Letter: Has Russia "Production for Use?" (1934)

Letter to the Editors from the October 1934 issue of the Socialist Standard

Has Russia "Production for Use?"

A correspondent (S.N.), writing from Waihi, asks how the S.P.G.B. justifies its attitude towards Russia in face of the following statement made by an observer of Russian conditions: —

After all, there is nothing wonderful about these (Russia’s) achievements. The simple and sufficient explanation is that in a mad world, one country is acting rationally—and is planning her industry and producing for use not for profit. . . .

The name of this observer is not given, but whoever he is, his observation is very much at fault. Nobody denies that the output of Russian industry has increased, but that can be said of many countries which make no claim to being anything but capitalistic. Whether or not those in charge of Russia can be said to be acting “rationally” depends on the point of view. From one angle it has been said that since Socialism in Russia is at present, and for many years to come, an impossibility, it is wise to come to terms with the capitalist world and enter into the mad scramble for markets which is a feature of world capitalism. At any rate, that is what Russia is doing. One outstanding instance of this is the enormous efforts Russia is making to develop the production of gold. The July issue of the Monthly Review of the Moscow Narodny Bank (an official | Soviet institution), publishes an article on gold production, from which we learn that the output of gold has been advancing rapidly. In December, 1933, it was nearly twice as great as in December, 1932, and a further great increase is planned. Russian gold output in 1933 was second largest in the world, being beaten only by Transvaal. The writer of the article in the Bank Review (A. Serebrovsky—chairman of the Central Administration of the Russian Government Gold Trust), holds out the hope that "in the near future the U.S.S.R. will assume first place in the world as a gold-producing country."

Is this rational, except on a purely capitalist basis? Of course it is not, and the Bolsheviks knew this well enough not so long ago. Did not Lenin tell us that under Socialism gold would no doubt be used for the construction of street lavatories ?

Again, this observer is quite wrong about Russia producing for use. Production for use (and this, too, the Bolsheviks once knew quite well) involves the abandonment of buying and selling, and profit-making. In Russia, however, goods are not produced for use but for sale, at a profit. The first charge on Russian industry is to meet the enormous cost (upwards of £100 millions a year) of the interest payments to the bondholders (mainly Russian citizens) who have invested money in the loans continually being raised by the Russian Government.

Quite unintentionally a pro-Bolshevik observer, Mr. Louis Fischer, who for years represented American newspapers in Moscow, showed the capitalist character of Russia in a recent article called " In Russia, Life grows Easier." He wrote: "The food situation, too, is much better than it was last winter. There is scarcely anything one cannot buy—if one has the money." (Nation, New York, June 13th, 1934. Italics ours.)

That is not production for use but production for sale, as in other capitalist countries, " to those who have the money." Ed. Comm.

Editorial: General Smuts (1950)

Editorial from the October 1950 issue of the Socialist Standard

As in this century it has become a widely accepted convention for professional politicians to speak well—and indeed flatteringly—of their party opponents when they die it would perhaps be unreasonable to expect obituary judgments to be well balanced and critical. With this in mind we could pass over the exaggerated praise of the work and qualities of the late General Smuts but still demand that those who attempt to assess him should give a recognisable portrait. But to do that the writers need to recognise what part Smuts played and the background against which he played it. In particular they need to see that he was a figure in the world of capitalism, thrown up by class interests and strictly limited in his action by the social system in which he lived and by the forces he represented. Instead many of the writers, including some who might have been expected to have at least some understanding of the reality, try to interpret him as if he had complete freedom of action to behave according to some abstract ideal, and as if therefore his seeming inconsistencies had to be explained as defects of character or courage or as errors of judgment.

A line taken by many who paid tribute to Smuts is that he was a man above class and national prejudices. To Mr. Attlee there was “in his large heart . . . a place for all humanity. His great contribution to the creation of the United Nations is but one example of his breadth of view and world statesmanship." (Daily Herald 12/9/50). The Prime Minister of Canada described him as having “adopted the world as his nation,” and Mr. W. N. Ewer (Daily Herald 12/9/50) credited him with “imaginative genius and liberal instincts . . .  His real greatness lay, perhaps, in his imaginative understanding of wider issues.”

These and many similar opinions explain nothing and merely fog the issue. The picture of the errant genius, usually triumphing over obstacles and the stupidity of lesser men, but occasionally falling below his own high ideals is and must be fundamentally false. The real Smuts started as a representative of the Boer farmers in their unsuccessful war against British imperialism and then came to power in South Africa as a capitalist politician, trying, as all administrators of capitalism must do, to reconcile divergent propertied class interests while defending South African capitalism against white workers and the non-white majority of the population. When we are told that he represented “all humanity” we need only remind Mr. Attlee of his own position as a caretaker of British capitalism—there is no room in capitalist administration for a “Minister for the welfare of all humanity.”

Attlee and Ewer cannot have forgotten how the Trade Union Congress condemned Smuts for his part in the crushing of the striking gold miners on the Rand in 1922. Mr. Ewer does in fact refer to it but interprets it (as also Smuts' attitude towards the natives) as “limitations” of his character. “His iron-fisted handling of the great Rand strike . . . cannot be forgotten in any judgment of him. And, though he opposed the ‘native' policies of Herzog and Malan, he was always a rigid up-holder of the idea of ‘white supremacy.' " 

The miners on the Rand in 1922 faced an attempt by the owners to force down wages and to undercut their standards by employing more low-paid native workers. In the strikes and rioting that followed it was Smuts who declared martial law and used troops, artillery, tanks and bombing planes to crush what he called a “reign of Red Terror.” Many lives were lost and many workers imprisoned.

The aspect of this that interested the writer of the lengthy tribute in the Manchester Guardian (12/9/50) was the bold way in which Smuts handled it. “Smuts’ personal courage and decision in this emergency are still the subject of talk in South Africa; after proclaiming his intention to impose martial law, he made his way secretly to Johannesburg, took command, and within a few days restored order.”

No noticeable evidence of the much praised love of “all humanity” there!

