CH. 22
33i
The agricultural causes of fluctuation are, however,much less important in the modern world for two reasons.In the first place agricultural output is a much smallerproportion of total output. And in the second placethe development of a world market for most agricul-tural products, drawing upon both hemispheres, leadsto an averaging out of the effects of good and badseasons, the percentage fluctuation in the amount ofthe world harvest being far less than the percentagefluctuations in the harvests of individual countries.But in old days, when a country was mainly dependenton its own harvest, it is difficult to see any possiblecause of fluctuations in investment, except war, whichwas in any way comparable in magnitude with changesin the carry-over of agricultural products.
Even to-day it is important to pay close attention tothe part played by changes in the stocks of raw materials,both agricultural and mineral, in the determination ofthe rate of current investment. I should attribute theslow rate of recovery from a slump, after the turning-point has been reached, mainly to the deflationaryeffect of the reduction of redundant stocks to a normallevel. At first the accumulation of stocks, which occursafter the boom has broken, moderates the rate of thecollapse; but we have to pay for this relief later on inthe damping-down of the subsequent rate of recovery.Sometimes, indeed, the reduction of stocks may haveto be virtually completed before any measurable degreeof recovery can be detected. For a rate of investmentin other directions, which is sufficient to produce anupward movement when there is no current disinvest-ment in stocks to set off against it, may be quite in-adequate so long as such disinvestment is still pro-ceeding.
We have seen, I think, a signal example of this inthe earlier phases of America’s “New Deal ’’. WhenPresident Roosevelt ’s substantial loan expenditurebegan, stocks of all kinds—and particularly of agri-