Friday, April 8, 2022

Review: January 1972 (1972)

The Review of the Month column from the February 1972 issue of the Socialist Standard

At Home

The New Year came in to the ominous sound of politicians and economic experts assuring us that 1972 is going to be a boom time to remember. Ominous for those who recall, or who know about, all those other Januaries when the same forecasts from the same quarters turned sour. Most spectacularly, and most memorably, the year of the Great Crash—1929—was welcomed as a bumper year. There is plenty of evidence that the people who claim to control the economy of capitalism have no idea of what is happening but at times they make it too obvious.

Thus boom year 1972 opened with about one million out of work; what did they think, of the gay assurances on the city pages? of the reports of the bumper time many big investors had in 1971, and expect to better in 1972? It opened with the miners striking in a desperate attempt to hold the slide in their standard of living, with a strike. What sort of a boom is it, in the mining villages with only a ghost of a pit to remind them of the reality of capitalism’s economics—and its anarchy? When the experts tell us we are in for a good time, wise men take cover.

Some had to take cover literally, as the drums of poisonous chemicals from the sunken steamer came bobbing in on the tides along the beaches of southern England. This will not help the seaside landladies to get their share of boom time 1972. The incident sparked off, again, a great uproar about the environment and the way in which capitalism fouls the air we breathe, the water we drink, the food we eat.

In some ways this is all to the good; after all, who chooses to take their holiday swim in a sea full of sodium cyanide? But it is fair to ask, where the environmentalists have been all this time, while socialists have been spelling out the facts on the pollution which capitalism has to cause. A clean world fit for humans to live in is an impossibility while society is organised on the basis of production for sale and profit. Capitalism pollutes and corrupts everything it touches, not simply our directly physical environment. We have been hammering home this lesson for over sixty years; and it still isn’t too late to do something about it.


The freeing of Sheik Mujib Rahman gave the people of East Pakistan a new god to worship; presumably they now feel secure and certain in their future. Nobody should be misled into thinking that the scenes of massive, hysterical rapture which followed Mujib’s release could happen only in a country like Pakistan. The memory of Nazi Germany, and of the mass adulation given to Churchill, is too close for that. The mob emotion in Pakistan is a symptom of the political backwardness of its people; just like their counterparts in more “advanced” countries, they are sure to be disappointed when they find how frail, how humanly impotent against the demands of class society, their new god is.

Meanwhile, a few thousand miles across the world the first preparations for the election of a new god are under way. In America the Democratic Party are beginning to sort out the contenders for their nomination for the next presidential election. From now until August there will be a series of primary elections, which will be contested with an intensity of purpose so strong that it may disguise the true nature of the whole affair. The same old promises, dressed up in up-to-date terms, will be dragged out and offered. There will be the same old talk about qualities of leadership, as each candidate modestly puts himself forward as the new superman who can solve all the problems of the American workers simply by being in the White House. A great deal of money will be spent in the campaigns. And the end result will be another leader of capitalism.


For some time it has been muttered, that Heath was about to reshuffle his government (“reshuffle” is a good word — after it all we’ve still got the same old cards) and present us with a new set of political bosses. There was some surprise, that this had not happened immediately in the New Year — and probably some anguish from the hopefuls who were looking to take the first steps up the ladder of political ambition. To the workers of Britain it need not matter, who rules over the part of capitalism they happen to live in. Their resolution for 1972 should be to do something about getting rid of the system, with all its suppression, its poisons, its cynicism and despair.

Editorial: The Class Struggle. A Lesson from Germany. (1927)

Editorial from the February 1927 issue of the Socialist Standard

There are large numbers of people who believe that discontent and social upheavals are caused by the propaganda of “agitators,” and conversely that they can be prevented by counter propaganda. For them Czarism was overthrown by Lenin, the miners’ strike was the work of Cook and the class struggle was created by Marx. They are unable to distinguish between the observation of facts and their causation. Marx did not preach the class war in the crude sense of desiring class hatred, either for its own sake or for any other purpose. What he did was to observe that in society as it existed before his eyes there was an employing, property-owning class and a propertyless employed class. No-one disputes this as the statement of an obvious truth, but for Marx it was not only interesting but also historically important. And having observed and examined the class division and consequent class struggle Marx rightly urged the need to apply this knowledge to current political movements. The workers must, he said, recognise that at bottom their movement, like the preceding movement by capitalists to establish and promote capitalism, is a class movement. It must eventually define clearly its class aim of transferring the means of production from private hands to the community. Marx never supposed that he, or other Socialists, “invented” the class struggle or the idea of Socialism. Socialism is the product of Capitalism in that the facts of the existing system gradually force themselves upon the notice of the workers. The task of the Socialist propagandist is to hasten recognition of the facts of social development by directing the workers’ attention to them.