The Times gets nearer to a recognition of the class nature of Smuts’ activities and interests when it points out how his party was defeated at the election in 1924 and he lost his own seat: —

“Of the many charges brought against Smuts, who had been in power for so long a time, two of the most widely circulated and effective were, based on his use of troops in suppressing the Johannesburg strike in 1922 and his connection with the Chamber of Mines, whose agent he was declared to be.”—(Times, 12/9/50.)

The South African workers had not forgotten how Smuts’ intervention strengthened the hand of the Chamber of Mines in their attack on wages.

It may be that Smuts had what Mr. Ewer calls liberal instincts but a capitalist politician cannot serve two masters, he cannot sacrifice the interests of the class for whom capitalism functions in order to serve the interests of those whom capitalism exploits. His love of all humanity did not include the white workers and the native population when their actions in their own interests clashed with those of the ruling class, and it would not be far wrong to say that a large element in the universal scope of Smuts’ vision was the necessarily world-wide interests of a country the main economic basis of which is the production of gold for world trade. South Africa had grown from a Boer farming community to an expansionist capitalism and Smuts’ horizon expanded with it.

Cooking the Books: Blowing up the global financial system (2026)

The Cooking the Books column from the October 2026 issue of the Socialist Standard

On 24 July US Treasury Secretary Scott Bessent announced that the US  would be taking measures against any individual, bank or organisation that helped Iran engage in international trade but also secondary sanctions against any state that continued to trade with Iran. Asked why these measures weren’t going to be applied immediately, Bessent replied ‘Why would I want to blow up the global financial system?’. It was a good question, but an evasive answer even if it did at least show an understanding of what might happen if secondary sanctions were strictly enforced.

Capitalism depends on international trade, and international trade requires a generally accepted means of payment. Originally gold was this ‘universal equivalent’ that could be exchanged against any other product of labour of equivalent value. The pound sterling, the dollar and the currencies of the other major states trading and investing internationally were convertible on demand into a fixed amount of gold.

This Gold Standard was suspended in 1914 and never fully recovered, with Britain going off it in 1931 and the United States in 1933. It was revived after the Second World War in a modified form known as the Gold Exchange Standard where national currencies were tied to a fixed amount of a national currency that was convertible into gold at a fixed rate. That currency was the US dollar and was convertible at a rate of 1 ounce of gold = 35 dollars. It meant that a unit of a national currency could be expressed as a fixed amount of gold.

This system ended in 1971 when the United States stopped agreeing to buy gold at a fixed rate. However, the dollar remained the main means of international payment and the world’s main reserve currency, which central banks hold for international payments for trade and investment, and which they can use to buy their own currency to try to maintain its rate of exchange.

This puts the United States in a privileged position. Other states’ dollar reserves are held in the form of interest-bearing US Treasury Bills, which means that those states are in effect lending money to the US. In fact it is said that these loans not only cover the US’s trade deficit but also provide it with the money to sustain its military might.

It also puts the US in a position to use sanctions as a foreign policy tool, penalising or threatening to penalise individuals, businesses, and other states by excluding them from dollar transactions if they fail to comply. Trump evidently thinks that it is a good idea to use this power even though it undermines the dollar’s reliability. Whether he will use it to impose secondary sanctions against China for refusing to stop trading with Iran remains to be seen. Banning China from paying with dollars really would ‘blow up the global payments system’.

Other states are taking note of how, from their point of view, the US is abusing its position in the global payments system and have been taking precautions, such as by paying with other currencies and by holding more of their reserves as gold.

Goldman Sachs noted (28 August) that ‘central banks have been diversifying their holdings using gold; which is considered less likely to be frozen than reserves held in foreign currencies’.

Gold may no longer be the money-commodity but it is still a store of value because it’s a product of labour. No interest is paid on gold reserves and gold is not a stable store of value since its price fluctuates up and down as a result of capitalists speculating in it, but at least it is not an asset that another state can stop you using or use to exact compliance.

Inflation and prices - Part 3 (1965)

From the September 1965 issue of the Socialist Standard

Link to Part 2.

Last month we discussed some aspects of the price of production, and what causes the changes in a commodity’s value. We then went on to the influence which the price and the value of gold has upon prices in general. So far we have assumed that the Government fixed the gold sovereign or pound at about one-quarter an ounce of gold and kept it at that amount. But suppose the Government decided to make an alteration in the law and to increase or decrease the weight of gold in the sovereign? If the Government made the sovereign half an ounce weight of gold instead of one-quarter ounce, the effect would be to cut prices of other commodities to one-half. Alternatively, if they decided to reduce the weight of gold in the pound to one-twelfth of an ounce instead of one-quarter ounce, the effect would be to multiply all prices by three. The £4 bicycle (we mentioned in Part One) would then cost £12. This would be a change in the currency unit showing itself as a rise or fall of prices. It would not affect the value relationship between gold and the other commodities—bicycles, suits or clothes and so on. The owner of one ounce of gold which formerly would buy a bicycle would still be able to buy one bicycle, but his ounce of gold would now give £12 instead of £4 and the seller of the bicycle, who formerly could get one ounce of gold for it, would still get one ounce of gold for it, but would now call one ounce £12 or 12 sovereigns instead of four.

Now this brings us to the inflationary movement that has been going on in Great Britain and in some other countries since about 1940. It may seem to have gone on in a mysterious way, but it is in fact an echo of something which has happened on previous occasions. Inflation took place during the Napoleonic Wars and again during the First World War. But before we can explain the technique of this inflation we have to ask ourselves what determines the amount of currency needed at any time.

This depends partly on the amount of trade that is going on, the amount of buying and selling transactions that are going on at a given moment, but it also depends on the rapidity with which currency itself circulates. The amount of currency needed can change because of expansion and contraction of production and trading, or because the velocity of currency circulation changes, or because the amount needed is reduced by the use of cheques, or certain other reasons. But we can still say that at a given time a given amount of currency is needed. Now when there was currency convertibility, that is to say when you could change gold into Bank of England notes and import and export it freely, the amount of currency regulated itself. Commodities were bought and sold through the medium of gold coins and notes convertible into gold which represented real values, that is to say the value of gold itself. This was a situation in which, if trade declined and less currency was needed, gold coins and notes flowed back into the Bank of England. On the other hand, if trade expanded and more currency was needed, additional amounts of it were forthcoming, but it was always directly linked with the value of gold. At that time, for every additional bank note that went into circulation from the Bank of England, the Bank had to place in its vaults an equivalent amount of gold.

