Devaluation of the Pound?
In the early days of capitalism the business men and economists invented the theory that if each capitalist got on with the business of selling goods and making profits production and distribution would flow smoothly and all would be well for everybody, including the workers. Like all such theories it was no more than their attempt to justify their profit-making activities against the critics and it became increasingly difficult to defend in face of the evidence that the flow was never smooth and at intervals was chaotically otherwise.
Then grew up the idea, from the same quarters, that with more study and the accumulation of facts and figures, capitalists and governments could foresee trends and avert unwanted developments. This, too, has proved to be a myth and a case in point is the frequency with which governments find themselves induced to vary the values of their currencies because of international trade difficulties. The point is that these revaluations are never the result of free choice. The pound has been devalued several times and now another devaluation is being discussed. The pound was once worth 4.86 dollars, then it was reduced to 4 dollars, and then, in 1949, despite the repeated denials of the British government, it was suddenly dropped to 2.8. And in the nineteen thirties Roosevelt cut the dollar to about half its gold content.
Now, Mr. C. L. Day, writing in the London and Cambridge Bulletin (supplement to the Times Review of Industry, September, 1960) gloomily forecasts the possibility that the low level of British exports will have to be met either by policies which will increase unemployment or by devaluing the pound.
The City Editor of the Daily Mail (7/9/60) concedes that Mr. Day may be right in his forecast because he "has an excellent record in this respect." but can derive no happiness from the prospect.
It may well be. But surely we can try a little harder and suffer a little more to preserve the value of our currency before we shrug our shoulders and admit defeat by devaluing the pound again—about the best way of making sure that nobody ever wants to hold pounds any more.
And, of course, the assumption that such a move would solve anything by giving a boost to exports depends on what other countries do; if world trade becomes stagnant they may all be doing the same, including the U.S.A. One forecast we can safely make is about the attitude of the government and employers if a devaluation is decided upon sometime: they will be urging the workers not to press for higher wages. In 1949 when the Labour Government took that step they knew that the effect would be to raise the cost of imports and raise the cost of living and Sir Stafford Cripps, Chancellor of the Exchequer, made his famous or infamous declaration that workers must not ask for more pay to meet higher prices.
Speaking in the House of of Commons on September 27, 1949, he said:—
"Especially and specifically there can, in our view, be no justification for any section of workers trying to recoup themselves for any increase in the cost of living due to the altered exchange rate. That is a general burden spread over all and must be accepted as a very real and essential contribution towards the avoidance of vast unemployment."
Fortunately the workers did not take much notice of his appeal: if it happens again they should in their own interest take no notice at all.
The Oil Industry
Ever since Malthus there have been “experts” telling us that at some time in the future world resources will not be sufficient for the needs of a bigger world population, but none of them have been able to show that world resources have been insufficient in the past or present, or explain why capitalism has all along failed to meet the reasonable needs of the vast mass of the population. It is not nature, or lack of efficiency in production that is responsible, but the structure of the social system, which in industry after industry periodically produces too much for the market and too little for the needs of those who have not the money to buy. At present world markets are glutted with too much coal and too much oil, millions of tons of unsold coal, oil refineries working below capacity and tonnage of idle tankers running into hundreds of thousands.
The City Editor of the Sunday Times (21/8/60), Mr. William Rees-Mogg, tells how the oil situation came about. It is the old story of capitalists absorbed in their own problem of producing to make profit irrespective of what is happening elsewhere, of governments determined to promote their own oil industries no matter what the effect on markets, and planners making forward plans in the dark. Mr. Rees-Mogg lists four specific reasons:
"The first is that the Suez crisis concealed from the industry the fact that it had reached a stage of over-investment. At what should have been the top of the investment cycle another great wave of investment was added on. The second reason, and a most important one, is that the American oil companies looked abroad for oil to supply their home market: then the cuts on imports forced them to try to sell abroad what they had found abroad. During the 1950s it also happened that local nationalist feeling made each country want its own refinery; as a result there are too many refineries. Finally, nature was generous and oil exploration, particularly in North and West Africa, found enormous new fields.”
About the planners he writes;
The result is that there is more oil, more coal and more electricity at lower cost than anyone foresaw. As recently as 1956 the standard view, taken, for instance, in the Hartley Commission Report, was that there would be a general fuel shortage lasting as far ahead as could be foreseen. That has already been proved false.
Russia too!
In the early days Russian economists used to maintain that in that country self-sufficiency was the aim and production was planned for the needs of Russian industry only. Now Russian trade departments are busy scouring the markets of the world for outlets for surplus commodities, from motor cars to oil. A special correspondent of the Times (8/9/60), who holds the view that the trade drive is only partly political in its aims, quotes from a recent Russian novel what he accepts as a picture of what has happened:
"A Russian novel which has just appeared devotes a chapter to the embarrassment of local officials in the Volga oilfields who are faced with an unexpected abundance of oil for which insufficient outlets exist. This presents a new problem for Soviet planners. By long tradition, they are conditioned to urge the industrial chiefs on the spot to increase output to the maximum extent, rewarding them generously with bonuses for “overfulfilling the plan.”The planners now appear to suffer from overfilled storage tanks, and measures must be taken to check the flow, which has consistently exceeded expectation. For example, the oil plan for 1960, as laid down in 1956, envisaged an output of 134m. tons, but production in 1960 is, in fact, likely to exceed 144m. tons. If these output figures are indeed unexpectedly high, they must have outrun the growth in refining and storage capacity, and it is reasonable to suppose that the foreign trade agencies of the U.S.S.R are under heavy pressure to dispose of extra quantities of Soviet oil abroad, additional to amounts which were originally earmarked for export. "
A sideline on this is provided by Mr. Stephen Parkinson, who recently led a delegation of British business men to Russia on behalf of the Institute of Directors. Writing in the Director (August, I960) he reports that the Russian officials they met “could not resist talking about greater trade possibilities and making one or two acid comments about their failure to sell Soviet oil to Britain’’—the British government has so far turned a cold eye on Russian offers to sell oil here well below the prices of the British and American companies.
Mr. Parkinson also had something to say about the Russian sense of humour which he finds is rather like the British. He tells of Russian officials he met: “Nor were they backward in pointing to what they considered to be the advantages of Socialism over capitalism, but it was all done with good humour and often to lighten the tedium of a long meeting.”
If Russian officials say, and Mr. Parkinson accepts, that Russian State capitalism is Socialism, it is funnier than any of them think.
Edgar Hardcastle
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