Sunday, December 4, 2016

The Sinking Pound (2016)

The Cooking the Books column from the November 2016 issue of the Socialist Standard

‘Hard Brexit fears push sterling to a fresh low’ read the headline in the Times (7 October) reporting that the pound had fallen to its lowest level against the dollar for 31 years. Others are suggesting that it could eventually fall, ironically, to £1 = 1 Euro.

Until 1973 most of the world’s currencies were tied to a fixed rate with the US dollar and so also to each other. If a country wanted to change this it had to get the agreement of the IMF. Governments tried to avoid such a formal devaluation as this was regarded as a recognition that they could not control the part of the capitalist economy they presided over as they had claimed in order to get elected.

Such devaluations reflected a situation where a country’s exports were doing badly, generally because their prices were uncompetitive due to a higher than average rate of inflation. This resulted in more capitalist firms wanting to sell the country’s currency than to buy it (to pay for its exports). Governments tried to hold the fixed rate by using their reserves of other currencies to buy their own currency. When this couldn’t be kept up, they had no alternative but to seek the permission of the IMF to devalue, i.e., to lower its exchange rate with the US dollar and so with other currencies too.

When the Labour government was forced to devalue the pound in November 1967 the Prime Minister, Harold Wilson, famously declared that ‘it does not mean that the pound here in Britain, in your pocket or your purse or in the bank, has been devalued.’

This was technically true but disingenuous as, while a pound would still buy a pound’s worth of goods in Britain, one effect of devaluation is to raise the price of imported goods. As many of these are consumer goods or enter into their production, the effect is that ‘the pound in your pocket’ will eventually come to buy less than before the devaluation.

Nowadays, with floating exchange rates, governments don’t need to formally change the exchange rate of their currency. They can just let market forces decide what the exchange rate is by the demand for it. Because a falling exchange rate increases the price of imported goods governments do not necessarily always want this, so they still intervene in the currency market to try to keep the rate from falling.

On the other hand, when they want to try to increase exports, they let it fall. In fact, now that under WTO rules tariffs can’t be used as a weapon of economic competition, letting a country’s exchange rate fall has become a replacement. The euro, which in effect established a fixed rate of exchange between the currencies of the member-countries all renamed “euro”, is in part an attempt to prevent this kind of economic competition. One reason Britain stayed out was to be able to continue to use this weapon.

The current fall in the value of the pound was exacerbated  by a rousing patriotic declaration by the Prime Minister at the Tory Party Conference that, with Brexit, Britain was to become an independent, sovereign nation again. To which the currency markets gave a decisive ‘that’s what you think’, illustrating yet again that no country can escape from the operation of the economic laws of world capitalism as well as reflecting the speculators’  assumption that, if Britain leaves the single market as well as the EU, British exports are likely to suffer.

Malady and Cure (1976)

From the February 1976 issue of the Socialist Standard

The advances made by medical science in the last hundred years are enormous. Whole classifications of diseases have been eliminated, and people are living longer. But medical progress has to fight against the same barrier that hinders all other attempts at advancement: capitalist society causes health conditions that medical science finds impossible to combat. Even schoolchildren are being affected. In a survey of the London area it was found that 25.4% were suffering from psychiatric disorder (see the Sunday Times 20th July 1975).

One of the most rapidly increasing threats to life in the UK is the heart attack, now killing more people than any other “disease”. The figures are now over 300,000 per year. Doctors of course have been grappling with the problem in the traditional ways known to them by prescribing more drugs, less butter, more rest etc.

But increasingly medical opinion is coming to the conclusion that the heart attack is not a "disease” in the commonly accepted term at all. On 10th July 1975 the Guardian published a report on the present attitude of the medical profession to heart attacks. The survey shows that the medical profession is changing to the opinion that it is caused by the very nature of capitalist society itself.

Indeed, if you were to come across certain extracts from the report at random, you would be forgiven for thinking that the survey was written by the Socialist Standard. Take the following extracts as an example:
  In an office situation a row with the boss, the anxiety of losing your job, the humiliation of not getting promoted, the exhaustion of too much success — these are the factors that raise the cholesterol level in the blood.
  For too long the coronary patient has been rested and then sent straight into the same environment that caused the first one.
  The heart attack can be seen as a glaring symbol of all that is wrong with the way men have been socially conditioned.
To be accurate, the report does say that these ideas are still causing controversy in the medical world. But any layman who sees the sort of pressures many workers face could tell that it cannot do them any good and that health must suffer. Who can doubt, as unemployment soars, that the worry over keeping or getting a job can cause many health problems, only one of which is the possibility of the failure of the heart.

Capitalism as a society built on production for sale has crises of what is callously called "over production” by economists and politicians. What they mean is that the recurring results of the boom/
slump cycle which is as inevitable to capitalism as gravity to earth, have struck again. Those in the growing dole queues know it. And if they have families to support, mortgages to pay, h.p. commitments to keep up etc. etc. it is small wonder that more and more hearts are refusing to co-operate.

Even in “normal times,” the problems that capitalism brings of conflicts, pressures, rush-hour etc. must seriously damage that most adaptable of organisms, the human being. Competition between worker and worker (for jobs, scarce houses, schools etc.) must bring in its wake damage to the human body.

So as you dash off on Monday to the office, the factory or the college, and spend your day in frustration, ponder this: Socialism is a different way of life, where human beings will organize their society harmoniously and co-operatively for the good of all. As all wealth will be owned in common, there will be no competition, stress, or strife between human beings. The aim of all will be the satisfaction of the needs of all. And as science has produced the possibility of production in abundance to the very highest standard, the needs of all, in a Socialist society will be satisfied. Man will be freed from the degrading task of “making a living” and free to explore possibilities in human development and social relations hitherto unthought of.

The alternative is to continue with capitalism and all its attendant problems and heart attacks. Let the Guardian remind you of what this means:
The coronary spiral follows the curve of economic crises and anxiety over jobs, money and investment in a way of life that is resting on a tightrope.
Ronnie Warrington