Woe to the Victors (1934)

From the November 1934 issue of the Socialist Standard

The Labour Party Conference this year was held in an atmosphere of expectancy and confidence of triumphs to come. Rightly or wrongly, the delegates felt that the rule of the National Government, coming to a close, is not to be renewed, and that the defeats and desertions of 1931 will be forgotten in a sweeping electoral victory not far ahead. Then, with a majority to back up its decisions, a Labour Government will inaugurate a new era in British politics. That is the belief, but Socialists do not share it. Electoral victory maybe—though improbable without a Labour-Liberal alliance of some sort or other—but that victory will be more than perilous; it may well be one of the most disastrous episodes in working-class history, comparable with the post-war “victories” of the Social-Democrats in Germany and Austria, with all their aftermath of violence, despair and savage reaction. Such victory will be not a development towards Socialism, but yet another check to the growth of the Socialist movement. These are hard words. Let us justify them in the light of what was by far the most instructive of the resolutions of the Conference. It was a resolution which the Labour Party's official organ, the Daily Herald, regarded as of such importance as to merit being featured on the front page. It was carried “by the largest majority that has been polled at the present Conference" (Daily Herald, October 5th). What was this question which divided the votes into a stupendous majority of 2,118,000 on the one side and the tiny minority of 149,000 on the other? Surprising as it may appear to those who regard the Labour Party as a party of Socialists, this huge majority came together in order to demonstrate the Labour Party's abhorrence of anything smacking of Socialism. It was, to be explicit, a recommendation of the Executive Committee in favour of “fair compensation" for owners and shareholders whose property is nationalised by a Labour Government, the compensation to be based roughly on the present valuation of the property. The proposal which the majority rejected was one put forward by the Socialist League which would have meant depriving the owners of one-half to two-thirds of their property.

Let us, first of all, make it perfectly clear that the Socialist League’s proposal is not Socialism, and that the League, in our view, is almost as muddled in its views as the I.L.P., from which it sprang, and as the Labour Party, to which it is uneasily affiliated. Socialism does not mean State industries run on capitalist lines, either with or without compensation of the existing owners. Socialism means a system of society in which the means of production are owned by society as a whole, a system in which goods will really be produced for use, not for sale and profit-making, and in which there will be no such thing as an income from the ownership of property, whether as land, buildings, plant, shares or Government bonds. These things are plain enough to Socialists, but at present utterly beyond the comprehension of the great majority of members of the Socialist League and Labour Party.

It follows that Socialists are not at all interested in the issue which divides the Socialist League and the Labour Party, as to whether or not the owners should receive full or only part compensation. There can be no such thing as compensation if Socialism is to replace Capitalism. What the owners now possess is the right to an income from property, the right to live without working, the right to exploit the labour of the working-class. There can be no Socialism unless and until the means of production and distribution are taken from them and made over to society for the use of all. The former owners will then enjoy the fruits of associated labour on an equal footing with all other members of society, neither privileged nor suppressed, but as equals. But there can be no compensation. You cannot abolish exploitation and at the same time give the exploiters something equivalent to their former right of exploitation. A slave-owner, deprived of his slaves, could be given property rights of another kind under capitalism. But abolish capitalist wage-slavery and you end exploitation for all time and for all persons.

These elementary truths of Socialism are, of course, unknown to the delegates at Labour Party Conferences, but in their groping, muddle-headed way the Socialist League members feel that there must be some catch in the Labour Party's bland assurance that there is going to be more of the cake for the workers without decreasing the share of the capitalists—hence their attempt at revolt, which was crushed with such devastating completeness.

It means that the Labour Party has reiterated its belief in “compensation," that is, in capitalism. It will take office if opportunity arises, determined to apply its numerous and complicated schemes for reorganising industry, raising wages, abolishing unemployment, etc., while retaining all the essentials of capitalism. It will retain rent, interest and profit, the wages system, buying and selling, and the struggle for foreign markets, and will leave the capitalist class still possessed of their property rights, their right to exploit the working class.

The result will be another tragic collapse, tragic because many workers will believe it to be a collapse of Socialism, or proof that political methods are useless. Every individual who lends a hand in the establishment of the Labour Party in power is contributing to that collapse, and is helping to ensure a further lease of life for capitalism, with the likelihood that the subsequent Government may be one of iron-handed, panic-stricken repression.

Before concluding, we may usefully devote a little space to the arguments of those who opposed the Socialist League. Mr. Herbert Morrison, an astute Labour politician, put the case cogently from a Labour Party standpoint when he said that to adopt the Socialist League amendment would frighten the electors, and "You would keep yourself out of political power " (Daily Herald, October 5th). Mr. Morrison here, as elsewhere, shows himself a clever exponent of half-truths. He will say, as we do, that there can be no Socialism without political power, and no political power without the support of the electors. He knows, too (but is very careful not to proclaim it at times and in places where it may prove embarrassing to the electoral prospects of the Labour Party), that there is no solution to the poverty problem other than Socialism, that all the highfalutin schemes of his Party will leave the problem unsolved. That is where the Morrisons— those who are interested in political careers—necessarily part company from the Socialist. We face up to the logic of the situation. Mr. Morrison and his Party dare not do so. They dare not proclaim from the public platform that there can be no Socialism without an organised majority of Socialists, with its logical corollary that any acquirement of political power before that organised Socialist majority exists is a snare and delusion to the working class. Mr. Morrison knows, and admits, that a Government cannot go beyond the mandate and understanding of the electorate. He knows that a Labour Government cannot introduce Socialism, which the electorate and the bulk of its own members neither want nor understand. He knows that the reform measures the electorate will permit and endorse are not Socialism, and will not solve the problems facing the working class, who form the overwhelming majority of the electorate. He knows, therefore, that a Labour Government cannot do the one thing which alone can solve the problems it is promising to solve. Only Mr. Morrison and his colleagues can say why they play this double game. Is it vaulting ambition, reckless of consequences? Is it the insane over-confidence of the “leader," persuading himself against his own knowledge and experience, that his god-like gifts will enable him to lead the "mob" to impossible victory ? Is it, after all, merely that underneath the surface-smartness of the successful Labour politician there is a profound stupidity and ignorance about the realities of capitalism and Socialism?

Whatever the answer, the penalty for the working class is appalling to contemplate. Let the leaders and followers alike stop and consider the spectacle of savage Hitlerite capitalism before launching out blindly on the path which led the German Social-Democrats to destruction, and may lead to a similar end in this country.

Edgar Hardcastle

Who wants an Income Policy? (1962)

From the September 1962 issue of the Socialist Standard

Anyone who reads newspapers, listens to radio or looks in on TV, must be aware that there is supposed to be a thing called incomes policy and that it is most important. It is not, in the main, spoken of as something anyone actually knows or has, but as something we ought to have, and all good citizens are looking for. Some unofficial seekers claim to have found it. The Prime Minister, with more modesty or more caution, is setting up the National Incomes Commission to operate the as yet undefined policy, though the TUC has, in advance, rejected the Commission as “both irrelevant to the nation's needs and unworkable in practice."

