It is, of course, possible that an excess of producing power might exist in particular industries by misdirection, being engaged in certain manufactures, whereas it ought to have been engaged in agriculture or some other use. But no one can seriously contend that such misdirection explains the recurrent gluts and consequent depressions of modern industry, or that, when over-production is manifest in the leading manufactures, ample avenues are open for the surplus capital and labour in other industries. The general character of the excess of producing power is proved by the existence at such times of large bank stocks of idle money seeking any sort of profitable investment and finding none.
The root questions underlying the phenomena are clearly these: “Why is it that consumption fails to keep pace automatically in a community with power of production?” “Why does under-consumption or over-saving occur?” For it is evident that the consuming power, which, if exercised, would keep tense the reins of production, is in part withheld, or in other words is “saved” and stored up for investment. All saving for investment does not imply slackness of production; quite the contrary. Saving is economically justified, from the social standpoint, when the capital in which it takes material shape finds full employment in helping to produce commodities which, when produced, will be consumed. It is saving in excess of this amount that causes mischief, taking shape in surplus capital which is not needed to assist current consumption, and which either lies idle, or tries to oust existing capital from its employment, or else seeks speculative use abroad under the protection of the Government.
But it may be asked, “Why should there be any tendency to over-saving? why should the owners of consuming power withhold a larger quantity