Correspondence: Currency, Credit and Socialism. (1931)

Letters to the Editors from the February 1931 issue of the Socialist Standard

Mr. B. Benjamin (Catford) writes that, "although there is no shortage of gold, there is quite definitely a shortage of money in circulation in practically every country in the world.” The only evidence Mr. Benjamin gives is a statement that there is no "affluence among the working classes." He writes: "The phenomena of falling prices, of stark poverty, and starvation in an age of plenty are indisputable signs of a decrease in the purchasing power of the nation." So far from this statement being “indisputable,” we emphatically do dispute it. It is simply not true.

In view of the fact that purchasing power arises, and can only arise, from the existence of goods and services of one kind or another in the market, there cannot be any difference between the total of goods in the world and the total of purchasing power. The two appearances are only opposite aspects of the same thing.

Mr. Benjamin is quite correct when he says that the workers lack purchasing power, but he fails to see the meaning of his own further statement that there is "starvation in an age of plenty." The workers lack purchasing power because the capitalist class control a large portion of it. We mentioned in the January issue that investors offered £140 million for a £3½ million issue of shares. Does this indicate lack of purchasing power?

If shortage of money has caused a shortage of purchasing power (these are two different things, let it be noticed), why are the capitalists in the main not affected?

Mr. Edwin Wright (S.E.5) also writes about "money reform." He says :—

  You have rejected the greatest discovery of modern or any time which would enable a Labour Government to establish socialism without bloodshed. . . .  I base my policy upon the fact that "banks create money”—that they have created £2,000,000,000 of money.  . . . As the Chairman of the Midland Bank admits, credit money is created by bankers.

We have on previous occasions had letters from Mr. Wright, but he continues to repeat his absurd statements without dealing with our answers to them.

First, let us disabuse Mr. Wright’s mind of the illusion that his money reform scheme is modern. It was already hoary with age when Marx wrote about credit in Volume III of "Capital,” and when John Stuart Mill disproved it and described it as a "confused notion" in his "Principles of Political Economy" (see People’s Edition, page 309, published in 1872). Mill wrote his book before 1847.

Mr. Wright offers us a scheme which "would enable a Labour Government to establish Socialism.” What he does not tell us is how he is going to make the Labour Government want to establish Socialism; and how, after that, he is going to make the Liberals keep the Labour Government in office when it starts trying to establish Socialism; and how, when it gets thrown out through loss of Liberal support, he is going to make the workers (who in the main do not yet want Socialism) vote for Socialism. Mr. Wright forgets, too, that he has on previous occasions told us that capitalists support his scheme as a means of saving capitalism.

Mr. Wright says that the banks have created £2,000 millions of deposits. His evidence for this is that Mr. McKenna is supposed to have said so many years ago. Mr. Wright ignores the address given by Mr. McKenna at the 1930 meeting of the Midland Bank, in which he ridiculed the idea (see "S.S.,” March, 1930).

It would also be interesting to know why, if banks can "create credit,” they do not create it for themselves instead of doing so for their depositors, and then paying the same depositors millions of pounds of interest on their deposits. Also, why do not Governments which control State banks use this power which Mr. Wright believes they possess? Why, for example, does the Russian Government try to borrow money abroad and pay high rates of interest on loans at home?

Ed. Comm.