II

INFLATION AND DEFLATION

103

classes,—particularly to rentiers; and is there-fore unfavourable to saving. The Deflationwhich causes falling prices means Impoverish-ment to labour and to enterprise by leadingentrepreneurs to restrict production, in theirendeavour to avoid loss to themselves; andis therefore disastrous to employment. Thecounterparts are, of course, also true,—namelythat Deflation means Injustice to borrowers,and that Inflation leads to the over-stimulationof industrial activity. But these results are notso marked as those emphasised above, becauseborrowers are in a better position to protectthemselves from the worst effects of Deflationthan lenders are to protect themselves fromthose of Inflation, and because labour is in abetter position to protect itself from over-exertion in good times than from under-employment in bad times.

Thus Inflation is unjust and Deflation isinexpedient. Of the two perhaps Deflation is,if we rule out exaggerated inflations such asthat of Germany , the worse; because it is worse,in an impoverished world, to provoke unem-ployment than to disappoint the rentier. Butit is not necessary that we should weigh one evilagainst the other. It is easier to agree that bothare evils to be shunned. The IndividualisticCapitalism of to-day, precisely because it entrustssaving to the individual investor and productionto the individual employer, presumes a stablemeasuring-rod of value, and cannot be efficient—perhaps cannot survive—without one.