Mr. Macmillan, addressing a Conservative rally at Luton Hoo towards the end of June, had told them about “ two great policies” he has for putting this country on the right road. The first is joining the Common Market. The second, as reported in the Sunday Telegraph on June 24th, “was to find further means, with the general consent of the people, to implement on a continuing basis an incomes policy based on fairness and common sense.” If we find such a policy, said Mr. Macmillan, and successfully applied it, we would “be able to keep our four great objectives, full employment, steady prices, a strong pound and steady growth.”

With the promise of fairness and common sense as its foundation, and so many nice things flowing from it, how could anyone not accept Mr. Macmillan's N.I.C.? But the truth is that when the TUC slashed the Commission on the ground that it is the Government’s device for restricting wages, they were echoing the thoughts most workers have when their own wage claims are being met with arguments about "putting the national interest first.” They think, with good reason, that it is to help profit.

Yet, despite its refusal to participate in NIC, the TUC (and the Labour Party) agrees that in principle there must be an incomes policy: only Socialists take another view.

People and unions and political parties have been arguing about an incomes policy and trying to frame one that would satisfy everybody, for a century and more. The ideas of the Unions have been rather restricted, going no deeper, for most members of each Union, than the belief that they at least ought to have higher wages even if the claims of the rest of the workers were a bit thin. The Unions found one slogan they could all agree upon: “A Fair Day’s Work for a Fair Day's Pay.” They and Mr. Macmillan both have a liking for that word fair. But, as the late Dr. Joad would have said, it all depends on what you mean by fair—such a comfortable word and so completely lacking in any meaning substantial enough to be got hold of. How can there be “fairness” between wages to workers who produce all wealth, and property incomes to non-workers?

Others, who thought a little more deeply about the question of incomes, discovered that it is impossible to justify the incomes we see being paid and received, on grounds of logic, humanity, or the moral tenets of “just reward” that are supposed to govern the world of work and which in fact have no influence whatever. So, a number of people totally rejected inequality of income and decided that there should be universal equality. Among these people may be named the late G. B. Shaw and the Labour Prime Minister, Lord Attlee, who were writing  on these lines thirty years ago. What they meant, and what the leaders of the  Russian Communist Party meant when they promised equality in Russia in 1918,  was that there should be only one rate of income all-round, with no, or at most, only small variations. There would in fact be one standard of living for everybody. Socialists were not surprised that both in this country under Labour Government and in Russia under the Communist Party, equality never happened. It never had the slightest chance of happening, for the good and sufficient reason that you cannot retain capitalism yet hope to impose on it an abstract conception of equality which was quite alien to it.

In the very early days of British capitalism there were individuals, Jeremy Bentham was one, who thought that that society was moving towards equalitarianism under its own momentum. We have seen how wrong they were. Inequality of accumulated wealth and property-income grew apace while Bentham was expecting the reverse, and once a high degree of inequality was reached it has remained, not at all affected by reforms supposed to end or at least to mitigate it. And with the growth of bigger and bigger companies and combines inequality has strengthened its hold, so much so that demands for equality are hardly heard any more.

But Socialists are still aiming at Socialism; which does not mean equal incomes, but the introduction of the only possible distribution principle for a Socialist social system—” From each according to his ability; to each according to his need,” and this, of course, involves the end of wages and salaries as well as the end of rent, interest and profit. As Marx told trade unionists back in the 19th century, they should scrap their slogan, “A Fair Day’s Work for a Fair Day’s Pay,” and put in its place the abolition of the wages system.

Edgar Hardcastle

News from India (1996)

Party News from the April 1996 issue of the Socialist Standard

Our companion party in India, the World Socialist Party (India), founded last year, is as active as ever. They report that one of their members campaigning amongst agricultural workers at Bahalalpur (West Bengal) was attacked by local “Communist Party of India (Marxist)” thugs. He was punched and his wrist watch and a tape cassette of a socialist meeting were smashed. Such tapes are proving very popular and our Indian comrades are planning to produce and distribute more.

At its January meeting the Executive Committee of the WSP(I) passed a resolution condemning “the violent attack and intimidation inflicted on our political campaigns and comrades by ruffians, goons and hirelings of the CPI (M) and urges upon all who stand for democracy, especially belonging to the World Socialist Movement, to politically raise the voice of condemnation against any such violence anywhere, using whatever meagre democratic means they do have at their disposal”.

The so-called Communist Party of India (Marxist) is part of the government coalition in West Bengal State and its leader has been mentioned as a future possible Prime Minister of India should the Congress Party lose the next elections. Apparently, he has a reputation for not being dishonest. He personally may not have been involved in any financial scandals but his party spreads the lie that Russia used to be socialist and employs intimidation to maintain control of its clients, i.e those whose votes it tries to keep in return for minor personal favours. 

Just Once A Year (1948)

From the December 1948 issue of the Socialist Standard

They come in their hundreds; they come in their thousands. Train loads, bus loads and coach loads, besides all those who make the journey on foot. Each town, village and suburb within a radius of miles, pours out its contingent.

It is the great annual trek to the shops of London. It is the prelude to the so-called festive season.

In Holborn and in Oxford Street; in Regent Street and in Piccadilly they jostle and push one another along the sidewalk, passing from shop window to shop window.

In this window there are fine coats made from the furs of rare animals, and in that one there are gorgeous gowns of rich materials. In the next are sparkling gems in gold settings and in the next are ingenious toys rivalled only by the mechanical wonders they are made to represent. And so on, passing windows tastefully displaying choice wines and expensive refrigerators, works of art and dainty lingerie, elaborate furniture and costly perfumes. At each window all heads are turned to gaze admiringly at the contents. But the crowds pass on.

At last a certain emporium is reached. Here we see a continuous stream of people passing in by one door and out by another. What is this place? Surely it must be a marvellous shop, or the many people who have passed all those other inviting stores, would not quicken their steps to gain admittance. Let us go in! It is indeed a large shop and it is crowded almost to suffocation. The goods displayed on the open counters are small and not as costly as those others we have seen. Had we looked before we entered, we should have seen the name of the store. Above the windows, in golden letters against a red background, we should have seen, “ F. W. Woolworth.” And, maybe, where the red background was a little faded, we should have seen, faintly showing through, the marks of figures that were removed during the war years: “3d.'' and “ 6d.”

But all these people; who are they? What are they ? They are the workers with their families. These are the men and women who have toiled to make all those costly comforts and luxuries that they have just been passing. These are the people who, for the last fifty weeks have delved and spun, hewn and drawn, fetched and carried and toiled to produce the best of food, the finest of clothes and the grandest of buildings.