We now come to the question of what happens if this convertibility is destroyed. Suppose the Government suspends convertibility and bank notes can no longer be converted into gold. This does not of itself cause inflation and rising prices. It only causes inflation and rising prices if, as well as suspending convertibility, the Government starts increasing the issue of the unconvertible notes to an excess amount, so that they exceed the amount of gold or silver which would actually circulate if they were not replaced by symbols. We mention silver here as well as gold because some countries used a silver coinage with convertibility instead of a gold coinage with convertibility, and when we refer to symbols we mean paper money—notes.

If the Government destroys convertibility and then issues an excess amount of notes, this causes prices to rise because more money is now circulating in relation to an unchanged amount of goods and trading transactions. This is just the same in effect as the earlier example of what would happen if the Government decided to cut the amount of gold in the pound from one-quarter weight of gold to one-eighth or one-twelfth of an ounce of gold. Prices in those circumstances would double or treble. Marx wrote about this:

“If the quantity of paper money issued is double what it ought to be, then £1 would be the money name not of one-quarter ounce, but of one-eighth ounce of gold.” 

The effect would be the same as if an alteration had taken place in the function of gold as the standard of prices; those values which were previously expressed by the price of £1 would now be expressed by the price of £2.

We may be asked how can one tell if inflation has taken place, because it is not always easy to know whether the amount of paper currency being issued is in conformity with the amount needed. There is in fact always the simple measure of inflation, and that is the price of gold itself in the market. As soon as convertibility ceases and excess notes are issued the price of gold starts to rise. We saw earlier that this had happened during the Napoleonic Wars. The economist Ricardo wrote about this, and what he wrote led to the setting up of what is known as the Bullion Committee, which issued its report in 1819. Ricardo set out to explain, as did the Bullion Committee, why the price of gold in the market had gone up from 77/10½d, an ounce to 92/- an ounce. Ricardo and the Bullion Committee gave their answer; that it was due to the suspension of convertibility and to the issue of excess notes. The remedy was simply to restore convertibility, in which case the excess notes would go out of circulation. The same thing happened again in World War One, and just after that the Cunliffe Committee, which reported in 1919, gave a similar verdict. They told the Government to stop issuing excess notes and the fall of prices which took place in 1921 and 1922 was partly due to the ceiling that the Government placed on the issue of bank notes, and partly due to the fact that a world slump was in being at the time.

We now come to the inflation that has gone on in the last 25 years. Again, we can see the proof of this inflation and the measure of it in the fact that instead of gold selling at about £4 an ounce, it is now selling at 250/- an ounce. The reason is the same as on the other occasions; convertibility has disappeared and an excess note issue has been engineered by the Government. The note issue in Great Britain has increased from about £530 million in 1939 to nearly £2,400 million. The steps by which this 25-year inflation has taken place included the following.

At the original gold weight the pound was equal to 4.86 American dollars. In the 1930’s it was the American Government which cut the gold content of the dollar to about half what it was before. A further step in the process was that in 1940 the British Government pegged the British pound to the American dollar, not on the old relationship, but on a new relationship of four dollars to the pound, and in 1949 they reduced it again to 2.8 dollars. The effect of these various changes has been that the amount of gold represented by the English pound is only about one-third of what it was in 1914 and in the 1930’s.

This is the main reason why the general price level in this country has more than trebled including, incidentally, the price of that particular commodity labour power—wages. It is true that the process in Great Britain has not been so crude or so drastic as the inflation which took place, for example, in Germany between the wars. On that occasion the German Government was paying its way by printing tens of millions of mark notes every day; in Great Britain now the effect is the same, though in less degree. The British Government prints additional notes and the Bank of England uses them to buy in Government securities. Incidentally, this has the effect of enabling the Government to get what may be called interest-free loans running into an amount of over £2,000 million, but, of course, the effect on the price level is just the same as it would be if the British Government had used the same direct method as was used by the German Government.

One thing it is interesting to notice here is that, being traditionalists, the British Government and the Bank of England continue to issue their accounts just as they used to issue them before 1914, as if the present note issue in this country had some backing. Before 1914 the Bank of England, apart from a certain small amount of notes which was uncovered by gold, had to have a gold reserve fully covering every additional issue of bank notes. At the present time in Great Britain there is in fact no backing at all for the note issue, but in the Bank of England accounts you can see the thing entered in the form that the £2,400 million of notes in circulation are shown on one side of the account in the balance sheet, and on the other side there is shown a similar figure for Government securities, which, of course, in practice means nothing at all.

Edgar Hardcastle

 

(To be concluded)

How the Workers are Butchered on the Rand. (1913)

From the August 1913 issue of the Socialist Standard

Putumayo is not such ancient history that one person here and there, with an exceptional memory for grisly tales of barbarity and suffering, can with an effort recall something of the facts of that interesting case. The present writer endeavoured to show that the wave of indignation which swept over the land, from the Cabinet Ministers in our immaculate Parliament to the poet (!) (now deceased) who once stirred the nation’s soul with a deathless poem calling upon the British bulldogs to “Hurry Up for Pity Sake !” (the merit of which poem was handsomely acknowledged by it being printed on red cotton handkerchieves and sold at a price within the means of all who had a nose to wipe thereon) might well have been let loose over equally deserving happenings very much nearer home.

That statement did not meet with universal approval. It seemed incredible to some that those smart, jovial, silk-hatted gentlemen who rush to and fro between Park Lane and Throgmorton Street, and who carry so gracefully the knighthoods and honours heaped upon them by the Liberal Government, could ever be guilty, could even fall under suspicion of being guilty, of any such atrocities as those with which those strange-named servants of a British company turned the peaceful Putumayo into a river of blood and tears in a “Devil’s Paradise.”

