Towards Stability
by [Holt, $2.00]
IF you want to know why your pet scheme for recovery or for business stabilization will not work, here is the book for you. It is not a large book, but it is an orderly and compact one, in spite of its being a compilation of lectures given at the Utah State Agricultural College.
In the first chapter, on ‘Fluctuations in Spending,’ the author sets out to state the causes of boom and depression. Broadly, he finds them to reside in alterations in the general disposition to buy goods, resulting from cumulative effects of industrial and financial growth and change. This sounds rather formal, but he goes on to more specific analyses. Consumer spending is dependent on producer spending rather than the reverse. Increased employment depends on new prospects for profit, not vice versa. And the whole credit system, both for business purposes and for installment buying by consumers, is an ideal mechanism for intensifying business fluctuations.
His uncompromising attitude toward official policy goes even further than this. Recovery will be hastened by a rapid and balanced reduction in prices and wages on the down swing. Maintaining them was a mistake. Governmental or industry-wide control of new investment is useless and harmful. A stable price level will not prevent depressions. Fiscal policies being followed during recovery may destroy the ability of the Reserve authorities to control booms. The proper use of wage increases is to control a boom. And so on. It is all very disconcerting and discouraging. The two final chapters are devoted to the ‘Problems of a Planned Economy’ and ‘Our Obsolete Constitution.’
If the reviewer has a criticism, it is that a certain quantitative element is lacking in the analysis, and that too narrow a range of controls is discussed. For instance, is it not true that, in the period leading up to October 1920, many billions of bank credit were generated to support speculation; that these funds were in addition to those normally derived from credit for the support of production and distribution; that the credit structure thus erected was impossible of maintenance; that its fall revealed its nature as a mass of bank indebtedness, whose liquidation during the succeeding years destroyed corresponding billions of purchasing power?
It is not asserted that this analysis is a complete statement of cause and effect — only that it represents a preponderant element. If so, the control of security and commodity speculation by margin requirements and similar devices merits attention which was not given in the book; and we might well renew our interest in landvalue taxation as one of the means of controlling realestate speculation.
These are suggestions only, brought out in the reviewer’s mind by the reading of this compact, workmanlike, and invaluable book.
RALPH E. FLANDERS