These same people have scraped a few coppers each week from their meagre wages to pay in to clubs in order that for one brief period they may spend on luxuries. Now they seek their “luxuries” in Woolworths. The portals of Galleries Lafayette or Liberty’s do not invite them and the plate glass windows of other shops keep them at a respectful distance. Even here, in Woolworths, the shop detectives mingle with the crowds—just in case some individual temporarily loses his respect for the property of others. Workers who have plied needle and thread to make fine raiment may now gaze at their handiwork—that is their portion. Those who have sweated to produce choice viands may now stand in the smell from the kitchens of the Piccadilly Hotel and sniff—it is their share.

And on December the 25th they may possibly have one good blow-out. Chicken and pudding and port-flavoured wine. Just for one day in the year they may kid themselves that they are hitting the high spots. Then, back to the grind.

Some day they will awaken from this stupor. They will set about the task of ridding themselves of an obsolete social system; a system that prevents them from enjoying the fruits of their labours. They will take the land and “all that in it is” from those who now own it and will work to produce the necessities and comforts of life for all. No need then to produce cheap articles for the many and super goods for the few. No need then to taste the good things just once a year. The best can be produced for all for always.

W. Waters

A plague on them all (1962)

Editorial from the November 1962 issue of the Socialist Standard

September and October were the months of concentrated party conferences. Liberal, Labour and Tory followed each other in quick succession, and the average worker may well have found the whole business a bit overwhelming. Conference reports can be boring and tedious, even though the press ruthlessly condenses the speeches. So who can be blamed for wanting to toss his newspaper aside with a snort of exasperation. Yet perhaps we should be thankful that the very closeness of the conferences meant that the agony was fairly short-lived, and for Socialists, anyway, there was an added advantage. It was easier to compare the policy pronouncements of the various vote seekers without too great a strain on the memory.

Now that the delegates have dispersed along with the hot air, there is one lesson which Llandudno and Brighton should have taught us. Despite the hero worship, despite all the speeches of the “greats” from the rostrums, they know well that none of them can hope to govern without working class support. The humble vote, multiplied by millions, will decide their fate, so they must keep their electional weather eye open. They cannot ignore the possibility that the present government may go to the polls before its full five years term has expired, particularly if Mr. Heath manages to get an early completion of the Common Market negotiations in Brussels.

Do not be misled by the bright and smiling picture of itself which each of these parties tries to paint for you, by “Auld Lang Syne," “ Land of Hope and Glory," or any other emotional finale to their deliberations. After all, if we are to believe the conference speeches, they have all never been so united, they all have the best possible leaders, and they are all going to win the next election. Rather should we look at the sort of things that were discussed and the decisions which were reached.

Some of the loudest shouting has been done by the Liberal Party whose conference was the first of the batch. It is a far cry from the great Liberal governments of the turn of the century, and the modern Liberal was saying things at Llandudno which would have shocked the old leaders. But then. Capitalism has come a long way since then and the old doctrine of free trade has given way to that of the Common Market, the forcefulness of Lloyd George to the almost unbearable smugness of Jo Grimond. The Liberal Party has undergone a revival of sorts after many years in the political wilderness, and perhaps there may be a Liberal government again one day. but the prospect does not enthrall us. And what evidence exists that the Liberals of the 1960s would be any more successful in solving Capitalism's problems than their Labour and Tory counterparts?

Although nobody can be quite certain, of course, it still seems likely that the next battle for power will be fought out between the Tories and Labourites. The Common Market negotiations may have given Mr. Gaitskell’s party an issue which will enable it to paper over some of the other cracks of recent years and fight with some semblance of unity. But unity for what? The unity of the Labour Party which fought and won the 1945 election is probably something which its present leaders remember with nostalgia, but when in power, it administered British Capitalism in much the same way as the other parties would have done.

In fact, the Conservatives’ Industrial Charter of 1947 was very cagey when discussing possible future moves to undo Labour’s nationalisation acts and had to admit that most of the state control would be left intact. Now, fifteen years later (“exceptionally slow even for Conservatives,” said The Guardian of 11/10/62 tartly), this document is foisted into the Llandudno limelight, all because something they said was gone for good is with us again—redundancy. “Let us humanise industrial relations,” bleat delegates from the floor, by which they do not really mean humanise (for that is an impossibility under Capitalism), but merely see that those who have worked the longest get a bit more compensation when they find themselves out of a job due to the march of “ progress."

It is all very much a sign of the times. With British Capitalism running into choppy waters again, its administrators, of whatever party, will be casting about them for policies to keep it on an even keel. But, as usual, the problems which have always baffled them continue to do so. There has been a slow but stubborn increase in unemployment, and after all this time they are still talking about urgent measures to solve the housing problem, as witness the agitated debate at the Tory conference.

Lacking knowledge of the real cause of these problems, workers will cast their vote in despair from one capitalist party to the other. There is even a risk of them supporting an anti-democratic body such as the Colin Jordan outfit. It is only the Socialist who says “a plague on all their houses” and works on for the day when the alternative of common ownership will be known on a mass scale and Capitalist Society will be no more.

Bumper Anarchism (2013)

Book Review from the August 2013 issue of the Socialist Standard

Anarchism: Volume 3 (1974-2012). Edited by Robert Graham. (Black Rose Books, 2013. £19.99)

‘There is always room and occasion enough for a true book on any subject; as there is room for more light [on] the brightest day, and more rays will not interfere with the first.’ (Thoreau)

Does this book really illuminate the darkness of our souls? Or more prosaically, is there room on our bookshelves for another Bumper Book of Anarchism? The answer is probably no. There are, it must be said, some interesting essays in this work, subtitled ‘A Documentary History of Libertarian Ideas’. Some like Ashanti Alston’s personal history of ‘Black Anarchism’ are even inspiring. Others are a useful potted history of recent events, eg. the Interprofessional Workers’ Union account of ‘Russian Capitalism’. However, outside the borderlands where the spark of Malatesta and Goldman clearly still burns bright, it would seem from this book that contemporary anarchist commentary is little more than an academic sport. It comes as no surprise that the first item in Graham’s selection is from the New Left Review, Britain’s premier distributor of intellectual flannel.

The selection and arrangement of material are by no means objective. Indeed, it is markedly obvious that the author has a hidden agenda. This is particularly noticeable in the core section on ‘Libertarian Alternatives’. In the author’s mind, this is doubtless supposed to pose the classic anarchist dilemma of mutualism versus collectivism. That the terms have no particular meaning or interest to a revolutionary is made abundantly clear by the concise contribution jointly authored by Socialist Party member Adam Buick and the late John Crump. The final article in the sequence comes down firmly in favour of mutualism, the nonsensical ‘exploration of forms of market capable of moving beyond the capitalist market’, or as we might term it ‘Capitalism writ small’. Given this preference, socialists should by no means imagine that anarchists per se are naturally ‘on our side’.