The Socialist could not hope to propagate Socialist ideas outside of capitalist conditions or before the existence of capitalism. The propagandist with the Socialist idea is himself only the product of those conditions. A handful of Bolsheviks, intelligent and devoted though they may be, cannot build Socialist society in a country—Russia—which is overwhelmingly peasant in composition and organisation. They can and are doing the good work of speeding up development on modern industrial capitalist lines. Similarly unlimited capitalist propaganda in industrial Germany and England cannot prevent, it can only delay, the growth of Socialist ideas in the minds of the workers. It is with great pleasure that we read of an enquiry undertaken by the International Catholic Labour Unions “into the sentiments of those German workmen who are organised in the Roman Catholic ‘Christian Trade Unions’ which have a total membership of more than 600,000.” The enquiry is reported fully in the Manchester Guardian (January 1st, 1927) from which the following is reproduced :—
Views of Catholic Trade Unionists.
(From our Berlin Correspondent). 
“The idea of “industrial peace” and of “reconciliation between workmen and employers” has been promoted with as great energy, skill and sincerity in Germany as in any other country. Leading German industrialists, even when they themselves are Conservative, have publicly declared that Germany cannot be governed without the help of the working class, and that Germany should have a coalition Cabinet in which the Socialist party is represented.

What German workmen themselves think of “industrial peace” has been rather a mystery, to which the Labour Press has given no satisfactory clue. But members of the Roman Catholic Centre party have, on behalf of the International Catholic Labour Unions, made an inquiry into the sentiments of those German workmen who are organised in the Roman Catholic “Christian trade unions,” which have a total membership of more than 600,000.

The result is of extraordinary and universal interest. The Christian trade union, which have been criticised as “unrevolutionary,” as subservient to the Church, and as hostile to the class war, form the moderate right wing of the German Labour movement.

The inquiry has been conducted with that complete honesty which the German Centre party always shows when it tries to establish facts that are important to itself. Questionnaires were circulated amongst the Roman Catholic clergy throughout the industrial districts of Germany as well as amongst the officials of the Christian trade unions. The following is a brief summary of the main subjects of the questions, as well as of the answers that were returned. Many of the answers are detailed enough to fill a book, and many were after long discussions with the workmen. In every case the questions relate to Roman Catholic workmen organised in the Christian trade unions.

The general tendency of the answers is to record growing enmity. The mildest expression used is “cold neutrality.” Other answers mention “estrangement,” “distrust,” “opposition,” “tension,” or speak of downright hostility. One answer says that the employers “have no soul and no conscience,” and another that “the purely capitalist attitude of most employers does not allow trustful co-operation to grow up. . . . In the factory the workman feels that he is not treated like a human being. … In public and political life he sees that the employers are, for the most part, on the side of reaction, and hostile to democracy.” The possibility of any improvement is denied. Some of the answers show that the industrial peace overtures made by German employers have aroused nothing but suspicion. Those employers who are themselves Roman Catholics are criticised with special severity. One answer says that “there is bitterness over the fact that Roman Catholic employers limit their Catholic ethics to their private lives and are anxiously concerned not to allow these ethics to appear in their business activities.” Many complaints are made about the “soullessness” of the big industrial concerns. Complaints from smaller factories and workshops, where a more personal relationship between employer and employed is still possible, are, on the whole, less acrimonious.

Intellectually and as a Christian the Roman Catholic workman condemns the class war. But, as many of the answers show, hostility towards the possessing classes has a deep emotional influence upon him. Workmen who have no property of their own and are entirely dependent on their wages are filled with a sense of insecurity and dependence. They feel an ever-deepening resentment, “especially when wealth is displayed before their eyes by the propertied classes. It is their daily experience that the propertied treat the non-propertied classes as beings of a lower order — nothing, indeed, embitters a workman more than this.”

