Back to Homepage Income Measures Income: Saving and Investment Methods of Buying That Save Money The Choice of Goods Methods of Buying That Reduce Mistakes In Selection Methods of Securing Information Concerning Goods Plans and Motives of Consumers Consuming the Product Who Is the Consumer? The Consumer in the Market Priorities and Preferences in Consuming Decisions The Consumer as User of Wealth The Consumer as a Buyer Consumers as Self-Conscious Agents Criteria of a Good Market Information Versus Persuasion of the Buyer The Rate of Interest Interest Rates and Economic Activity Saving, Investment, and Income Saving Motives Saving Plans and their Realization Total Spending Is the Key to Prosperity The More We Spend, The More We Have Spending by Private Enterprise

Spending by Private Enterprise The second important peacetime market relates to expenditures for the capital equipment necessary to expand our total productive resources and for keeping our industrial facilities modern. During the present war, we have engaged in the output of machine tools, new plants, and general industrial equipment on such a large scale as to raise questions concerning the magnitude of the demand for these in the immediate postwar years. Nevertheless, there is certain to be a considerable market for capital goods in the United States, provided that businesses can anticipate the market for their products and are willing to assume the risk. Certainly, the most important single factor in the domestic demand for capital goods is the potential market for the products which this capital equipment can produce. This potential market in turn depends upon consumer buying power and the translation of this buying power into real consumption. There are many people, especially businessmen, who contend that, given the proper environment (usually meaning less government activity), industry will spend vast funds for productive plants and equipment--so vast that all savings will be absorbed. This contention deserves further appraisal.  Many economists, following classical economic principles, believe that much higher volumes of capital expenditures can be attained if only the forces of competition will be given freer play. Elimination of monopolistic practices will permit the easier entry of new enterprises, and new products, new processes, and increased efficiency will eliminate the inefficient enterprises more rapidly. Consequently, there will be a more rapid total replacement of plants and machinery. But in order for such expenditures to absorb a larger share of a much larger total of savings, the turnover or replacement of plants and equipment would have to increase so sharply as to bring continuous unprecedented numbers of business failures. Both new entries and failures would have to rise far beyond any known levels. Even under such circumstances it is doubtful whether productive capacity could be kept from getting so far out of line with actual consumption as to cause recurring declines in capital expenditures and, therefore, depressions. Certainly, every consideration should be given to stimulating expenditures for capital goods after the war. Policies should point toward minimum restrictions, maximum incentives, and increased competition, so that private investment in plant and equipment will be encouraged. More rapid replacement of obsolete equipment should be stimulated through appropriate tax measures. However, we must not lose sight of the fact that unprecedented quantities of industrial facilities have been created during the war and much of this capacity can be used for peacetime purposes. Nor must we lose sight of the need for maintaining a reasonable relationship between total productive capacity and actual consumption if recurring depressions in producers' goods output are to be avoided.   Home