Recent happenings in South Africa, however, in which British miners, and British soldiers, and British (!) capitalists, and British knights, and the highest of high officers of the British Crown, are concerned, show clearly enough that in all essentials, the “cultured” ones of our Western civilisation are quite aa capable, given the materials, as any Portuguese half-breed in the pay of British capital, of creating a “Devil’s Paradise” of their own, with British blood and brawn, on the soil of the British Empire.

All the humbug of that sly old servant of Satan, W. E. Gladstone, who covered his machinations in the interests of the ruling class with a slime of “moral” cant, in which the “wrongs” of the Balkan people quivering under the spiked and envenomed heel of “Abdul the Damned” were in particular made to be a mat, jealously guarded and preserved, for him to clean his begrimed boots on, has been, it seems, bequeathed in trust and with compound interest, to the Liberal party. While they are busy fulminating against the “White Slave Trader” at home, they are, with brutal cynicism, crowning the blood-reeking fortunes of South African millionaires with titles. So that the political funds of the “Great Liberal Party” may benefit, they make murder respectable by covering it with the cloak of knighthood. 

Those who do not know how, and at what cost of working class suffering and misery, these South African fortunes have been amassed, are invited to think over the scanty particulars reproduced from a Press which, under a system, fails to suppress much that they would for the simple reason that sensation (and advertisements) is their life’s blood.

“‘However healthy a Transvaal rock-drill man may appear to be on his return to this country,’ Dr. Haldane told the Departmental Committee on Industrial Diseases in 1907, ‘he will probably be dead within a year or two.'” (“Pall Mall Gazette,” 7.7.13.)

“The death rate of one section of the men who mine the gold—the machine men or rock drillers—is over 230 per thousand from one disease—miner’s phthisis—alone. Such a death rate from a single occupational disease must be unparalleled in the whole industrial world. It can only be compared with King Leopold’s Congo Free State.

“Speaking before a representative meeting of mining engineers in Johannesburgh in September last Mr. Koetze, the Government mining engineer, said : ‘Sooner or later every worker underground in these mines will contract miner’s phthisis.’

“The practical result of commissions of inquiry have been recommendations that water be used to keep down the dust which causes the disease. These recommendations have been urged upon the mineowners, in each case with the same result—utter callousness and neglect.”

These extracts were written by Dr. G. L. Ugmara, M.R.C.S., L.R.C.P., and were reproduced in the “Morning Leader” for December 2, 1911.

“No less than 10,000 people die in these mines every.” (Mr. Merriman.)

“Miners’ phthisis is said to be due to the inhalation of fine dust which arises not merely from rock-drilling without the accompaniment of water, but also from the blasting operations with explosives. Last year more than 1,000 of 3,000 men examined by the Medical Commission were found to have phthisis. No rock-driller could work in the mines for sixteen years and escape it. Death took place as a rule before the age of forty. Here is a table which showed at that time how inevitable is the doom of any man who undertakes this work :—

Years of service Percentage of men affected

    2½ 25

    4½ 55

    6½ 70

   10½ 80

   13½ 90

   16½ 100 ” 

“Daily News.”

“Then all the miners and the population know that the mine owners are responsible in the same way for the death among the Kaffirs, which Mr. Sauer, the Minister for Native Affairs, has characterised, as regards the natives from tropical countries, as little short of murder. There was no need for any limitation in the phrase. The probability is that over 100,000 natives have been killed in the mines since the war.” (Mr. R. L. Outhwaite, M.P., in “Reynolds’s,” 6.7.13.)

There can be no escape from such a mass of evidence supplied by the capitalists’ own tools and fellows. Ten thousand victims in a year ! It would take a continent of Putumayos to equal this stupendous crime. When the war was raging we were told that they were “painting the map red,” but never in those days of open and avowed slaughter were such libations of blood poured out to the “Imperial idea” as have been run out, as from a vast broken cask, every year since, to satisfy the blood-thirsty vampires of Park Lane, in the ultra-respectable West End of London.

It is the story of Whitehaven retold in more callous letters. There miners were hurled to death because it would cost their safe and comfortable masters something to ventilate the mine in accordance with the first clause of their own Mines Act. On the Rand thousands of working-class lives are thrown away annually because it would absorb some of the knighted owners’ profits to spray with water in the process of rock-drilling, and to allow time for the dust to settle after a “blast” before the men returned to the “face.” It is the story of rubber retold, on a scale more in keeping with the dignity of the yellow commodity.

It cannot be pleaded that this wholesale murder of black and white is the work of a few of the capitalists alone. It is aided and connived at by the whole master class as such. How the British Government imposed a “hut tax” upon the natives whose land they had stolen, and sent a military force to enforce the payment of the paltry sums that could never pay the expense of collecting them, in order to drive the blacks into the mines to earn the money in which alone the taxes were payable, may not be entirely forgotten by some who do not especially treasure the memory of these curious incidents. It reads and looks and smells remarkably like some of the means resorted to by the “brigands” who cost virtuous England the price of a special commission and a House of Commons inquiry. Ten thousand victims a year ! Oh, the stinking hypocrisy of the howl that greeted the revelation of the Peruvian atrocities !

The war which was engineered in order that the mine owners might squeeze another four million pounds profit per annum out of the writhing and quivering carcasses of their white and black slaves was the work of a Tory administration, but it was reserved for a Liberal Government to make the Transvaal a “self-governing” colony, in order that they might be able to say when miners were to be butchered on the Rand : “We cannot interfere.” Strange, is it not, that when the Outlanders were supposed to be writhing in agony under the indignity of being without the franchise, the fact that they were under a foreign Government did not prevent the full armed might of the British Empire being used to “see them righted,” but now that these miners are being massacred in cold blood by troops provided and paid by the British Government, under the direction of a high officer of the British Crown, on soil painted red” with the blood of ten thousand British soldiers, nothing can be done because the Transvaal is a self-governing British colony !

