Alladin's Lamp. Another Conjuror Fails. (1919)

Pamphlet Review from the August 1919 issue of the Socialist Standard

"The New Way. To Pay Old Debts. To Find New Money, and Reduce Taxation." By John T. Day, Editor of the "Shoe and Leather Record."

The Sign of the Loose Jaw

In the above pamphlet Mr. Day, like most capitalist writers on economic subjects, makes quite a number of ill-considered statements, easily seen of the to be false or absurd. Most of these statements are unsupported by evidence of any kind, and no reasoning whatever is attempted to justify them. Sometimes in a further statement the author even supplies evidence, unconsciously, that exposes his previous utterances, as, for instance, when he says that "Money is only counters," and further on explains that "When we send money abroad in settlement of international balances, it goes as metal and not as money. It may or may not have been minted into sovereigns, but if it has it is more likely than not to be melted down at the end of its journey."

Surely this is direct and conclusive evidence that the metal contained in a sovereign is equal to the value stamped on its face. All Mr. Day's subsequent jeers at the gold standard, therefore, fall flat, because gold as a standard of price is real value, and the sovereign, being the unit of measure, is exchangable for other forms of wealth in multiples or fractions of itself.

The Frailty of Bradburys.

For the same reason our author's statement that "paper money is as good as any other for internal purposes" is only true up to a certain point and under favourable conditions. But why a difference between internal and external purposes ? If it is lack of confidence which makes gold international money, then lack of confidence in the home government, industrial crises, or financial panic, will transform credit notes into mere "scraps of paper," and gold immediately asserts itself as the only general equivalent embodying value—the only equivalent desired because its value is the result of embodied labour, which, of course, is the only source of exchange value. Credit in all its forms is only the acceptance of a promise to pay in the recognised medium of exchange. Neither commodities that are unsaleable, nor businesses that are redundant, are acceptable as equivalent or as security.

A Definition of "Tick."

The credit system, therefore, depends for its stability on expanding trade. Directly markets show signs of failure to absorb the increasing mass of commodities flung indiscriminately upon them, up goes the bank rate. If this does not restrict production, a certain proportion of commodities become unsaleable, prices fall, small capitalists, unable to pay the high rate of interest or push their sales by extensive advertising, are the first to go to the wall—hence their agitation for "cheap money."

The Finger of Gord.

Mr. Day, as a champion of the smaller fish in the capitalist sea, is desirous of saving these smaller fish from the cannibal greed of the bigger fish, who in every industrial crisis scoop them up wholesale through bankruptcy. He, therefore, calls upon the Government to nationalise the Bank of England and provide State credit, i.e., provide the smaller capitalists with the necessary capital to carry on production in spite of a falling market.

But the large capitalists reply, in the language of Malthus, that the world is for the fittest, and when the world's commerce is convulsed with repeated shocks that shake down business houses in every crisis, a divine purpose is revealed because the big concerns, with their wider scope, can effect economies in production and cheapen commodities for all mankind. To the small capitalists, as to the large, exploitation of the workers is natural, and is a necessary part of what would be the best of all possible systems, if they could only retain the plunder.

The predicament in which the small capitalists find themselves is due entirely to the natural development of the capitalist system. Competition between capitalists for a limited market must necessarily result in the success of those who operate with the largest amounts of capital. We see this truth emphasised daily, large concerns acquiring others in competition with them and amalgamating into groups with the object of controlling entire industries or markets.

The extinction of the small capitalist is no concern of the workers. Their immediate concern is how to escape exploitation altogether. If they side with him and endeavour to stop the progress of the big concerns, their action must be as futile and foolish as was that of the Luddites, who sought to hinder the march of machine production by smashing a few of the machines. It is no more possible to arrest the development of a social system than it is to reestablish the conditions of a former period or system.

In the United States a movement against the trusts has been on foot for years. A number of Acts have been placed on the Statute Book and, as one writer put it, "there is a growing hostility towards wealth"; but the power of the trusts has not diminished, and the amalgamation and absorption still go on.

In this country men like Mr. Day, instead of agitating against trusts, invent wonderful schemes for providing unlimited credit. Much more marvellous than the slave of the magic lamp, who only created wealth from nothing, he would transform the national debt—which is on the wrong side of nothing—into its equivalent of assets, or real wealth, by a magic systena of book-keeping all his own.

Briefly, Mr. Day's idea is 

"that the Bank of England should be nationalised. That the Treasury should offer to exchange outstanding war bonds for what might be called national credit bonds, bearing a higher face value, but carrying no interest. These would be received at the Bank of England, and credit given for them at their face value. Thus the Bank and the Treasury would be as it were two pockets of the same garment, and when and whether the debt was paid to the Bank would be of little consequence. The whole transition would be merely a matter of book-keeping. No money would pass. Consequently, the entire debt might be quickly wiped out, in form as well as in substance, without a penny being raised by taxation."

If the matter were as simple as this the question might well be asked, why did not the Government print credit and treasury notes for the payment of everything they needed to prosecute the war ? Mr. Day's scheme is the same in substance, the only difference being that he defers its adoption till after the war and increases the face value of the bonds by three per cent.

Those capitalists who availed themselves of the offer would gain the three per cent., but in doing so would renounce the interest periodically due to them, while at the same time their opportunities for investment would diminish as the amount withdrawn in this way increased. It must be obvious that no bank would receive and pay interest on credit or treasury notes unless a large percentage could be profitably loaned by them. The result would be a diminution, and possibly the disappearance, of interest on deposits. Mr. Day would, in any case, have not only cheap money, but, as the experiment progressed, vast quantities of idle money.

Of course, the scheme could never get as far as this. Some of the small capitalists, already tired of their five per cent. patriotism and hard up for capital, might avail themselves of it, but the vast majority would hang on to their five per cent. until they could see opportunities of using their capital in the ordinary way of exploitation for a higher return.

Mr. Day's new way to pay old debts, etc., so far as he is concerned, is an "Arabian Nights" dream. It must remain a dream because the big financiers and capitalists, who in group form control the political machinery in every country, actually use the bank rate as a brake on production. When the world's markets are saturated with commodities and demand begins to slacken, they beat the smaller capitalists out of the market with their high rate of interest and ensure for themselves the bulk of the trade.

But who gets the trade, or who pays the taxes, or the national debt, is of small interest to the working class. They can neither pay out of wages based on the cost of living, nor obtain anything more from trade than such wages. Their obvious course is, therefore, to understand why it is that, although they produce all the national wealth, their share is a bare living wage.

Large and small capitalists are united in one class to exploit the working class. The elimination of the small capitalists, or the more equitable distribution of trade, or capital, among capitalists generally, matters nothing to the workers. The more closely the latter examine all such questions the more convinced will they become that, for them, the one question that transcends all others is their exploitation as a class. Their "New way to pay old debts" should be to gain control of the political
machine, and to use the power they thus obtain to take from all capitalists, nbig and little, the right to exploit.

F. Foan