A common fate in the years of revolution and inflation created some fellow-feeling between workmen and intellectuals, but almost all traces of this have vanished. It is only “in an occasional priest or an occasional physician that the workman sees a true friend nowadays.” Generally speaking he likes and respects the clergy who are engaged in welfare work, but the clergy and the Roman Catholic Church as a whole are losing their hold upon him. An answer from the Rhineland states that “one must be blind in both eyes not to see that the authority of the clergy is dwindling.”

There has been a great change; for whereas Roman Catholic workmen in Germany used to be hostile to Socialism, they are now no longer so, except in a purely theoretical manner. Almost all the answers agree on this point, although they vary in their attempts to explain it. In the economic struggle there is practically no difference between Socialist and Roman Catholic workmen. If the Church were to wage war on the Socialist movement, it could not, so the answers emphasise, expect the Roman Catholic workmen in Germany to show the slightest enthusiasm for such a war.

On the whole the prestige and the persuasive power of the Communist movement have diminished. It still takes a hold on those who think that Socialism is not coming quickly enough. Its influence on young and undeveloped workmen is considerable. The attempt to make Communism attractive to Roman Catholics by representing it as a kind of primitive Christianity has met with some success.

Youthful Roman Catholic workmen on the whole show great mental independence and an inclination towards Radicalism. They observe the formalities of the Catholic faith but without religious enthusiasm. There is a broad tendency amongst them to strive for a united trade union movement, irrespective of faith. Considerable numbers are attracted by the semi-military organisations of Fascist Right and Communist Left.”
Here we have extraordinary evidence of the truth of the materialist view of history. The highly organised, richly financed and skilful propaganda of the Roman Catholic Church is helpless against the educational effect of the actual conditions of working class life. Marx truly described religion as the “Opium of the People,” but to misquote a Biblical saying, “Man cannot live by opium alone.” In the long run he demands material comforts, and rejects the social system with the religious apologists for it, because they offer him the opium of religion when what he needs is bread.

The Monistic Conception of History by G. V. Plechanoff (part III) (1927)

From the February 1927 issue of the Socialist Standard

[Plechanoff’s Famous Work now translated.]

Chapter II.
“One of the most important conclusions to which one must come through the study of history is that the government is the most potent cause in shaping the character of the people; that the qualities and defects of nations, their strength or their weakness, their talents, their education or ignorance, are almost never due to climate or racial peculiarities; that nature gives everything to everybody, and the governments preserve or destroy the gifts of nature that constitute the common possession of the human race.” In Italy there were no marked changes either in climate or in race; “nature was the same for the Italians of all times; the only thing that did change was the government—and these changes always brought with them, or came together, with changes in national character.”

Thus argued Sismondi against those who tried to make the fate of nations dependent upon their geographic environment. His arguments contain some truth. Geography can really not explain much in history, especially because it (geography) is part of history, and because, as Sismondi says, governments do change, though the geographic environment remains the same. But this is only by the way ; we are interested in an other question. The reader must have already noticed that the fluctuations of the historical fate of nations is opposed to the stability of geographic environment. Sismondi knows of only one factor that can explain these changes : government—that is, the political order of a given country. The character of a nation is wholly determined by the character of its government. It is true that after dogmatically stating this theory, Sismondi tries later to soften it. Political changes, he says, come either before changes in national character or after them. That means that the character of the government is sometimes determined by the character of the people. Sismondi then has before him the same contradiction that the French “Enlighteners” had. The character of a nation is determined by the character of its government; the character of a government is determined by the character of the nation. Sismondi could just as little solve this contradiction as the French “Enlighteners.” He was therefore compelled to take as foundation for his discourse at one time one, at another time, another, member of this antinomy, But, as long as he has once taken the view that the character of a government determines the character of a people, he had to exaggerate out of all proportions the concept of government. It meant for him the whole social environment, all peculiarities of social relations. It would be more correct to say that for him, all peculiarities of a given social environment are affairs of government, the results of the political order. This is the stand point of the eighteenth century. When the French materialists wanted to express, in a short and vigorous manner, their convictions as to the all-powerful influence of the environment on man, they said : “C’est la Législation qui fait tout”—and whenever they spoke about legislation, they always meant political legislation, political order. Vico has a small article called Essays on a System of Jurisprudence in which the Civil Rights of the Romans are Explained by Their Political Revolutions. Though this essay was written just at the beginning of the eighteenth century, the ideas expressed in it, on relations between civil rights and the forms of government, were the accepted views until the restoration period. The “Enlighteners” reduced everything to politics.