I say nothing about the lives lost in the so-called rioting. Where life is held so cheap it seems little enough to make a bother about. But whose estimate of working-class life is it that counts ten thousand workers lives as of less importance than the cost of providing safe conditions for the mining of 40 million pounds worth of gold ? Think of that great army of workers—men of your own class—who must march to death to produce one year’s output of gold from South African mines. Ten thousand of them, black and white. For every million pounds 250 lives. We have been nurtured on grim and haunting pictures of the unspeakable Arab slave-caravans, but was ever anything more appalling enacted in all Africa than is enacted by these silk-hatted brigands of Park Lane, West ?

Fellow workers, very guarded must be the language of the revolutionary who would criticise those who engineered a great war in order to grab the mines, who have butchered you on a hundred shambles from Peterloo and Featherstone to Llanelly and the Rand, who waste your lives by raising the loadline of ships, and by refusing to adopt automatic couplings on the railways, who murder you by thousands for the mere cost of ventilating coal mines at home and spraying the dust in the mines of South Africa. To speak too plainly of these things is to ask to be sent to prison, for those who set so little store on your lives have taken every cunning care to so hedge about their victims with laws and armed force that they must die almost unheard. Hence much must be left to the reader’s imagination. But attention is directed to that clause in our Declaration of Principles which declares that the “armed forces of the nation exist only to conserve the monopoly by the capitalist class of the wealth taken from the workers”. Its contradiction, in the face of every military action since the war, from Sir George White’s (the “hero” of Ladysmith) smashing of the coal porters’ strike at Gibraltar to the latest gun-boat demonstration at Leith and cold-blooded butchery in the streets of Johannesburgh, is here challenged. It cannot be seriously and truthfully contradicted.

If this is true, then it is true also that the hope of the workers lies in obtaining control of those armed forces by capturing political power.

That is the way out—the Socialist way. First to deprive the murder class of political control by ceasing to elect them and their Labour allies to Parliament—electing Socialists instead—then by expropriating them and establishing the Socialist Commonwealth. There is no other way.

A. E. Jacomb

Cooking the Books: Capitalist musings on money (2026)

The Cooking the Books column from the January 2026 issue of the Socialist Standard

Some capitalists have been philosophising recently on their favourite subject — money. One-time investment banker Matt Levine titled his ‘Money Stuff’ column in Bloomberg News (24 November) “Leave the Gold in the Ground”.

Gold is no longer used as the currency — what Marx called the ‘money commodity’ — as it was for millennia. It is, however, still a store of value. ‘Even now’, Levine pointed out, ‘gold is an important reserve asset, and people hold it in their financial portfolios in the form of gold futures, gold exchange-traded funds, etc’. What is being traded are titles to the ownership of gold. Those who buy and sell these are speculating on how the price of gold will move in the future. The gold itself is stored underground in a safe vault. When these titles are exchanged what happens is just that an entry of who it belongs to is changed in a database. The gold stays where it is.

Levine discusses the case of a group of capitalists who, noticing this, have come up with the idea of selling titles to gold that is still in the ground. They are either fools or knaves as they are assuming that unmined gold in the ground is as valuable as gold bars in a vault. But, of course, it is not. Unmined gold has no value precisely because it hasn’t been mined, though the land under which it lies will have a price based on what royalties might be received were it to be mined. Gold bars in an underground vault have value only because they have been mined, refined, made into bars and transported, their value reflecting the amount of labour that has had to go into doing all this.

What is perhaps surprising is that this is the explanation put forward in a news site for capitalists, surprising because it is an application of the labour theory of value that pro-capitalist economists teach is nonsense. After noting that ‘that modern finance creates layers of abstraction on top of real-world activity, and sometimes those abstractions become unmoored from the reality’, Levine applies this not just to titles to gold but to the shares in any business. As an example he takes Amazon:

‘A share of Apple Inc. stock encapsulates all of the labor and creativity that went into inventing the iPhone and manufacturing it and selling it and building app stores and everything else; all the factories and offices and decades of decisions are all reflected in the tradeable electronic token that is a share of stock’.

Another capitalist who has been philosophising on money is the richest person in the world himself, Elon Musk. Fox News reported him as telling a business forum on 17 November:

‘“If you go out long enough, assuming there’s a continued improvement in AI and robotics, which seems likely, the money will stop being relevant at some point in the future,” Musk said. He added there will still be constraints on power, such as electricity and mass. “The fundamental physics elements will still be constraints, but I think at some point currency becomes irrelevant,” Musk said’.

Musk seems to be embracing here the FALC — Fully Automated Luxury Communism — thesis. Improvements in AI and robotics will certainly make socialism easier but it is not that which will make money irrelevant. What will is only the conversion of the means of production from the private property of the few into common property of all. And that doesn’t have to wait for ‘full automation’, nor will it come about automatically through advances in technology.

Russian gold (1947)

From the November 1947 issue of the Socialist Standard

People whose only principle is to praise every act of the government of State Capitalist Russia, need to be very careful how they throw stones at the other capitalist states. In the Daily Worker (23/9/47) Mr. Allen Hutt pokes fun at “our elaborate apparatus for extracting the yellow metal at enormous expense from deep holes in the ground in South Africa in order to bury it again in deep holes in the ground in Kentucky.”

This is indeed one of the daft things that necessarily go with capitalism, but why is it more daft to mine gold in South Africa and bury it at Fort Knox in U.S.A. than to mine it in the gold-fields scattered all over Russia in order to hoard it in Moscow? Already by 1934 Russian gold production, according to the “U.S.S.R. Handbook” (1936, p.197) had been expanded so much that Russia claimed to be second only to South Africa as a gold producer. Mr. Hutt should read “U.S.S.R. in Reconstruction,” May, 1937 (published in Moscow) where he will learn how gold production was increased fourfold between 1930 and 1936 and was still rapidly expanding. He will read how more and more men and materials were being-poured into the remote gold regions, how scientists were perfecting methods of mining, how mines were going to deeper and deeper levels.

“The principal gold fields,” we read, “are situated hundreds of kilometres from railways and navigable waterways. Goods are transported through Taiga, boundless steppe, sand dunes and over mountain ranges to the gold fields.”

And all for what purpose? “Soviet gold flows in a broad stream to the capital of the Union of Soviet Republics, where it is refined and stamped according to the world standard.” Some of it is then sold to U.S.A., to go into the vaults at Fort Knox. The same Russian publication quotes a resolution passed by the Russian Communist Party in 1922 affirming that government policy must be “to maintain the gold fund inviolable and to develop the mining of precious metals.”

