Abstract
AbstractThe stock of capital goods will always be a mixture of new best-practice techniques and older vintages, associated with lower productivity and higher running costs yet still profitable to keep running if short-term variable costs are covered. A crucial determinant of the proportion of new to old machines in any industry’s stock of capital goods is therefore the level and rate of change of wages. The rate of accumulation not only has these supply-side effects; it is also obviously a major determinant of activity and employment. There is the possibility of a virtuous cumulative process. To achieve this, we need to make sure, that wages in all industries rise by amounts which are determined principally by the growth of overall productivity and the general price level.
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