Monday, September 17, 2018

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And is Marx out of date?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

A Co-op in Spain (2014)

Book Review from the November 2014 issue of the Socialist Standard

Dan Hancox: ‘The Village Against the World’. Verso £9.99.

Marinaleda is a village of 2,700 people in the Andalusia region of southern Spain, about sixty miles east of Seville. Under the Franco dictatorship it was poor and underdeveloped, like most places in the area, where massive landed estates owned by aristocrats prevailed. When Franco died in 1975, Spain began a transition to capitalist democracy. The people of Marinaleda organised in unions and demanded land; eventually, in 1991, the government gave them 1200 hectares of land belonging to a duke.

So began the development of what Hancox terms ‘an anti-capitalist answer … [a] community founded on mutual aid and collectivism, not the profit motive’. The village co-operative owns El Humoso, a farm several miles away. This is planted with labour-intensive crops such as cotton and sugar beet, thus providing more employment than the previous practice of growing crops such as corn that need little labour power. All co-op members earn the same wage, and any surplus is re-invested to create more jobs. There are no local police, the village is run by assemblies on the basis of direct democracy, and many villagers live in self-built homes for which they pay just fifteen euros a month. Each month the villagers work together voluntarily doing improvement work, such as gardening in the park.

Yet all is not quite what it seems. The regional government provides building materials and architectural assistance for the self-built homes, and also some kind of farming subsidy (unfortunately Hancox does not say much about this). The unemployment rate is much lower than the national average, but is still five to six percent. The present economic crisis in Spain has not left the village untouched, with regionally-based funding drying up, and there is insufficient money to pay the workers at El Humoso. The charismatic mayor, Juan Manuel Sánchez Gordillo, is taking a back seat and is powerless to solve the current problems.

Further, some rather unpleasant aspects of local life are mentioned. Two of the village’s elected councillors are from the PSOE (roughly the Spanish equivalent of the Labour Party). One of them tells Hancox that those who do not agree with the mayor (those who are not Gordillistas) do not bother to attend the assemblies, and many of those who attend do so as a way of getting work. Some opponents have felt uncomfortable staying in Marinaleda and so have moved to live elsewhere. Hancox comments that in this and other cases it is impossible to distinguish facts and gossip, leaving the reader with no idea of where the truth lies.

Marinaleda carries on some Andalusian traditions of anarchism and anarcho-syndicalism, and shows that people can live without large landowners and capitalists. But it is not a socialist village, just one way of organising production to survive under capitalism. 
Paul Bennett

50 Years Ago: Soviet Millionaires (1994)

The 50 Years Ago column from the February 1994 issue of the Socialist Standard

A very great war produces, out of profound social tragedy, its mordant satirical humorists. This one is no exception: in addition to biting ironists of the Nat Gubbins school, "Yaffle," and others, we may now acclaim one Reginald Bishop as the wittiest cynic of the day. With elephantine solemnity, Mr. Bishop has turned out a little booklet on "Soviet Millionaires" ("Soviet Millionaires," Russia To-day. pamphlet. 2d.), in which he playfully pretends that he is "explaining" that they are the result of "the establishment of socialism in Russia in 1934" (p. 12).

The result is the funniest piece of satirical writing since this war broke out. For this we thank him very much.

How to do it! Mr. Bishop chides those who are shocked to hear of millionaires in Russia, and "to whom the very word millionaires represents an evil influence in society." He points out that Russian millionaires are "only" rouble millionaires: they do not possess the equivalent of a million pounds sterling (p. 3). "But even were a rouble millionaire possessed of as much money as a sterling one, it would still not be anti-socialist. . . . because in the Soviet Union the millionaire has acquired his roubles by his own toil" (p. 3) . . . 

We agree with the Daily Worker, wherein Mr. W. Holmes averred that Reg. Bishop has done very well in dealing with statements by "Hyde Park spouters." that in Russia to-day the social system is one based on wage-labour and capital. The "Hyde Park spouter" is the Socialist Party platform and Mr. Bishop's pamphlet is so good that it can be confidently recommended to any political sap who still swallows the guff about Socialism in Russia.
[From an article by "Horatio’ in the Socialist Standard. February 1944.]

It's a bloody lottery! (1995)

From the February 1995 issue of the Socialist Standard

The advent of the National Lottery has unleashed a real feast of unreason. The Sun (14 November) took up a lot of its valuable space printing a large red disc, five inches in diameter. The accompanying text boasted that the Sun “now brings you another amazing way to help you scoop the huge jackpot - LOTTERY SPOTTERY. The giant red dot on this page has been charged with lucky psychic energy . . . all you have to do is touch the lucky spot when you want to pick you numbers. Just close your eyes and the numbers will come to you. You can also use the power of Lottery Spottery by cutting out the dot and rubbing it on your lottery ticket to turn it into a winner”.

What’s that again? Psychic energy? The Sun explains. “Top British psychic Nella Jones channelled her energy into the Sun’s lucky red spot, which we have reproduced here . . . even if you’re playing the lottery with the Sun’s Wizard of Odds Sunplans, a little bit of extra luck will do your chances no harm at all.”

And how does this so-castled “psychic energy”, which we are told was implanted in some unexplained way into a red disc in the Sun's office in London, transfer itself into the millions of Sun newspapers printed and sent to the farthest comers of the kingdom? We are not told. But then, if you have enough reasoning power to ask such questions, you wouldn’t be reading this rubbish in the Sun, would you?

Bloomsbury' Press, which brought out Anna Pasternak’s Princess in Love (the book that even convinced royalists found sick-making) made its own grab for profits by publishing Dream Ticket, sub-titled How to Win the National Lottery! This book, said Bloomsbury, allows you to “decode the secret predictions of your sleeping mind” (Guardian, 16 November). If you dream of eating lettuce, bet on 34 and 29, if [you dream] of cutting your nails, then it’s 13,31 and 24.

And John Major gave the nation a lead by betting on numbers “combining his birthday with the addresses in Downing Street that he has occupied”. A large advertisement in the Observer (1 January) offered readers the chance to buy “the Lottery-Beater”, telling the buyer how to win the National Lottery. So here is a genuine philanthropist: he knows how to win the National Lottery (otherwise he couldn’t offer to sell readers the information), but he isn’t going to win it himself, he will let others do it.

Fortunately for him, many people won’t be able to work that out.

The Sun (31 December) had big headlines: “The Question That Is Gripping Britain - Why Haven’t These Balls Dropped Yet?” The article began: “These are the amazing 19 numbers that still haven’t been picked after six draws of the National Lottery'.” They “include No. 7 - said to be the luckiest lottery number of all. So if you are looking for a banker to play in all your lines, 7 may be the one for you”.

Almost certainly, the journalist writing this tosh must know that numbers drawn previously have no effect whatever on numbers drawn later. If you toss a coin fifty times, and get heads each time, the chances that you will get heads or tails at the fifty-first time are exactly even. But the editor (on behalf of the proprietor, Rupert Murdoch) wants this obscurantism, so the journalist supplies it.
Alwyn Edgar