Kaz.

Economists' bunk exposed (1984)

From the March 1984 issue of the Socialist Standard

With understandable glee the Keynesians have greeted an attack on the monetarist doctrines of Professor Milton Friedman by Hendry and Ericsson, which, according to the Guardian (15 December 1983), is to be published by the Bank of England. The Guardian had two articles on it, both by Christopher Huhne — “Monetarists' Guru Distorts His Evidence”, and “Why Milton's Monetarism is Bunk”.

The articles set out at length the case against Friedman and include the statement that he had been supplied with a copy ‘two months ago, but has not yet responded'. The authors of the attack do not themselves claim that it destroys the monetarist case; only that the evidence on which Friedman has relied to support it is grossly defective. It will still be open to Friedman to present other evidence. Whether or not Friedman succeeds in rebutting the attack is of great importance to both the Keynesians and the monetarists but it need not concern us. Monetarist doctrine is indeed wholly fallacious, but for quite a different reason, and it did not have to wait for the publication of the new attack. It was for example dealt with in the Socialist Standard in January 1983. What does matter is whether Marx’s explanation of the several factors which determine the price level, and its rises and falls, is correct.

One red-herring trailed by Friedman has first to be disposed of, that is his nonsensical claim that Marx was a monetarist. In an interview in the Observer (26 September 1982) Friedman said: “Let me inform you that among my fellow monetarists was Karl Marx”. He explained how he arrived at this conclusion.

  Monetarism . . . was a new name for the Quantity Theory of Money which dealt with the relationship between the quantity of money and economic variables such as price level, interest rates and unemployment.

Marx did not suggest that unemployment exists because of variations in the quantity of money. In a broad sense any theory which deals with the quantity of money could be called a “quantity theory", but there was not, as Friedman implies, just one such theory. There were a number of different theories. Marx’s was unique to him and was rejected by adherents of the others. All that the Friedman interview does show is his ignorance of Marx's economics.

Marx's explanation of what determines the prices of individual commodities and what determines the general price level and its changes, involves a number of different factors: the commodity’s value (amount of labour socially necessary for its production); day-to-day fluctuations of supply and demand; the rise of prices in booms and their fall in depressions; monopoly; and, where the gold standard was in operation, changes in the value of the money-commodity, gold. In the last half-century in this country the prices of some commodities have been affected by government subsidies, which enable them to be retailed at prices below what would otherwise be their market prices.

When the British gold standard operated in the nineteenth century the paper currency (Bank of England notes) was, by law, tied to a fixed weight of gold (the pound was about ¼oz of gold). The notes could be exchanged, on demand, into the fixed weight of gold, and gold into notes. The consequence was that the purchasing power of the notes was always (except for marginal, temporary deviations) the same as that of the fixed weight of gold. There could never be a rise of prices resulting from depreciation of the notes (inflation). The price level in 1914 was almost exactly the same as in 1850, though there had been moderate rises in booms and falls in depressions in the intervening years.

With the abandonment of the gold standard in 1931 the paper currency ceased to be tied to a fixed weight of gold. It could be, and has been, massively depreciated through excess issue. The notes in circulation. under £500 million in 1938, now total over £11,000 million. The continued inscription on the £1 note, "I promise to pay the bearer on demand the sum of one pound”, is now entirely meaningless. The excess issue of notes since 1931 has been the major cause of the massive increase in the price level.

Marx dealt with this situation:

  If the paper money is in excess, if there is more of it than represents the amount of gold coins of like denomination which could actually be current it will (apart from the danger of falling into general disrepute) represent only that quantity of gold which, in accordance with the laws of the circulation of commodities, is actually required, and is alone capable of being represented by paper. If the quantity of paper money issued is, for instance. double what it ought to be, then, in actual fact, one pound has become the money name of about ⅛ of an ounce of gold instead of about ¼  of an ounce. The effect is the same as if an alteration had taken place in the function of gold as a standard of prices. The values previously expressed by the price £1 will now be expressed by the price £2. (Capital Vol. I Allen and Unwin edition, pages 108-9)

It is important to notice that Marx was not saying (as did some quantity theorists) that any increase of paper money causes prices to rise: only if it is in excess of the gold coins that would circulate. With the expansion of total production the necessary amount of gold coins would rise, as it did in the nineteenth century, with a consequent increase in the Bank of England notes without any rise of prices. Marx also pointed out that with the development of the banking system and greater use of cheques, the necessary amount of gold coins increases less fast than the increase in the volume of transactions having to be handled.

In the half century of excess issue of paper money and consequent inflation, the other factors named by Marx as affecting prices have of course continued to operate.

Where then does Marx’s explanation of inflation differ from Friedman’s theory that prices rise as a result of an increase in the amount of “money”? The explanation is that for Marx “money” meant notes and coins and nothing else. For the Friedmanites (and also for the Keynesians) “money” includes bank deposits and is predominantly made up of bank deposits. The Bank of England currently publishes half a dozen different figures for the amount of “money”, varying in size according to whether they include some or all of bank deposits, and whether they include deposits in paper money or only deposits in sterling. Some of the Bank's figures also include investments and deposits in the building societies as part of “money". Marx would have rejected all of them, as being quite irrelevant in relation to the determination of the level of prices.

So how do bank deposits come into the monetarist and the Keynesian theory of prices? Both schools are adherents of the “bank deposit theory' of prices", according to which the price level is determined by the size of bank deposits. It was stated by Keynes in his book Monetary Reform (1923, page 178).

  The internal price level is mainly determined by the amount of credit created by banks, chiefly the Big Five . . . the amount of credit, so created, is in its turn roughly measured by the volume of the banks' deposits.

Since 1977, when the Labour Government announced its intention to curb inflation by “controlling the money supply” (the policy continued by the Thatcher government), what they thought they were doing was to halt the rise of prices by controlling the size of bank deposits.

But why should the price level be affected by the size of bank deposits? The man who deposits £1,000 in a bank has the option of doing that, in which case the bank lends or spends the £1,000. or of lending or spending it himself. Why should the effect on prices be any different whichever option he chooses? The answer to this question is that the monetarists, and the Keynesians, both belong to what the late Professor Edwin Cannan so aptly described as “the mystical school of banking theorists”, the school which believes that the banks “create deposits” and thereby increase purchasing power and so increase prices above what they would otherwise be.

