Welfare in Relation to Cycles and Growth

The question of how all this affects the welfare of ordinary people is best approached by way of investment and saving, on the grounds that consumption goods constitute the real saving necessary for the construction of capital goods and that what is saved cannot be consumed. We have seen that as the economy moves into boom, the expansion of investment will result in ‘a considerable absorption into the vortex of exchange of accumulated consumable stocks’ (p. 170). Of course, consumable goods will continue to be consumed during the expansion phase but on the real-saving logic of the Robinson Crusoe economy, the construction of capital goods will preclude, to that extent, the production of consumables. There is thus a ‘going without’ in the present in order to provide for better times in the future. The deprivation continues in the depression because though consumption goods are relatively plentiful, there is again an argument in favour of their being accumulated as a means to provide for expansion in the coming revival.