very impressed.)
In an interesting synchronicity, Fortune covered the demographic future shortly after The Economist engaged it.
Now have two ads:
Remember defined-benefit plans? I don't want to boast, but I've got one.
Look! Technology is going to change our lives, but not in a way that will make your husband less of a jerk.
These two images suggest explanations for why the business press will turn out to be wrong about the rising birth rate trends of the previous five years will turn out to be wrong. Prosperity? Technology changing things? A reassertion of patriarchy? They may not be good explanations, but they're better than The Lancet's!
But it is time to have a look at them.