The banks don’t create anything. They merely lend or spend or keep in their vaults, whatever sums depositers choose to lend to them in the form of deposits — that and no more. Keynes (in the Report of the Macmillan Committee 1931, page 36) claimed that “the bulk of the deposits arise out of the action of the banks themselves”. The monetarist Milton Friedman holds the same “mystical” view. In his Free to Choose (Pelican Books. 1980, page 298) he claimed that, while the banks cannot print “the pieces of paper we carry in our pockets”, they can , and do “authorise a book keeper to make entries in ledgers, that are the equivalent of those pieces of paper”. Major Douglas, founder of the Social Credit movement, put the same daft view in his statement: “the banks have the power to create untold wealth by the stroke of a pen”.

There is abundant evidence over the years which shows that the theory that prices are determined by the size of bank deposits is fallacious; though there is sometimes the appearance of a reverse link between prices and bank deposits, in the form that when prices rise bank deposits sometimes show a rise, because people have larger money increases out of which to make deposits in banks. Neither the monetarists, nor the Keynesians, nor anybody else, have ever succeeded in showing that Marx’s statement of the several factors which affect prices is invalid.

One last note on the Guardian articles, which includes the remark: “a Treasury spokesman said last night that the Government had no intention of changing its monetarist policy”. One apparent change of intention has taken place. In the 1979 Tory election programme policy was defined as that of "controlling the money supply” (that is bank deposits). In the 1983 Tory programme the words were altered to read: “We shall continue to set out a requisite financial strategy which will gradually reduce the growth of money in circulation”.

On the face of it the reference to “money in circulation" might be taken to mean restricting the printing and circulation of the note issue, and the Bank of England has now added to its collection of definitions of “money” a new one called M nought (M0) circulation of notes and coins only.

In 1919 the Government did instruct the Bank of England to reduce the amount of notes in circulation, and niillons of pounds of notes were burned. Inflation was not only halted, but prices fell drastically. So far there is no sign that the Thatcher government intends to repeat that action, for the notes in circulation have continued to increase.

Edgar Hardcastle

Obituary: Margaret Hopwood (2011)

Obituary from the November 2011 issue of the Socialist Standard

Margaret Hopwood (1924–2011)

Manchester Branch are saddened to report the death in Bolton of Margaret Hopwood, the widow of Alf Atkinson, late General Secretary of the Socialist Party.

Margaret joined Manchester Branch in 1945, were she met Alf, having been introduced to socialism by her father Ernie Hopwood, a Socialist Standard subscriber and sympathizer. She remained active in the branch until it folded in 1957 and was involved in the re-forming of branch in 1968, a very active period in Manchester. She was responsible for organizing the 1969 and 1970 Manchester Summer schools, both tremendous successes.

In 1975 she and Alf moved to East Grinstead, a career move for Margaret who became headmistress of a school teaching English as a second language to immigrant children. This gave her an opportunity to work at Head Office, and she was Overseas Contact Secretary and a member of the Library Committee for many years. She was also a founder member of Croydon branch in 1981. Generous and hospitable, she and Alf accommodated Bolton and Lancaster delegates at Conference and Autumn Delegate Meeting for years – more than eight members at once sometimes.

Despite her commitment to socialism, Margaret could be critical at times of the Party and its members. Often, her opening remark was “and what have you done for socialism today, comrade?” She was by far the best Socialist Standard seller I have ever seen; no street corner was safe. On retirement, she and Alf moved to Shrewsbury, attending meetings in Birmingham until Alf’s death in 1998, when she transferred to Manchester Branch again.

Margaret was clever, funny and a true socialist.  She will be missed by her many friends and comrades. Our sympathy goes out to her children, Owen and Adele, both members of the Party, and to her grandchildren.

Joan Morris

Letters: Hierarchical? (1988)

Letters to the Editors from the January 1988 issue of the Socialist Standard

Hierarchical?

Dear Editors.

In an otherwise interesting and informative article on "Computers in a Socialist World" in the November Socialist Standard, George Marcelo makes the strange statement that in a Socialist society “it is likely that the system will be hierarchical". He further states that "bigger decisions . . . would be decided on higher up the hierarchy".

Strange indeed, because the last thing a socialist society will be is "hierarchical". It will, by its nature, be a society of freedom from compulsion where people will work together cooperatively without having to take orders from anyone above them. A society of common ownership, free access and democratic control could not work in any other way. It is the present society that is shot through with hierarchy reflecting the power given by ownership of wealth.

George Marcelo's reference to "hierarchy" in Socialism may of course just be an unfortunate use of words. Since he uses the word in the context of decisions being made according to their importance at local, regional or world levels, perhaps by it he means a system of decision-making according to the number of people the decisions will affect. But. whatever the case, it should be made clear that the notion of hierarchy, with its associations of leadership and minority decisions from above, could have no place in the organisation of a socialist society.

Yours for Socialism.

Howard Moss

Swansea

The SWP and Russia

Dear Editors.

It was inevitable that, sooner or later, the SWP would nail their colours to the mast and declare in favour of Leninist state capitalism — Russia 1917 model — in their literature. Despite this, when confronted with the anti-socialist nature of their case, SWP members and supporters continue to claim that they want the same society as the socialist — eventually.

But as the article, Leninist State v World Socialism in the October Socialist Standard points out, the socialist is as opposed to the state run by the SWP as to the Russian or any other state. Any doubts as to how socialist criticism in such a state would be judged may be dispelled by reference to the Russian state's attitude to similar criticism of its system. This is indicated in a pamphlet published by Novosti Press Agency entitled Socialist Economics Today. The writer, an economist of Moscow University called Professor Margarita Bunkina tells us.

 The essence of socialism has become the subject of keen debate in the course of which, the opponents of the new social system [Russian State Capitalism - W.R.] frequently pose as supporters of socialism — not of that which has actually existed in the world for 60 years, but of some other kind of socialism which they claim has still to be built

So Russian workers criticising Russian state capitalism from a socialist viewpoint are regarded, correctly, as "opponents of the new social system" attempting to propagate “some other kind of socialism". As such, they become victims of that state's corrective institutions. Can anyone believe that socialist criticism of the state run by Lenin's political heirs in the SWP would be dealt with differently in view of that party's clear support for Bolshevik tactics and aims?

               Yours fraternally,
W. Robertson

                                                                                                                        Brighton

Socialism v Anarchism

We have received two letters which raise some points about the above article (Socialist Standard, October 1987). We hope to publish these, with our comments, in the February issue.

Editors

Computers in a socialist world (1987)

From the November 1987 issue of the Socialist Standard

We are in the middle of an industrial revolution. Once, the craftsman had to give way to the factory worker. Now, the factory worker has to give way to the computer worker. In the future, the computer worker will have to give way to a worker with another skill. This is necessary because capitalists, the men and women who own and control the things needed to produce wealth, compete with each other. They need to employ (exploit) workers to run the most efficient production methods available.

Since most computers are owned by capitalists, they reap the benefits of computer technology. Computers are used in "defence" (Star Wars, controlling guided missiles). finance (calculating bills, cash vending machines) and industry (controlling robots, designing products). There are other uses but these are the main ones. There are some workers who own computers, but these are toys. If you disagree, try borrowing a factory from a capitalist and running it with your computer.

