12 
taxes, the utilisation of capacity was increased and that 
stimulated private investment which proceeded at very 
high levels. To this was added the built-in stabilisation 
of the social security system which to some extent smoothed 
out fluctuations. In spite of this the fluctuations were 
still quite marked in U.S. as compared with Europe and quite 
apparently were connected with the changes in public 
(especially military) spending which illustrates the 
importance which this spending had in the promotion of 
effective demand. 
A subsidiary factor in the intense investment activity 
in the earlier period was probably the fact that the 
corporations had only a small indebtedness after the war, 
tb 
so that there was a large margin up the establishment of 
A 
conventional debt ratios. The banks in their turn had 
a wide margin of possible increase in lending. Given 
sufficient investment opportunities and optimism th is 
would facilitate strong investment activity. 
This optimism was indeed there. The belief in consumption 
as a condition and even as a guara^ee of prosperity 
had become an important element of American capitalism / 
an economic religion almost as strong as the traditional 
protestant ethic. In view of its implications for wage 
policy this involved also a certain spirit of social 
consensus - in spite of all the qualifications which you 
might here have to make; the contrast to the present era 
is striking. 
The buoyancy was also increased by the opening and expansion