Some of the mining is carried on by the State and the rest by individuals organised into co-operative groups. Of course it is all described as “Socialist” gold-mining, whatever that is supposed to mean.

Mr. Hutt in the Daily Worker recalls how Voltaire in “Candide” describes the land of El Dorado, where gold lay about disregarded and treated like dirt. He might also have recalled how Sir Thomas More in his “Utopia ” anticipated the use of gold and silver not as precious metals but to make “chamber-pots.” It was doubtless from that source, or possibly from Kautsky’s book “Thomas More and his Utopia” (p.203), that Lenin got the idea that under Socialism gold would be used “for making public lavatories in the streets of the great cities of the world.” (Quoted by Ralph Fox in “Lenin.”)

Sir Thomas More had another notion, which was that in “Utopia” gold would be used by the masters to make ”chains and fetters for their slaves.” That is certainly the effect on the minds of the workers under capitalism, wherever the worship of the Golden Calf still flourishes.

There is another, more grim, joke that Mr. Hutt overlooked. In U.S.A., while it is an offence against capitalist law to try to make forcible entry into the vaults at Fort Knox, it is at least not illegal to disclose where the gold reserve is situated. In the Russian ‘”Utopia” they have made even that a criminal offence. According to Soviet News (11/6/47, published in London by the Soviet Embassy) the new Criminal Code makes it an offence for a private individual to disclose “information on the current account balance and operative financial plans of the U.S.S.R.,” or to disclose “the place and system and safekeeping and transportation of precious metals of the State Fund, currency valuables and money coins.”

The unlucky Russian worker who lets out that the Russian “Socialist” gold reserve is kept at Moscow or wherever it is “shall be pimishable by confinement in a reformatory labour camp for a term of from five to ten years.”

This “mild” sentence is given “provided such action cannot be qualified as treason or espionage.” What happens for the aggravated offence of giving this information to foreigners and thus committing treason is not stated. If Mr. Hutt had written his little paragraph in Russia he would have been for it.

Edgar Hardcastle

Notes by the Way: South Africa the Golden (1946)

The Notes by the Way Column from the September 1946 issue of the Socialist Standard

South Africa the Golden

Gold mining is by far the largest industry in South Africa. It employs 40,000 Europeans and 360,000 natives. It pays more than £17,000,000 a year dividends to the shareholders. What it pays to the natives and how they are treated has been described in an article by E. S. Sachs, South African Workers’ Delegate to the I.L.O. (Manchester Guardian, 19/8/46).

“They receive an average cash wage of 2s. 2d. per shift . . . Part of this meagre wage is deducted to repay advances made to the worker on recruitment for boots and other purposes. The African worker must also buy a cheap mattress or sacking for use on the concrete bunk on which he sleeps in the compound where he is forced to live. He must also buy some clothing . . . There is no extra pay for overtime or Sunday work. He is provided with food and medical attention free, but receives no sick pay. The Chamber of Mines estimates the cost of food to be 5.28d. and medical services 1.15d. per shift per man. The only paid leave the worker gets is on Good Friday and Christmas Day.”

In 1943 a Government Commission recommended an increase of 3d. a shift, but the owners refused to pay it, and “the Government did nothing except introduce an emergency regulation prohibiting meetings of Africans on land proclaimed as a mining area.”

They are not forbidden by law to form trade unions, and many are organised, but they “may not leave their compounds without a special pass from their employer and are subject to severe penalties, including imprisonment with hard labour, for absenting themselves from work or for any breach of their contract.”

The natives have had no increase of pay since 1914 and their union has pointed out that their wages were actually much higher 60 years ago than to-day.

We wonder if the native workers derive much comfort from the United Nations Charter, of which South Africa is a signatory, proclaiming the determination of the upholders “to promote social progress and better standards of life in larger freedom!”

An appropriate footnote is the following news item in The Star (July 24th, 1946) announcing the arrival by ‘plane of a cargo of very important persons from South Africa, on official and private business in London.

“In the silver Skymasler “Drakensburg,” belonging to South African Airways, were 34 millionaires, multi-millionaires, or near millionaires, including Van der Byl, Field-Marshal Smuts’ right-hand man and a leading figure in South African industry. The party, most of them from Johannesburg, were met by Sir Eric Crankshaw, Secretary of the Government’s Hospitality Fund."

Russia, Turkey and the Dardanelles

While British Imperialism seeks to safeguard capitalist interests in the Middle East by keeping troops in Transjordan and Palestine and by military agreements with Egypt and Iraq, Russian Imperialism counters with a demand that Turkey shall permit the setting up of Russian military forces on Turkish territory in the Dardanelles area and by promoting its own puppet movement in Persian Azerbaijan. Russia has also been carrying on propaganda to secure the support of Arabs in the Middle East countries as a means of reducing British influence there. In short, the two old firms carry on as all through the 19th century notwithstanding that Russia is now labelled “Communist” and Britain “Labour.”

Twenty-four years ago, when Russia was weak, it was Russian and British Communist Party policy to pose as the friends of the Turks because Turkey was then in conflict with Britain, and British troops were in occupation of Constantinople and the Dardanelles. The Executive Committee of the Communist Party of Great Britain accordingly produced a declaration demanding that Turkey be freed from the Imperialist occupation forces.

“The E.C. of the C.P.G.B. sends its greeting to the British Muslim Association and desires to join with it in the demand . . . that Constantinople and Adrianople shall be restored unconditionally to the custody of the Turkish people.” 

(The Communist, September 23rd, 1922.)

Now Russia is stronger so the old policy goes on the scrap heap and the demand is made that Russia have forces on Turkish soil.

The same resolution went on to demand that North Africa, including Tripoli, be given complete independence. It also opposed the “insidious regime” of the League of Nations mandatory system.

In view of this it is entertaining to observe that at the Paris meeting of the Big Four Powers in May of this year Russia put in a claim for a United Nations Trusteeship or Mandate for herself over Tripoli, a claim that was later abandoned in face of opposition and watered down to a claim for the appointment of a Russian Administrator with an Italian deputy and an international advisory committee. (Daily Telegraph, 11/5/46).