Eventually, the penny will drop for the wage and salary earners of the world and then the means of producing and distributing wealth will belong to everyone. This will mean that computers will be used to satisfy the needs of everyone. It is not possible to predict exactly the uses to which computers will be put, because it all depends on the will of the majority of people at the time and none of us is a mind reader. But it is useful to think about what computers could be used for, because this gives us an insight to what socialism could be like. The possible uses are:

• matching production to needs;
• “electronic democracy”
• automation of dangerous or unpleasant work;
• others that you can think of.

Matching production to needs:
If you want to know what people need, you ask them, or better still, arrange for a computer to ask them for you. It saves you travelling all over the world, asking monotonous questions such as: "Do you use aftershave?" — useful information for someone who does his/her bit by brewing aftershave. In turn, the aftershave brewer could enter into the computer the raw materials that are needed and in what amounts. The computer would transmit this information to the suppliers. And so on. Of course, you could use the Post Office. A computer does the same thing, only quicker (for a more detailed account of such a system, see Socialist Standard, July 1984. p.131).

“Electronic democracy”
No, this is not a souped-up version of the BBC's Election Battleground. If a computer can count aftershave users, it can also count votes cast for and against any proposal presented by any person, such as "Should we continue making aftershave?" Cash vending machines and telephones could be voting machines. In the evening, the aftershave brewer could turn on the TV and see the result. This system can also be used to elect and instruct delegates. It is likely that the system will be hierarchical, a local computer counting votes for local proposals, a regional computer counting votes for regional proposals and a world computer counting votes for world proposals. Bigger decisions affect more people and so would be decided on higher up the hierarchy. A TV channel could be dedicated to listing the "decisions of the day” in the morning and reporting on the results of the poll in the evening. This system could be implemented today. Ask yourself why governments which spend millions on supposedly defending democracy are not willing to spend even thousands implementing it.

Automation of dangerous or unpleasant work:
There will always be dangerous or unpleasant work that needs to be done. It will be possible to automate work that produces essential goods and services. The technology to do this has existed for several years. Robots can now assemble cars, manufacture computers. make furniture and so on. More recently, computers can mimic workers that make decisions according to rules, such as quality control inspectors, lawyers and doctors. The reason some work is not automated yet is because it is still unprofitable to do so. But the technology is there, waiting to be used should society decide to use it. For example, if our aftershave brewer decides to grow bananas for a change and no replacement was immediately available, he/she could see an expert systems programmer. This programmer would write a programme that would instruct the computer to operate the aftershave brewery. Should the ex-aftershave brewer get nostalgic, he/she could always return and pull the plug on the computer.

Others that you can think of . . .
The building blocks for constructing the computer systems described above have been available from up to ten years ago. What you have read is not science fiction. It is fact. World-wide computer networks exist today. They are used by companies, especially multi-nationals, in order to co-ordinate their activities and to communicate with each other. The hardware is already in place. All that is necessary is for programmers to reprogramme the computers to perform the tasks described in this article, should that be the wish of the majority of the people at the time.

Defenders of the capitalist status quo tell people that socialism is not workable. They think that workers are not intelligent enough to run a system of production for use, one where there are no followers and leaders but a system where everyone co-operates in decision making. They forget that workers are intelligent enough to perform the tasks necessary to run capitalist society. It is workers who design, build and operate computer systems. When the wage and salary earners of the world, the working class, want socialism they will have it.

George Marcelo

Drugs . . . drugs . . . (1988)

Book Review from the January 1988 issue of the Socialist Standard

Cured to Death by Arabella Melville & Colin Johnson. (New English Library, £2.50).

The authors' aim in this well referenced book is to show that "Western medicine has made a fundamental error in allowing itself to become reliant on the universal use of drug therapy" (p.3).

The authors present a comprehensive analysis of the effects, on individuals and society, of prescription drugs and the factors involved in their use. "Drugs are manufactured by commercial organisations for the same reason as any other product: to make a profit" (p.4). The methods employed to increase these profits include high pressure sales techniques (for the so-called ethical products), falsification of test results, the dumping of drugs with proven dangerous side effects onto countries with less effective, or more corrupt, control procedures after they have been withdrawn from sale in other countries. The drugs industry have created unnecessary cases for treatment, promoted new diseases to meet the need for "cures" already discovered and moved towards mass medication in the name of disease prevention.

Also included in this analysis are the political power of the drugs industry, the inherent danger of all drugs and inadequacy of testing procedures, the difficulties of identifying side effects, the pressure on doctors, the conditioned attitudes of doctors, patients and the medical establishment and some harrowing case histories of victims of drug side effects.

Owing to the difficulty of identifying side effects in individual patients and the understandable reluctance of many doctors to consider the possibility that treatment prescribed by them may have caused harm, the only statistics available to indicate the extent of the harm caused by the mass use of drugs are those suggested by interpreting the results of epidemiological studies. The best estimates of drug induced disease in the population of Britain lead to a constant prevalence of two per cent, or over one million people. According to the authors the probable figure for drug-induced deaths in Britain is between 10,000 and 15,000 in an unexceptional year, at the current rate of prescribing (p. 108).

This book provides yet more evidence — if any were needed — of how the insatiable drive for profits, which is fundamental to capitalist society, damages health and destroys lives.

Grant Dixon

Futility? (1988)

Book Review from the January 1988 issue of the Socialist Standard

Julian Symons: The General Strike (The Crisset Library)

This is a re-issue, unchanged, of the original edition first published in 1957, except that it has a short preface by the author commenting on the 1984 miners' strike and some other matters.

The book provides a well-documented account of the events leading up to the so-called "General Strike", which was called to support the miners in their resistance to wage reductions; the reasons why the TUC General Council called it off after nine days; the resentment of the miners at what they regarded as "betrayal": and their ultimate total defeat after staying out for many months. It contains details of the statements and actions of all the leading figures, politicians, union leaders and others, with some critical observations by the author on the conduct of the strike.

Symons thinks it was a mistake to have called out the printers because this prevented the appearance of some newspapers which would have given publicity to the miners' case, and left all the effective publicity in the hands of the government, through the radio and the official journal The British Gazette. The TUC 's own journal, The British Worker, was read only by supporters of the strike, not by the general public. He comments on the serious failure of communication between the miners' union and the TUC. The two miners' representatives on the General Council of the TUC were absent from London throughout the strike, so that the miners' leaders were ignorant of much of what went on.

