Mr. LOVEDAY then points out that for various reasons these financial rigidities have increased. "In recent years, the joint- stock system, under names varying with the law in different countries, has replaced to a constantly increasing extent the more personal enterprise. . . . Gradually with the growth of the big industrial concern, with the extension of the multiple shop . . . a greater and greater proportion of the population has been thrust out of positions of direct, independent control into the mass of wage-earning and salaried classes. Such persons can no longer invest in themselves; to the extent that they play for safety or apparent safety, and give preference to fixed-interest-bearing obligations over profit-sharing equities, they inevitably add to the rigidity of the financial system. Many forces have induced them to prefer safety to profit..." -- Prosperity and Depression, p. 117Wilhelm Röpke referred to the treatment for this as the "de-proletarianization" of society:
And herewith we glimpse the outlines of a policy—going beyond cyclical policy—which seeks to mitigate the sensitivity and instability of our proletarianized, centralized, mass-type society through decentralization, de-proletarianization, the anchoring of men in their own resources, encouragement to small farmers and small business, increased property ownership, and the strengthening of the middle classes. In this way, it would be possible to equip society, internally, with a set of springs with whose help it could withstand even the strongest economic shocks without panic, pauperization, and demoralization. -- Economics of the Free Society, p. 232I am growing convinced that this is correct: the fact that we need things like NGDP targeting and aggregate demand stimulus to treat recessions (and I think we do) is a symptom of a more general malaise: that we live in a "proletarianized, centralized, mass-type society."
Stimulus does, as some Austrians have noted, resemble another dose of a drug for an addict. But Keynesians and monetarists are also correct: so long as the patient is in the shape he is in, he needs these additional doses. The patient could die of an "Austerian" cure unless his overall health is restored. Simply pulling him off the drug that is keeping him going is not a good treatment plan.*
* And I will note that this position appears to resemble the one at which Minsky arrived.