112 SECTIONAL ADDRESSES. 



before we arrive at a final conclusion, but in general it is at least clear that 

 unemployment is more likely to ensue from rationalisation tban was the 

 case during the War. 



(3) Lastly, as regards the methods of rationalisation. Here, of course, 

 the task of analysis is complicated by the fact that a large variety of 

 rationalisation methods can be distinguished, the effects of which on the 

 employment situation (even without taking demand conditions into 

 account) may be very different. 



(a) So far as so-called ' Financial •Rationalisation ' is concerned : that 

 is, the writing down of book values and the consequential cleaning up of 

 the balance-sheet position, there is obviously no direct connection with 

 the problem of employment at all. 



(6) But financial rationalisation, when it means — as it increasingly 

 does — a greater degree of integration of enterprises, does affect the 

 employment situation directly. 



When integration involves concentration of particular types of output 

 at different works, then, in so far as different degrees and kinds of skill are 

 involved, a problem of mobility at once arises, for grades and types of 

 labour formerly required at more than one point are now required, perhaps, 

 at only one point. The greater the difficulty of getting labour to move, 

 the greater the chances that the further consequences of concentration — 

 improved processes, eliminating the kind of labour which is difficult to 

 obtain by substitution of another kind, or the replacement of labour by 

 machinery — may throw a particular kind of labourer out of work 

 altogether. At the very best one is then left with the problem of 

 reabsorption in another direction. 



(c) Standardisation of types, whether occurring as a result of con- 

 centration of output at certain points within an integrated group forming 

 part of a wider industry, or whether occurring as a result of deliberate 

 agreement by all the producers within an industry, has also a direct 

 bearing on the labour situation, in so far as repetition work in and of itself 

 encourages the further use of machinery and the substitution of skilled 

 by unskilled labour. 



(d) Lastly, we are left with certain rationalisation methods which have 

 as their object not the direct cheapening of the product, but control over 

 the market, through common sales-organisations of one kind or another. 

 Their effect on the employment situation ob\'iously turns on the price 

 and sales policy adopted : and they thus involve the question of demand, 

 to which we must now turn. 



In considering the relations between rationalisation, the market andj 

 unemployment, there is one obvious point which tends to be lost sight of 

 in popular discussion. The degree of rationalisation which ' pays ' is not 

 an absolute magnitude, but depends on the ' shape of the demand curve.'' 

 Thus a complication is introduced through the circumstance that the 

 point of optimum economy in production may involve a volume of output 

 which, if it is to he sold, reduces the aggregate return below the maximum 

 attainable if a smaller volume had been produced and marketed. In 

 such a case — which cannot always be foreseen in advance — and given the 

 absence of effective competition, the economies in labour cost may be 

 eaten up by a rise in the overhead cost, and if there has been a reduction 



