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THE THEORY OF MODERN WELFARE 225
commonly met with in a protracted period of depression.
But this explanation, applicable within a limited range of the phenomena that make up a period of depression, points the way to another class of considerations that go far toward explaining the rest. It appears that the phase of the difficulty covered by this explanation is traceable to a discrepancy between the accepted capitalization, the interest charges, and the eaming-capacity. And it appears equally plain that the only remedy applicable to the case (barring a speculative exaltation of busineae) is a recapitalization of the concerns affected on a lower basis, to fit the lowered cost of production of the equipment and its lowered eamingcapacity. But under existing conditions of law such a remedy cannot be applied to the interestbearing securities, — except by process of insolvency, — and it is very relvictantly applied to other capitalized wealth ; besides which it is, practically, very difficult to effect such an avowed recapitalizar tion as applied to the stock of incorporated companies, particularly in the case of those whose stock is ostensibly the capitalized value of their plant.
Such a readjustment of nominal value to actual value as shown by the facta of earning-capacity is continually going on, in some measure; but it does not cover the entire range of facte involvefc.
and it ia nearly always of the nature of a reluctant concession, following only after the need of it has become somewhat pressing. It can, therefore, in the common run of cases, not catch up with the progressive difficulty which it is designed to meet, in so far as the difficulty is of a progressive character.