In his new preface the author says that in the 1926 struggle "the miners . . . deserved better leaders". What all workers need, of course, is to rid themselves of the whole idea of "leadership" and themselves take on the responsibility of getting to understand the forces they are up against in the class struggle, including keeping in their own hands decisions about starting and ending strikes. But the author makes a sensible comment on the 1926 strike and the strike of 1984:

  On both occasions the miners' leaders greatly underestimated the power and resources of their opponents. which were far from fully extended. In 1926 the armed forces played a very minor role and in the later strike were not used at all. although the police on some occasions had an almost military role.

One thing is strangely missing — a statement about nationalisation. In 1926 it was the belief of the miners, the TUC. and the whole trade union movement, that the workers' problems would be solved if only private ownership of the mines was replaced by nationalisation (state capitalism). And yet in 1984 it was the nationalised Coal Board against which the miners fought for nearly a year.

They said it . . . in 1987 (1988)

From the January 1988 issue of the Socialist Standard

January

• Britain is no more equal a society today than it was a hundred years ago. (Roy Hattersley, Deputy Leader of the Labour Party)
• The technical possibilities for increasing safety are almost limitless. But safety is normally expensive. (Guardian summary of the Layfield Report on the Sizewell B reactor)
• I have to accept that I may well be used by god in this way. (James Anderton, Greater Manchester Chief Constable)
• Civilisation is in peril of we do not tackle homelessness. (Lord Scarman, launching International Year of Shelter for the Homeless)

February

• I'm not upset by being tapped, but I don't like inept tapping. (John Golding, General Secretary of the National Communications Union, on his phone being tapped during the British Telecom engineers' strike)
• We have a higher standard of living now than this country has ever known. (Margaret Thatcher)

March

• I made a lot of money. (Michael Heseltine, in interview with Terry Coleman)
• A television interview is no place for original thought. (Alan Watson, Liberal candidate for Richmond on Thames)
• One third of the nation is ill-fed, ill clothed and ill-housed. (Ian Wrigglesworth, SDP MP)
• We are in business to make money. (Merrick Roocroft, British Rail Area Manager)
• As a market researcher, I've been trained to meet all arguments with a bland smile. (Rosie Barnes, SDP MP)

April

• I am amazingly tired. (Taunea Tagaki, Neiwado Trading Company, after paying nearly £2 million for a diamond ring once owned by the late Duchess of Windsor)
• I think I have spent some £2 million but if it is much more that's a problem for my bank manager. (Sam Moussaieff, who spent nearly £6 million at the Windsor auction)
• It's a marvellous way of getting to know people. (Prince Charles, on working on a building site)
• We are all capitalists. The only difference is that for you it's the state that invests, while for us it's private individuals. (Thatcher to Gorbachev)
• There is something in it for everybody. (Gary Hart, on his abortive election programme)

May

• You can't go too far to catch votes. (Denis Healey)
• Islington is like a walled city. The issues here are housing, housing and housing. (George Cunningham, SDP candidate, Islington South and Finsbury)
• I'm Labour. I'm just am. (Girl in a pub, talking to New Society)

June

• When we had a Labour government last time . . . they had to slash public expenditure left, right and centre. (Nigel Lawson, Chancellor of the Exchequer)
• In my lifetime your party had a go at it four times and made a fuck-up each time. (Willesden 'bus worker to Ken Livingstone, Labour candidate, Brent)
• There is no activity, no idea, superior to that of securing victory at the next election. (Neil Kinnock)

July

• Nearly everybody enjoys it. It's a pretty useful job. You get to work with nuclear missiles. You get to work with the most sophisticated intercontinental ballistic missile in the world. It's accurate and it works first time every time. I've been working with missiles for 12 years and I've enjoyed it. It's a lot of fun. (Major General Fisk, US Air Force at the Cheyenne nuclear missile base)
• I didn't trust the Liberal Party at all. (David Owen)
• I thought we had freedom of the press in this country. (Nicholas Browne-Wilkinson, judge at a Spycatcher hearing)
• A low profile is not my style. (Edwina Currie)

August

• Money is the cog that keeps the wheel of life turning. (Midland Bank brochure)
• If you can do this job and come out of it with your playing intact, your health intact and a little dignity - it's a minor miracle. (Michael Davis, leader of the London Symphony Orchestra)

September

• We are seeing in our cities, the growth of new slums which defy public health regulations, fire regulations, safety regulations. (Lord Scarman)
• Actually I felt as if I was dead. (Clement Freud, on losing his parliamentary seat at the general election)
• There is some opposition to thought in the Conservative Party. (Alfred Sherman, former political advisor to Thatcher)
• If we're not going down the yuppie path, I don't know where we are going. (Dennis Skinner, Labour MP on his party's "review" of policy after the election)
• The police service responds to situations. It doesn't create them. (Chief Superintendent David Ibbs, Wolverhampton police)

October

• It's a nice clean job. (Father of a fitter at Sellafield nuclear power plant)
• We're making so much money we don't give a damn what they are saying about us. (Director of a merchant bank)
• He does not talk to the press. (Aide to Kelvin MacKenzie, editor of the Sun newspaper)
• It's like Holloway prison. (Labour MP Dawn Primarolo on the House of Commons) 

November

• I like looking at gardens but I don't actually get down on my knees and plant things myself. (Lady Rothermere)
• They are using antiquated methods and putting safety at risk in the interest of profit. (Robert Adley, Tory MP on overloading on Sealink cross-Channel ferries)
• What does (Prince) Andrew actually do? (Tory MP)
• It's like working for an advertising agency but only promoting one product. (Country vicar, on his job)
• After all the money was given last time, after all the personnel and equipment that was put into Ethiopia, after the establishment of effective early-warning systems - after all this, why are things no better? (Bob Geldof on another outbreak of famine in Ethiopia)

December

• Some 90 per cent of the population should hear the sirens which will warn of an impending nuclear attack. (Written reply by Douglas Hogg, Home Office Minister)
• Unfortunately, the babies don't realise how important budgets are and they keep on being born. (ITV News At Ten, on the hospital cuts)
• Things are getting worse. People are suffering or dying while waiting for operations. (Consultant surgeon - Bristol Royal Infirmary)

The Communist Party in Indonesia (1954)

From the December 1954 issue of the Socialist Standard

Fifth Party Congress
The Communists have always claimed to be the heirs of Marxism; the real “revolutionaries.” Socialists have denied their claims. We have always said that the Stalinists are neither Socialists nor Internationalists; that they do not stand for the abolition of Capitalist society.

A recent Congress (the fifth) of the Indonesian Communist Party supports our viewpoint.

In the Cominform paper For a Lasting Peace, for a People’s Democracy (October 15, 1954), D. N. Aidit, General Secretary of the C.P.I., reports on some of the more important aspects of the Congress.

Private Property and the Peasants
After admitting that the basic reason for the failure of the “People’s Revolution” of 194548, was due to the fact that the peasants had not supported it, Aidit claimed that the peasants now were rising against the landlords in South and Central Sumatra; and that elsewhere the agrarian programme of the Communist Party, adopted at the Congress, had aroused the peasants throughout Indonesia.