Longer Life—and Shorter

While one body of the scientist hirelings ot capitalism are busy improving atom bombs, germ warfare and other means of destruction, we read the following (Evening Standard, 16/8/46): —

“First details are disclosed to-day of the existence in Britain of research on making people live longer and becoming more useful . . . the possibility of increasing life to as much as 200 year has been freely discussed.”

3 Per Cent. by Another Name

“New York, Friday.—A U.S. agreement to lend £2,500,000 to Saudi Arabia, announced to-day, contains no mention of interest payments. 

The word ‘interest’ was omitted because Moslems oppose on religious grounds the charging or paying of interest. Under the heading ‘Thanksgiving,’ however. Saudi Arabia will pay the usual 3 per cent.”

(Daily Mail, 10/8/46.)

German Social Democrats and the Russian Zone Election

Elections are being held in the Russian Zone of Germany, and as, under what the Communists call democracy, they are prevented by the Russians from putting up candidates, the S.D.P. has advised its members to spoil their voting papers. The following appeal was published in their journal, the “Social Democrat” :–

“The election in your zone is not a democratic election. Should you, therefore, stay away from the poll altogether? That would really be best. but for many of you it might have heavy consequences. Our advice is, therefore, that you should take part in the poll but demonstrate against constraint of conscience by making your voting papers clearly invalid. Make this action a united and powerful demonstration for freedom. Do not divide yourselves by voting here or there for some other party that appears to you as a lesser evil.”

The Manchester Guardian correspondent (20/8/46) who quotes this, describes it as “political folly,” on the ground that it would be better to vote for the Christian Democratic Union or some other group in order to strengthen the opposition to the Communists (now calling themselves “United Socialist Party”).

While we are opposed to the reformism of the German Social-Democrats, this refusal any longer to vote for the “lesser evil” indicates a marked improvement on their past behaviour.

Plenty—For Those Who Have the Money

The following quotations, one from the Daily Worker on British capitalism and the other by Mr. Hugh Chevins on Russian State Capitalism, need no comment: —

“Luxury Feeders. Why should there be, to all intents and purposes, no limitation at all on the amount and variety of food which luxury purchasers can acquire, while the bulk of the families in the country have to prepare for still further sacrifices on the food front?” (Daily Worker, 8/7/46.)

“It was once said that anyone may dine at the Ritz in London—if he can pay the price. The same remark applies with equal truth and more irony to eating at the smart hotels and restaurants in Communist Moscow. . . . The average money wage is reliably estimated to be about 350 roubles a month. That amount can be spent in a single meal with the utmost ease at the Metropole, National, Moscow or Savoy Hotels, and at the Astoria, Caucasus or Europa restaurants, but only by the privileged class.” (Mr. Hugh Chevins, Industrial Correspondent, Daily Telegraph, 9/8/46, after a recent visit to Moscow.)

Shades of the Versailles Treaty

It was common talk early in the recent war that at least the politicians would remember the errors, the cynicism and the idiocies of the Versailles Treaty after last war and avoid them this time. Here is the lament of the Manchester Guardian on the outcome of the labours of the foreign ministers of the Allied

Powers to date : —

“That it is a bad job few will deny. As they stand the draft treaties are deplorable. They follow no accepted political or economic principles. They are both unjust and inconsistent. No attempt has been made to discover the facts or consult the will of the inhabitants by commissions of inquiry or plebiscites. Each one is a compromise between rival Powers who openly fear and distrust each other. Even so they represent the best that can be done by patient and enduring diplomacy, and as such they will be welcomed by a weary Europe. Blessed are the peacemakers—even if the peace in this case is one which passeth all understanding.” 

(Manchester Guardian, 10/7/46.)

Edgar Hardcastle

Analysis of Wealth. I. Value. (1916)

From the June 1916 issue of the Socialist Standard

Although from time immemorial the mass of objects which we term wealth has formed the basis of humanity’s existence, it is only of recent years that a scientific investigation of the conditions of its production and distribution has arisen. This is indicative of a development of these conditions, for if there was in the past a lack of effort to solve economic problems, this can only be because these problems existed, if at all, in an obscure, immature fashion. In the days when small local communities were practically self-supporting and articles only rarely exchanged on their borders, it was obvious enough that wealth was the direct product of labour for individual consumption. Likewise in the earlier stages of production for exchange the seller of commodities knew them to be his personal products and attached no miraculous import to the money for which he sold them and with which he purchased the products of men likewise known to him. With the complexity of full-blown capitalism, however, the workers become separated from the commodities produced by them, which acquire a mysterious knack of realising more in their sale than what was laid out in buying the necessary factors for their production. Henceforth wealth seems to spring from nowhere—money makes money; and problems present themselves for solution.

Founded upon the very conditions which give rise to the problems, however, is the power of the capitalist class, who have a pretty sure instinct that a real economic science is inimical to their interests since it unavoidably exposes their parasitical position in society. It can readily be understood, therefore, that prior to critical revolutionists like Karl Marx developing the science in working-class interests, only a few isolated truths were revealed by the studies of honest, if orthodox, inquirers likewise few in number ; while the mass of so-called economic literature became of an apologetic character seeking to obscure, in capitalist interests, the very problems it pretended to elucidate.

Members of the working class, having nothing to fear from criticism of a social order which entails nothing but poverty for them, may find in the writings of Marx a clear, if elaborate, analysis of the facts of their existence. Time spent in their study, snatched though it be from scanty leisure, is repaid by the acquisition of an undying purpose in life and the joy of knowledge with which to carve the road to power. If in the following paragraphs the writer can outline the main points of Marx’s economic theory in such a way as to arouse interest in some hitherto apathetic or hostile mind, his immediate object will be served. If the inquirer be worth his salt he will not rest till he is intellectually equipped for the conflict with capital.

The unit of modern wealth is the commodity, which has three essential features. Firstly it must satisfy some human want ; be useful. Secondly it is a product of human labour, a conscious adaptation of nature ; while lastly it must be exchangeable for other useful labour products. It must find its way into the social market else it is no commodity.