But since the activity of a legislator, though not always teleological, is invariably conscious, and the conscious activity of a man is always dependent on his “opinions,” we come again to the thought then, that opinion is above everything else, although we set out to prove the supremacy of environment. The younger set of French historians took an entirely different view of this problem.

The course and results of the French Revolution, with its numerous surprises, was in itself a flaring denial of the power of “opinions.” Many had become entirely disappointed with “reason,” and others, who did not succumb to disappointments, became more and more inclined to the view that environment is all-powerful, and the investigation of its development became all-important. But their views on environment were also changed. The great historical happenings have demonstrated the weakness of legislators and political constitutions to such an extent that to declare them as the determining historical cause was ridiculous. Political constitutions began to be viewed not as a cause but as a result that is to be explained.

“A large number of writers, learned historians and publicists,” says Guizot in his Essais Sur L’histoire de France, “tried to explain the given state of society and state of civilisation through the prevalent political order. It would be far wiser to begin with the study of society itself in order to understand its political institutions. Before these institutions can become causes they are results ; society creates them before it begins to change itself under their influence. Instead of judging a people according to its political institutions, we must first study the people to find out what sort of a government it must of necessity possess. Society, its constituents, the life of its individual members, their dependency on their social positions, the relations between various classes of men—in short, the civil life of men (L’etat des personnes), these are the problems that should first engage the attention of the historian who wishes to know how people lived, and the publicist who wishes to know how they were governed.”

This view is just the opposite of Vico’s. The latter would explain civil laws through political revolutions; Guizot, on the contrary, would explain political institutions through civil life, that is, through civil laws. But the French historian goes even further in his analysis of society. According to him, the civil lives of all nations that entered the historical arena after the fall of the western Roman Empire, are strongly tied to their land relations (état des terres). The study of their land relations must therefore precede the study of their civil life : “In order to understand political institutions, it is necessary to study the different groups that constitute a given society, and their mutual relations.” In order to understand these groups, it is necessary to know the nature of their land relations. From this standpoint Guizot studies the French history of the first two dynasties. For him it is the history of a struggle between various groups of society. In his history of the English Revolution, he goes a step further, describing it as a struggle of the bourgeoisie against the aristocracy, and thus silently admits that in order to explain the political life of a country, it is necessary to study not only the land relations, but their property relations in general.

This view was not only held by Guizot, but was also shared by Mignet, Thierry and others.

In his Vous des Révolutions d’Angleterre, Thierry represents the history of the English revolution as a struggle between the bourgeoisie and aristocracy. “All those whose ancestors belonged to the conquerors,” he says in speaking about the first English Revolution, “deserted their castle for the King’s camp. At the time it could be said that the armies assembled—one in the name of leisure and power and the other in the name of labour and freedom. All those who did not work, all those who looked to life only for the pleasures that they could get without working for them, assembled under the King’s banner, to protect their common interests; all the descendants of the conquerors that were drawn into commerce fell in with the party of the people.”

The religious movements of that time were, according to Thierry, only reflexes of real life interests : “Both sides fought for real interests. All the rest was only for pretext. Those who were on the side of the subjects were mostly Presbyterians, that is, they did not want any subjection even in religion. Those who fought on the other side were Anglicans or Catholics, that is, they strove for power and taxes, even on the religious field.” Thierry quotes from the History of the Reign of James the Second the following words : “The Whigs looked on all religious opinions as politicians ; even their hate of the Pope was caused not by the prejudices and idol-worship of that unpopular sect, but by their desire to make the power of the state absolute.”

