CHAPTER 22
CYCLES AND TRENDS

THE instability of the economy makes the maintenance of a golden age impossible. When all other conditions are satisfied tranquillity is still disturbed by fluctuations generated from within. Accumulation periodically lags behind the growth ratio of the economy and then leaps to catch up. Each overshoot brings a reaction, and another lag, to be followed by another leap. Even when accumulation goes on steadily over the long run it is not steady from year to year, but occurs in bursts.

The very fact that accumulation takes place unsteadily reduces the growth ratio below what it would be in golden- age conditions, for uncertainty weakens the urge to invest and consequently slows down technical progress. The trend which emerges ex post from the operation of the trade cycle is not the same thing as the growth ratio of a golden age, but is an imperfect reflection of it.

Nevertheless accumulation is still possible if entrepreneurs pursue it with vigour, and our analysis of accumulation keeping step with, surpassing or falling short of the potential growth ratio of the economy holds good when it is translated into terms of cylical fluctuations.


CYCLICAL ACCUMULATION

When accumulation is going on over the long run the end of a boom sees a larger stock of capital than has ever been in existence before. The first point to be considered is what prevents disinvestment in the subsequent depression from reducing it again to no more than was formerly in existence.

The essential condition is that monopoly (in the short- period sense) should not have increased compared to the last

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