What, then, is this “revolutionary” programme? The common ownership of the land? No. The policy of the Indonesian Communists is to “ isolate the peasant masses from the feudal landlords,” to end feudal land ownership, and “to give the landlords' land free of charge to the peasants as their own private property.”

The Congress decided to replace the slogans “Nationalization of the Land ” and “All Land to become State property" with “Distribution of the Land to the Peasants,” and “ Individual Ownership for the Peasants.” The reason for the change of slogans is explained away by the admission that; "The principle of private ownership of the land in our country is so deeply rooted in the lives of the peasants that they cannot understand an agrarian revolution in any other form other than the land of the landlords should be distributed as their own private property.’’ (D. N. Aidit). In other words instead of advocating the common ownership of the means of living—Socialism—the Communists advocate the continuation of private property relationship in a different form—just because the peasants want it!

United Front with the Capitalists
Although the Indonesian Communist Party has now set itself the task of strengthening the “alliance ” between the workers and peasants, this does not mean that they intend to ignore “intelligentsia,” small and large capitalists.

The Congress agreed that the key to the victory (of the Communist Party) lay in the creation of a “National United Front” of workers, peasants, intelligentsia, small capitalists against the feudal landowners and the “Imperialists.” “Their land,” said Mr. Aidit, “must be confiscated and nationalized.”

In attempting to unite workers, peasants and local capitalists against the landowners and foreign capitalists, the Communists have as their object the creation and building-up of a national capitalist state, sympathetic to Soviet Russia, and under the leadership of the Communist Party. Their aim is the exploitation of the Indonesian masses by local capitalists instead of foreign ones.

As in Ceylon, Indo-China and other Asiatic countries, the Indonesian Communists represent not the interests of the workers but those of both the Russian and the local native ruling class.

Peter E. Newell

Marx, Money and Prices (1967)

From the January 1967 issue of the Socialist Standard

We are often asked why we continue to make use of the writings of Karl Marx, who died over eighty years ago and whose theories have been so generally rejected by economists.

So many things have happened, they say, that Marx could not know about; capitalism has undergone such unforeseen changes; and was not Marx responsible for the rise of Russian State Capitalism? Unaccountably the questioners forget to put it to themselves. If Marxian theories have long been disproved and discredited why do the opponents of Socialism go on, year after year, making new attempts to disprove and discredit them? Why don’t they just forget?

Still it is a fair question. The answer is that capitalism has not changed in its essentials: it is still a system of society in which the means of production and distribution are class owned, in which commodities are produced for sale and profit by a non-owning working class which lives by selling mental and physical energies to employers, including the state-capitalist, so-called nationalised industries. As for Russia, the course of events there completely vindicates Marx’s view that Socialism could not precede the development of capitalism; Marxian theories no more determine the actions and policies of the Russian government than does theology determine those of the governments in nominally Christian countries.

And when we come to economic theory, Marx’s analysis of capitalism in operation, value, prices, unemployment, banking, crises and so on is more valuable in depth and scope than anything done by his detractors.

And is Marx out of date? What is the present incomes policy of the Labour Government but yet another attempt to deal with the trade cycle which Marx described and explained—and in particular the fact to which Marx drew attention, that in a certain phase of the boom prices rise and wages rise faster than the production of consumer goods?

And one sphere in which Marxian theories hold their own is in the explanation of price changes, including the prices of individual commodities, the price of labour-power (wages), the general upward movement in booms and the downward movement in slumps, the general movements related to changes in the value of gold and finally the general movements related to the volume of currency.

Leaving aside the day to day fluctuations of price caused by market fluctuations of supply and demand and the fact that some commodities normally exchange above or below their value, Marx postulated that the basic element in the exchange of all commodities in capitalist society is value, measured by the amount of socially necessary labour in all the operations required in the production of a given commodity. From which it follows, firstly, that if one commodity requires twice as much socially necessary labour as another, its value will be twice as great, and secondly, that in gold all other commodities find their “universal equivalent”, again related to value. This explains what is behind the value of gold coinage; the coin is a weight of gold representing the value of gold. In concrete terms the Pound or sovereign which circulated in Britain in the nineteenth and into the present century was, by law, a fixed weight (about one quarter of an ounce) of gold.

The next proposition is that in order to carry on the sales and purchases of commodities and other payments a certain amount of gold coin (and subsidiary silver, copper etc., coinage) would be needed. A number of factors enter into the determination of what volume of currency will actually be needed; the volume of transactions, the prices of commodities and the rapidity of circulation etc., for a description of which the reader is referred to Marx’s Capital Vol. 1. Chapter 3. “Money, or the Circulation of Commodities”.

The next stage in Marx’s explanation is that a circulating gold coinage can, without any alteration of the proposition, be replaced by a convertible paper currency, that is freely convertible into a legally fixed and unchanging weight of gold. In 19th century Britain, Bank of England notes, which circulated alongside the gold coins, were by law convertible on demand into gold.

Then comes a completely different situation, the replacement of gold coin and convertible bank notes by an inconvertible paper currency—the situation in Britain today. The Marxian proposition, still based firmly on the concept of value, is that if the inconvertible paper currency exceeds in amount the amount of gold coinage that would be needed, the general price level will correspondingly rise.

 If the quantity of paper money issued is, for example, double what it ought to be, then, in actual fact, the pound, has become the money name of one-eighth of an ounce of gold instead of about one-quarter of an ounce. The effect is the same as if an alteration had taken place in the function of gold as a standard of price. The values previously expressed by the price of £1 will then be expressed by the price £2. (Capital Vol. 1 page 144 Kerr edition).

But what have the other economists to say about this? Most of them reject the old theory outright. The late Lord Keynes wrote in his Treatise on Monetary Reform forty years ago:

  Thus the tendency of today—rightly I think—is to watch and control the creation of credit and to let the creation of currency follow suit, rather than, as formerly, to watch and control the creation of currency and to let the creation of credit follow suit.

In the meantime in keeping with this changed attitude (and in keeping with mystical ideas on “credit creation” referred to in the Socialist Standard (December 1966) the meaning given to the word “money” changed. Some writers wanted to regard as money, not only the note issue and coinage but also those bank deposits which are withdrawable on demand, and others have extended it to cover all bank deposits.

And the 1959 Committee on the Working of the Monetary System capped it by declaring that they regarded the note issue as in effect no more than “the small change of the monetary system” (page 118).

But the proof of the pudding is in the eating. The economists who reject Marx have to explain why events—that the price level is more than three times what it was before the war—are explicable on the lines of Marx’s proposition about the effects of an excess issue of currency, but quite inexplicable on their theory that the amount of currency can be disregarded.

Edgar Hardcastle