In Mignet’s opinion “social movements are determined by ruling interests. These proceed to their goals, stop as soon as the goal is achieved, and make place for other movements which are unnoticed at first but which grow to be predominant in time. This was the way of feudalism. Feudalism exists in the needs of men—but not yet in practice—this is the first epoch; in the second epoch it existed in practice, slowly ceasing to correspond to man’s needs and finally ceased to exist entirely. No revolution was accomplished in any other way than this.” In his history of the French Revolution Mignet interprets these events from the standpoint of the “needs” of different social classes. The struggle between these classes is for him the mainspring of what happened. Of course this standpoint did not find favour in the eyes of the eclectics of that time. The eclectics accused the new historians of fatalism, and the spirit of system. As it usually happens in such cases, the eclectics did not see the really weak points in these new theories and energetically fought against its strong points. At all events this conflict is old and at present uninteresting. It is more important to note that these views were defended by the St. Simonist, Bazar, one of the most brilliant representatives of socialist thought of that time.

Bazar did not think that Mignet’s book on the French Revolution was perfect. As one of its defects he considered the fact that according to Mignet the French Revolution was a thing in itself, without any connection with “that long chain of efforts which, after destroying the old social order, were to make the introduction of the new order easier.” He knows, of course, that the book undoubtedly has its good qualities. “The author strove to characterize those parties that led the Revolution consecutively. He wanted to show us the connections between those parties and the interests of certain social classes, to show how the development of events put first one party and then another at the head of the movement and caused them to disappear entirely afterwards. The spirit of system and fatalism, for which these historians have been so severely criticised by the eclectics are, in Bazar’s opinion, most valuable assets.”

If one should have asked Thierry, Guizot or Mignet whether the character of the people determines the form of its government, or the form of the government determines the people’s character, every one of them would have answered that in spite of the fact that between these two there is always a strong mutual influence, they must, nevertheless, both be explained by a third, more important factor : “by the social life of the people and their property relations.” And the contradiction that could not be solved by the French materialists of the eighteenth century, could thus be solved now.

(To be continued.)

Letter: The Single Tax and Socialism. (1927)

Letter to the Editors from the February 1927 issue of the Socialist Standard

The Editor,

Sir,—In various articles which appear in the Socialist Standard stress is laid on what the S.P.G.B. declaim a fact, that the working class can expect nothing under capitalism, only their upkeep, i.e., food, clothes and shelter.

It is also claimed by the S.P.G.B. that the standard of living of the working class tends to the downward grade.

This statement is true, but it does not follow that the standard of living cannot be raised instead of sinking. I claim that the single tax will raise the toilers’ living—by taxing the owners of land and compelling them to pay economic rent for land in use or not in use. This would solve the unemployed question, because the land will be open for anyone desirous of using it on conditions of paying the economic rent. The toilers working in factories, etc., could increase their wages, because there would be no competition for jobs. A. MacLaren, M.P. for Burslem, is regarded an expert on the land question, and I have heard him challenge all opposition, either in set debate or by questions, but S.P.G.B.ers have been conspicuous by their absence or silence.

The S.P.G.B. are flippant in abuse of Labour M.P.s and ought to be prepared to defend their position in debate.

Henry George spoke of Socialism as a noble ideal, which was sure to be realised.

I have no desire to write a lengthy letter, because space is needed for your own writers, but perhaps you will be kind enough to print my letter and also your reply.
Thanking you in anticipation,
Single Taxer.

Reply to “Single Taxer.”
The position of the working class in relation to taxes—single or compound—has been dealt with on numerous occasions in the pages of the Socialist Standard, but as our correspondent does not appear to have seen these articles, we may deal with the point again.

“Single Taxer” admits that our statements that the workers only receive, on the average, sufficient for maintenance and reproduction, with the standard of living tending to fall, is correct. But we need to know why this is so to meet “Single Taxer’s” claims.

The various things necessary for producing wealth—land, factories, machines, railways, etc.—are owned by one class in society—the capitalist class. The working class only possess their power to labour. Before they can apply this labour-power to either the land or the instruments of production, they must obtain permission from the capitalist class to do so. The latter class only give this permission when they calculate that they can sell the things produced at a profit. The fact that individual calculations may sometimes be erroneous does not affect the main point. Moreover, the capitalists are not concerned whether the articles are used for necessities, comforts, or even vices. If they can be sold at a profit the uses to which they can be put does not matter.

