DISCOVERY 



147 



however, the insect practically ceases to breathe, to 

 feed, or to move. The muscles lose their irritability 

 and they have all the appearance of being dead. 

 Whereas in the case cf the Rotifera and Tardigrada 

 the suspension of life is due to the drying up of their 

 watery surroundings, the hibernation of insects and 

 snails, and — as we shall see later — of various forms of 

 vertebrate animal, is due mainly to the onset of 

 winter. It is a seasonal occurrence, though in many 

 cases we shall notice that in the tropics, where animals 

 retreat during the hotter months (restivation), the 

 hotter months coincide in time with the drying up of 



the surroundings. 



[To be continued.) 



[Our thanks are due to the proprietors of the Neiv York 

 Evening Post for permission to reprint portions of this 

 article. — Ed.] 



Industrial Stability 



By A. C. Pi^ou, M.A. 



Pr.ifessor of Political Ecvnrmij in Camhridgc UniiUTsiltj 



A LEADING note of the industrial activity of modern 

 states is its fluctuating character. Not only do we 

 find from time to time one industry expanding while 

 another decays, but also besides the relative fluctua- 

 tions, there are more or less rhythmical fluctuations 

 of an absolute kind in industry as a whole. It is these 

 absolute fluctuations that economists are accustomed 

 to refer to under the name of the trade cycle. They 

 do not, of course, occur in the form of equal propor- 

 tionate movements in each several industry. On the 

 contrary, they are always combined with relative 

 fluctuations occurring at the same time. In booms 

 the constructional industries expand relatively to 

 other industries, and in depressions they contract 

 relatively to them. But, over and above these relative 

 movements, there is also an absolute movement on the 

 part of these two sorts of industries taken together, 

 which is associated with fluctuations in the aggregate 

 volume of work done throughout the country as a 

 whole. 



Now it could not be laid down a priori that fluctuat- 

 ing activity as such must be less favourable to human 

 welfare than regular activity of equal aggregate 

 amount. There is no reason, for instance, to believe 

 that the world would be a better place if, instead of 

 being wholly awake in the day and wholly asleep at 

 night, people were half asleep all the time. Is there 

 any more reason to believe that it is worse for people 

 to work for three or four years very hard and then 

 for three or four years rather slackly than it would 

 be for them to work moderately hard every year ? 



The answer, it would seem, must depend on the 

 physical and psychological constitution of human 

 beings, and could not, therefore, be derived from 

 economic considerations alone. In actual life, how- 

 ever, the question is not put in this highly ethereal- 

 ised form. We know that, as a matter of fact, with 

 industry organised as it is, periods of depression are 

 a.ssociated, not with relaxed work for everybody, but 

 with total unemployment for a certain nmnber of 

 people, and we know that, whatever there may be to 

 say in favour of alternations of hard work and holidays, 

 there is nothing to say for alternations of overtime 

 and involuntary unemployment. No doubt, it is 

 possible, by various palliative measures, to diminish 

 substantially the social evil that unemplo3fment carries 

 with it. But, in spite of this, nobody seriously denies; 

 that, as things actually are in the modern world, 

 general industrial fluctuations involve grave injury to 

 welfare, and that, if somehow greater stability could 

 be introduced, there would be a very large social gain. 

 It is not difficult to show that, even if we had a 

 monetary system so contrived as to keep the general 

 level of prices approximately constant, some degree of 

 cyclical industrial movements would still take place. 

 There would be alternations of business confidence 

 and business malaise ; at one time all the various 

 groups of people concerned in different sorts of pro- 

 duction would over-estimate the rate at w;hich their 

 stuff, if they produced it, would exchange for other 

 people's stuff ; when the stuff, after a period of 

 incubation, was finished and ready for trading, they 

 would all discover their error ; and, in consequence, 

 pessimism and a period of contracted output would 

 set in. Though, however, this is true, it is also true 

 that the cyclical fluctuations of industry, which would 

 thus take place even under a regime of stable general 

 prices, are much aggravated when the monetary 

 system is of such a sort that these prices rise in booms 

 and fall in depressions. For the persons in control of 

 industry are, in the main, debtors in terms of money, 

 so that, when prices rise, the money payment they 

 have to make in interest remaining the same, the real 

 payment is diminished, and, when prices fall, the real 

 payment is increased. This means that in periods 

 of boom, when they are already somewhat over-con- 

 fident, business men receive an additional fillip in the 

 form of a bounty at the expense of their creditors ; 

 and in periods of depression, when they are already 

 unduly pessimistic, they receive an additional dis- 

 couragement in the form of a tax for the benefit of 

 their creditors. Moreover, since business men generally 

 foresee future movements rather better than the 

 people from whom they borrow, they may look, when 

 prices are rising, to obtain neio loans on better terms 

 than they could do if everybody's foresight was equal I 



