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SAYINGS AND INVESTMENT

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The same quantity of bananas as before will con-tinue to be marketed, whilst the amount of currentincome devoted to their purchase will, by reason ofthe thrift campaign, be diminished. Since bananaswill not keep, their price must fall; and it will fallproportionately to the amount by which saving ex-ceeds investment . 1 Thus, as before, the public willconsume the whole crop of bananas, but at a reducedprice-level. This is splendid, or seems so. The ThriftCampaign will not only have increased saving ; it willhave reduced the cost of living. The public will havesaved money, without denying themselves anything.They will be consuming just as much as before, andvirtue will be sumptuously rewarded.

But the end is not yet reached. Since wages arestill unchanged, only the selling-price of bananas willhave fallen and not their cost of production ; so thatthe entrepreneurs will suffer an abnormal loss. Thusthe increased saving has not increased in the least theaggregate wealth of the community ; it has simplycaused a transfer of wealth from the pockets of theentrepreneurs into the pockets of the general public.The savings of the consumers will be required, eitherdirectly or through the intermediary of the bankingsystem, to make good the losses of the entrepreneurs.The continuance of this will cause entrepreneurs toseek to protect themselves by throwing their em-ployees out of work or reducing their wages. Buteven this will not improve their position, since thespending power of the public will be reduced by just asmuch as the aggregate costs of production. By how-ever much entrepreneurs reduce wages and howevermany of their employees they throw out of work, theywill continue to make losses so long as the communitycontinues to save in excess of new investment. Thus

1 The case where the bananas will keep will be considered in detail inChapter 19. It will be found not to differ from the above as much as mighthave been expected.

VOL. I

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