a., e.g.. Burton, Crises and Depreittani, ch, VTII., f or a BDCclDOt MOMuit of depreasiona tmi crises in the United Sutea daring thlt psriod.
THE THEORY OF MODERN WELFARE 249
sequel of the period of liquidation. Therefore there did not result a persistent unfavorable discrepancy between capitalization and eaming-capacity, with a consequent chronic depreasion. On the other hand, the eaming-capacity of investments was high relatively to their reduced capitalization after the crisis. Actual eaming-capacity exceeded the nominal eaming-capacity of industrial plants by so appreciable a margin as to encourage a bold competitive advance and a sanguine financiering on the part of the various business men, so soon as the shock of the liquidation had passed and business had again fallen into settled channels. But such a bold competitive advance means the beginning of an extension of credit and a speculative movement in industry, such as has been discussed some pages back in connection with crises. This movement has a cumulative character, after the manner there indicated, and its outcome is an inflation of capitalization and a large extension of credit, which normally ends in a period of liquidation.
Within the period spoken of (1816-1873) this liquidation is apparently always brought on by some extraneous disturbance. But it seems that the theory would require us to say that the extraneous disturbance requisite to bring such a speculative movement to a head will be slighter the farther the movement has gone; so that in the
250 THE THEORY OF BUSINESS ENTERPfilSE