io THE PRESIDENTIAL ADDRESS 



working force and released purchasing power can come together 

 again in an increased demand for other products which, to this extent, 

 have not been hitherto within effective demand. The supply of this 

 increase may go part or all of the way to absorb the displaced labour. 

 But this process takes time, and the labour displaced is not at once 

 of the right kind nor in the right place. More important, however, 

 is the invention of quite new objects of public demand, which may be 

 desired in addition to the supply of old ones. This brings together 

 released labour and released purchasing power in the most decisive 

 way. The most orderly and least disturbing phases of progress will 

 be found when these two types of innovation are reasonably balanced. 

 Of course, few new objects of purchasing ambition are entirely 

 additive ; most of them displace some other existing supplies. 

 Artificial silk displaces some cotton consumption, radio may displace 

 some types of musical instruments. Recently the German produc- 

 tion of pianos and guitars has been at a very low percentage of 

 capacity, and part of this has been made good by the demand for 

 radio sets. The dislocations caused by labour-saving machinery 

 can most easily be made good by a due balance of new labour 

 creating commodities. 



A natural increase of population is the best shock absorber that the 

 community can possess, especially if accompanied by an extension 

 of territory such as the United States enjoyed in the constant west- 

 ward movement of the frontier in the nineteenth century, or Britain 

 in the period of overseas emigration. A moment's reflection will 

 show why this is the case. Assume that 1,000,000 units of a com- 

 modity are made by 100,000 men, and that there is an increase of 

 population of 2 per cent, per annum, so that in five years 1,100,000 

 units will be consumed and employ 110,000 men. Now assume the 

 introduction of a new invention which enables 1,100,000 units to 

 be made by 100,000 men. There will be no displacement of existing 

 labour, but only a redirection of new and potential labour from that 

 industry to other fields. Again, a considerable reduction in demand 

 per head can be sustained without dislocation, if the actual aggregate 

 of production demanded is maintained by increasing numbers. The 

 affected industry can remain static and need not become derelict. 

 New entrants to industry will be directed to those points where 

 purchasing power, released through labour-saving devices, is creating 

 new opportunity with new products. New capital is also naturally 

 directed into the new channels, instead of into additions to the old 

 industry. 



Now the problem before all western industrial countries is the 

 fact that their populations are shortly becoming stationary (and then 

 will begin to decline noticeably) and this safety valve of increasing 

 population will no longer be available. Every transfer of per capita 