Another important point to bear in mind is that when the articles are produced they belong to the capitalists—not to the workers. Thus the workers are without any means of living—even after working—until a share of what they have produced is handed back to them in the form of wages. The share left to the capitalists, after paying wages and replacing the value consumed in production, is called surplus-value. Out of this surplus-value various charges such as advertising, rates, taxes, etc., are paid. “Single Taxer’s” theory is that by placing the whole burden of taxes upon the landowner the unemployed problem would be solved, “because the land will be open for anyone desirous of using it on conditions of paying the economic rent.”

The first point to be settled here is what does “Single Taxer” mean by “economic rent”? He does not say. Various definitions are given by different writers, but the one in general use is “the price paid for the use of land apart from any buildings or structures upon it.” How would this rent be fixed? Again, “Single Taxer” does not tell us. Generally single tax theorists claim that it will be settled by competition among those desiring the land. It is easy to see that this is how the bulk of such rent is decided to-day. For instance, a wealthy oil firm bought some land in the City of London a year or two ago upon which they built their offices. Now this land was “open for anyone desirous of using it on conditions of paying the economic rent,” and it may be asked why some labourer, suffering from lack of house room, did not take up this land and use it for himself. The answer would be “he could not pay the economic rent.” It thus is quite evident that the only people who could hire the land under the single tax scheme would be the same as those who hire it to-day— namely, those wealthy enough to pay for it. This would leave the working class exactly where they are now—unemployment and all.

“Single Taxer” may argue that the position would be different because the “economic rent” would be taken by the Government for the purposes of taxation, thus relieving industry of a burden it bears to-day. This may be granted, and from this point of view, the single tax is the ideal form of taxation for the capitalist as it would be placing the tax where it would be the least trouble to him. But “Single Taxer” cannot show how this would alter the position of the workers. They would still remain slaves to the capitalists and still receive, on the average, a maintenance wage. How the capitalists have to divide up the surplus value they have robbed from the workers is of little concern to the latter. Their interest and business is to abolish the robbery by taking control of political power for that purpose.
Editorial Committee.

Letter: A discussion of the Money Question. (1927)

Letter to the Editors from the February 1927 issue of the Socialist Standard

To the Editor,

Socialist Standard.”

Dear Sir,

In reply to A.W.S. in the December issue of the Socialist Standard, on the question of currency, you deny that inflation had taken place during the war period, and, presumably during the years immediately after. In support of that contention you employ a formula which, as you insist, requires for its validity, “any given period under normal conditions” (italics mine).

2) It would be interesting to know by what line of reasoning, or by what stretch of imagination, the war period, and the post-war period up to the resumption of the gold-standard by this country, could be regarded as normal, and treated as such by you.

3) Gold was at no time during the actual war period allowed to function freely as a commodity. The whole supply of the British Empire representing upwards of 60 per cent. of the total gold output of the world, was commandeered by the Government for the use of the Bank of England. Consequently the possibility of measuring the depreciation of paper-currency, relative to gold-currency, which obtains during normal times, by the excess of the market-price of gold over its mint-price, was denied us.

4) No person was permitted to melt or export gold. Those who defied the law were known to make large profits; and thus the depreciation of the paper-pound could be gauged roughly by inference.

5) During the sterling exchange slump in 1915, the Bank made a gallant attempt to maintain the sanctity of the gold-standard and exported a considerable quantity of the metal over a short period. The pace was found too hot, however, even for a Bank that could monopolise for its exclusive use the major part of the newly mined gold, in the world, and the Government was compelled to come to its assistance and by the mobilisation of American securities held in this country, and by their subsequent sale abroad, managed to peg the dollar-exchange at a rate that made it more profitable to settle adverse balances by the purchase of bills, or drafts, than to export bullion.

6) The phenomenon of rising prices preceding the increases of currency during the war period you cite as proof evident that inflation could not have been the cause of high prices. A little consideration, however, will convince one that such precedence is quite in harmony with excessive issues of bank credit. The total credit-units, i.e., legal tender—currency, plus cheque currency, operating at a given time being conditioned by, and strictly limited to, the mass of credit entered on the books of the banks.

7) Thus in the sense that currency is merely an effect, the terms inflation, and deflation, of currency, are meaningless. The amount of currency employed being that needed to allow commodities to circulate at their prices ; which may, however, be paper prices.

The war-time inflation was a credit inflation which in its turn necessitated additions to the currency to give effect to it.

