3 
competition beco_mes too costly and too risky^ and new entry 
j 
is/made excessively difficult. The consequence is that 
an increase in profit margins - natural as a consequence of 
the emergence of oligopolistic power - is not automatically 
counteracted/and excess capacity is not automatically 
eliminated. What happens is rather this: The low utilisation 
of capacity discourages investment and acts as a drag 
on the long run growth. 
On the face of it it may seem to you that this scenario 
is too drastic: It would seem to imply that excess capacity 
would never stop growing. We have to recognise, however, 
that aggressive competition is never completely absent 
even i n an oligopolistic economy. It only works very 
imperfectly, very slowly. Even in present t-ime steel 
industry in the U.S. there are new entrants, the mini-mills 
which force some of the integrated steel mills out of 
business. Only the process is very slow and in the meantime 
the depressive action on investment and effective demand 
is considerable. Moreover, we know that there are 
systematic agreed capacity reductions by scrapping 
carried out by some kind of cartell apggBaHi. arrangement. 
More generally the pressure on the economy will be mitigated 
in ajmodern economy owing to the existence of "big government" 
that is, by the appearance of large government deficits 
as a consequence of the depression, which will feed effective 
demand into the economy and so counteract the decrease in 
utilisation of capacity.