116 SECTIONAL ADDRESSES. 



unit of output, no single country engaged in international trade under 

 competitive conditions can hope to contract out of its consequences, good 

 and bad, except at the expense of its international trade. This is in itself 

 a sufficient reason for pushing ahead with rationalisation in this country. 



(2) In the short run, rationalisation is not a remedy for unemployment, 

 but, on the contrary, is itself a factor in making for unemplojouent, except 

 to the extent that it stimulates demand in the constructional and equijD- 

 ment industries. But since a loss of markets due to progressive reductions 

 in prices by rationalised industries in other countries also adds to the 

 volume of unemployment in this country, the short run evil of unemploy- 

 ment in this country changes in character, rather than grows in volume. 

 Industries are in part depressed because local costs of production are 

 too high and unemployment ensues. Rationalisation reduces costs, but, 

 until the lower costs have helped the industries in question to regain their 

 market, and expand it, unemplojmient will remain. But unemployment 

 resulting from rationalisation is a lesser evil than unemployment resulting 

 from relative inefficiency. 



(3) In the long run, since rationalisation effects a lowering of real costs, 

 then, given a desire for a rising standard of life, there is no reason to suppose 

 that the volume of unemployment will not again fall. But, in the absence 

 of any definite knowledge of the elasticities of demand for different pro- 

 ducts, we cannot foretell in what directions an increased demand for labour 

 will manifest itself. Both American and British experience would seem 

 to show that the demand for labour in the existing body of industries is 

 likely to shrink, absolutely in relation to the population, relatively in 

 relation to the output : whilst every increase in the technical knowledge 

 available to industry will make the demand for labour in relation to output 

 smaller in the new industries, the rise of which we have every reason to 

 suppose (to judge from past experience) will accompany reductions in 

 real costs in the existing industries. Thus, the occupied population in the 

 future is likely to be less ' industrialised ' than in the immediate past : and 

 the growth of trades and occupations outside the narrow concept of 

 ' industry ' will continue as rationalisation proceeds. 



(4) The most optimistic view of the situation must take into account 

 the fact that a grave transfer problem is involved, and that monetary and 

 other circumstances having nothing directly to do with the rationalisatior 

 problem may accentuate the difficulties of transition. The first and most 

 obvious step in the direction of ameliorative measures must therefore be^ 

 an increase in the mobility of the working population. 



(5) In estimating the probable duration of unemployment resulting 

 from rationalisation, account has to be taken, not only of the state of 

 technical knowledge, but of the movement of the population. Since 

 rationalisation produces its most striking results when the aggregate 

 demand for a product continually increases, a stationary population (and 

 the most advanced nations are tending to stationariness of population), 

 places a limit to the expansion of output in each of the several directions 

 in which the economies of large scale production are most strikingly dis- 

 played. At the same time, the decline in the number of new entrants into 

 industry, which is to be expected over the next few years, will diminish 

 the immediate pressure. But it is quite possible that the normal level of 