8) For example, as late as 1920 the Government still owed the Bank of England the sum of £400,000,000, which it had borrowed from time to time on “ways and means” account. Is it reasonable to suppose that when the Bank created that mass of credit (purchasing-power) goods of a gold value equivalent to the nominal amount of the loans, were actually available for exchange? And if not then rank “lawism” was being indulged in.

9) It is a matter of common knowledge that on the unpegging of the exchange in 1919, and when gold was again permitted to function freely on the open market it immediately commanded a premium ; thereby pricking the bubble of pretence of non-inflation.
I am, sir,
Yours faithfully,
William Nicholls.

Reply to W. Nicholls. 
For ease of reference we have numbered our correspondent’s paragraphs, but before dealing with his letter in detail it may be as well to note that the only place where he attempts to deny, definitely, our case is in the last line of his letter. All his other objections are in the form of suggestions and inferences.

1) This paragraph reads rather strangely. Mr. Nicholls introduces an emphasis not to be found in our reply to A.W.S., when he says we “insist” upon a certain formula, We did not “insist.” We merely stated the facts in ordinary terms. Why does Mr. Nicholls introduce the emphasis? Perhaps the second paragraph will supply the answer.

2) Neither in the reply to A.W.S., nor anywhere else, have we stated that the war period, or the post-war period, could be regarded as normal. This is a deliberate misrepresentation of our statements. When this is noticed the emphasis of his first paragraph may be explained as a stepping stone to the misrepresentation of his second.

3) This paragraph is just journalistic claptrap. For some time after the war had started gold was still in use as currency, but neither then, nor at any subsequent period would a sovereign purchase more commodities in the ordinary market than a £1 currency note. The two circulated as equals, proving there was no depreciation of the paper currency here.

4) This paragraph displays an ignorance of the economic basis of money. Outside of currency, gold is a commodity—a paper note is not. The only place where they can be compared accurately is in the country issuing the paper. (See June, 1922, S.S.)

5) This paragraph shows the confusion that arises from merely looking at the surface. The Government had to make huge purchases abroad, chiefly in America, and, with the issue of the war in doubt, the paper of every belligerent country was either only accepted with reluctance or entirely refused. But this has nothing to do with “inflation” here. If the amount of paper currency had been reduced to one tenth of the quantity then existing, it would have made no difference to the reluctance to accept this paper abroad. Hence the paying for the goods ordered by the securities called in.

6) Here Mr. Nicholls has to abandon his case. The careful reader will notice that he does not deny our statement of the facts. Neither does he say that the rise in prices was due to excessive issues of bank credit. He only suggests it by a non-sequitor. The question is not whether a rise in prices could
result from an excessive issue of bank credit, but whether the particular rise we are dealing with did so result. Mr. Nicholls does not definitely claim that this was the cause.

Although it is a side issue in the present discussion we may point out that there is no such thing as “cheque-currency.” Currency consists solely of legal tender. Cheques are not legal tender and therefore cannot be currency.

7) This paragraph gives us our case once more. That the wartime inflation was a “credit inflation,” we had already explained in our June, 1922, issue. But a credit inflation is not a currency inflation. Neither are additions to the currency necessarily inflation, as we have already explained.

8) This paragraph really has nothing to do with our case, but it shows once again how Mr. Nicholls has missed the essentials of the problem. For what purpose did the Government borrow the £400,000,000 “from time to time”? Firstly, for munitions of war. Secondly, to pay interest falling due on the loans. In the first case it is not only “reasonable to suppose,” but an actual fact, that goods of a gold value to the amount of the loans were available—and delivered—to the Government to be consumed in war operations. In the second case it is simply an alternative to raising taxes to pay this interest. Ultimately these loans will be liquidated by operations with the taxes.

9) This paragraph mixes two things—the so-called unpegging of the exchange, a Government manipulation—with the restoration of the gold standard. Gold was not permitted to “function freely” until the gold standard was restored in 1925 and only then if the “bull” may be permitted, under certain restrictions. That there was no such thing as “the bubble of pretence of non-inflation,” was shown by the fact that neither then nor now will a sovereign purchase more than a £1 currency note. And this despite the enormously important fact that, along with the so-called restoration of the gold standard, the £.l currency note was, for the first time, made inconvertible.
Editorial Committee.