Book Review on ‘The New Prosperity’

This short book was in fact a gift given to Boston University by the author himself in 1933. At the time, the Great Depression had taken hold, prompting new methods to be utilized by President Franklin Roosevelt.

There would have been many books providing prescriptions and cures to the plague of the Great Depression of the 1930s. Bernard London’s interesting concept is to be contended with.

The author makes it plain that the free market is too volatile to be entrusted with the task of organizing resources. He maintains that government intervention is a necessity for the recessions to end. His method is preventative measure but also a cure to recessions and depressions; the scheme is called ‘Planned Obsolescence’.
London notes that economies go through bubbles and eventually burst as many resources are made unutilized, namely labour. However, once the bubble is burst the economy cannot restart because interest and wage are inflexible (‘sticky wages’). This makes it very difficult for borrowers to repay the loans they owe to the lenders and this means that some landlords must demand more rent from their tenants. These tenants will not possess the money because most of them are left unemployed from the recession. Eventually many are left to the streets because they cannot pay the rent.Either homelessness or ‘huddling’ takes place; this involves multiple families living in the same apartment and sharing the rent between them. However, this is a temporary reprieve because job opportunities, due to constricting demand, will continue to persist. This eventually leads to a downward spiral that the author hopes to avoid.

London starts with a radical method of providing an expiry date for each good. As the good becomes expired, the owner must deliver it to a government station to attain coupons. These coupons can be used to buy the same type of good (or others). This compulsory expenditure method allows for spending to begin again in the economy and allows for businesses to employ workers.

This method also alleviates the negative relations between capital and labour. As entrepreneur’s capital expires, more people will be employed to build it. This enables workers to attain a wage and does not put them at the mercy of some capitalists. [Capitalists and entrepreneurs are used interchangeably]. Anyone keeping the goods longer than their expiry date will be subjected to a tax.
Another prescription would be to keep taxes very low during recessions in order to allow people to build up disposable income. Indirect taxes would become a thing of the past and interest rates should be permanently kept at 2.5 to 3.5%. This is done in order to not burden entrepreneurs and borrowers. This will also alleviate real estate prices and mortgage problems (that have plagued many households during the financial crisis of 2007).

An Emergency Department must be created in order to perform all of these measures. Indeed, some of these solutions may seem routine by the Federal Reserve, but planned obsolescence is left on paper.

What remains clear is the author’s zeal to protect the working man from the grave problems that occur during recessions.


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