Thus a commodity is a combination in an object of utility and exchangeability, or in other words, of use-value and exchange-value. The former is due to its natural qualities (physical, chemical, etc.,) and also distinguishes it from any other commodity. It is this difference in usefulness which leads to the exchange of commodities, although it by no means determines the ratio in which they are exchanged. Any given commodity vendor does not exchange, say, boots for boots, but for some article of wealth which has different properties. On the other hand it would be absurd to say that boots are as useful to him as the commodity he receives in exchange. Any attempts, therefore, (and there have been many), to explain exchange-value through utility are futile. Exchange-value is a relation of equality, while a comparison of the use-values of commodities simply reveals their differences or inequalities. What, then, is exchange-value ? If we take a pair of boots and a ton of coal, each selling say for £1, we have three commodities (including the sovereign) of equal value. Compare as we may their relative weight, colour, smell, size, or any other tangible property, we can discover no equality between them. Their uses are different and it is highly improbable that the relations of supply and demand in coal and boot markets respectively are identical at any given moment. We are thus left with only one feature common to all these commodities, viz., they are products of human labour, they embody human energy. In this respect they may be compared and an equation between them arrived at if we measure the energy embodied in them by the time occupied in its expenditure. If, then, our imaginary pair of boots and ton of coal are equal in value, it can only be because they contain equal quantities of labour or. in other words, have taken an equal length of time to produce.

It is important to remember here that commodities are social products and presuppose the division of labour in society. Producers of coal and boots or of any other special product cannot exist on their commodities alone ; they exchange as a matter of necessity. In consequence they seek to minimise the length of time taken in producing any given commodity in order, by the cheapness thereof, to secure a certain sale. If, therefore, someone takes up unnecessary time in the production of a commodity its value in exchange ia not enhanced thereby. It is the socially necessary labour-time alone which forms value.

Another result of the division of labour is the difference in quality of the forms of labour which produce different commodities. Certain occupations exhaust more nerve and muscle in a given time than others. Their products therefore contain more value in proportion to the intensity of labour in excess of that embodied in other commodities. This, however, by no means affects the fact that they are reducible to one common element, simple labour-power ; the more intense or skilled labour simply counts as a multiple of ordinary labour. Labour remains the factor which determines value.

This fact in the key to the door of economic mystery. Ignoring this, the professional “political economists” have endeavoured to lead us down one blind alley after another, beguiling us the while with romantic yarns concerning the awesome and unapproachable majesty of Money arrayed as Capital, embodiment of all the attributes of God, before whom the knees of men must bow for ever. Let us try to use the key and enter the holy presence. Mayhap ’tis a gilded skeleton, after all with which they would scare us.

Value (by which we continue to mean exchange-value) does not exist apart from material, valuable objects, any more than weight exists apart from things which are heavy, or heat apart from hot things. In measuring or expressing the value of a commodity we are, therefore, compelled to use some other commodity as an equivalent.

In common practice we use gold and say, for instance, 1 pr. of boots is worth 1 sovereign ; but if 1 ton of coal is also worth £1, then we might just as well say, 1 pr. of boots is worth 1 ton of coal or any other commodity which exchanges for £1. £1 serves as an expression of the value of the boots only because, like the boots (and the coal), it contains a definite quantity of human labour, and is in this respect equal to them.

There is, therefore, nothing mystical about the function of gold as money more than there is about the use of mercury as a measure of heat, or iron weights in a greengrocer’s shop. Gold measures value only because itself is valuable, as mercury has a temperature and iron is heavy. As coin gold becomes symbolic and may be replaced by tokens bearing a nominal value only, but said tokens must not diverge in nominal value from the real value of the gold which would otherwise be used. Likewise the amount of depreciation in weight and therefore value which a gold coin is allowed to suffer and yet remain in circulation, is limited by law.

The quantity of gold for which a commodity will exchange we term its price. This price is broadly determined by the commodity’s value, which is liable to fluctuations as the time taken in production varies.

The price, however, does not only reflect these variations. The velocity with which it is disturbed from time to time carries it now above, anon below the actual value of the commodity. On the surface these minor disturbances appear to be caused by supply and demand, and this is indeed so ; but the relations of supply and demand are themselves subject to the changes in labour-time. Assume, for instance, that the time occupied in producing a given quantity of boots is decreased by some new invention or pro­cess, then there will be a tendency to increase the output beyond the power of the market to immediately absorb, followed by a fall in price. The excess of boots remaining unsaleable, pro­duction is restricted till prices rise, probably above the new value, afterwards falling to approximately the correct level, when production, is resumed. The process may be compared with the oscillations produced on a pair of balances when the weight on one side is disturbed. Owing, however, to the continual alteration in the values of commodities due to improved methods of production, prices hardly ever come to rest at an exact coincidence with value. Nevertheless, it must be an approximation of price to value that takes place, for money is under the same necessity to express its value in the form of other commodities as these commodities are to express their value in the form of money. The state­ment that a sovereign is always worth a sovereign teaches us nothing.

Gold as money, then, is a transformed commo­dity. In addition to its own use (mainly luxurious) it has acquired the functions of universal equivalent—equivalent for all other commodities. Alone of all of them it is directly exchangeable for any of them by reason of its fitness to serve at once as a measure of value and a means of exchange or medium of circula­tion. Like all other commodities, it originates in a form of division of labour in which the means of production are private property and the product also; in which, moreover, production is not for direct use but for exchange.

The self-supporting peasant family of the Middle Ages had little use for money. Its various products were consumed by itself. The labour of each member was obviously part of the family’s labour. Consequently products were not exchanged within it but were considered the family property. Long ages before civilisa­tion tribal mankind produced forms of wealth which were used without going through the process of private exchange. They too needed not money.

The existing order of society, in which goods are produced for the market, is not immortal. It has not always existed ; nor will it continue for ever to exist. When the vast means for producing wealth have been converted from private into common property ; when the labour of society becomes consciously organised and its products distributed directly for consumption ; when, in short, Socialism has been established, money will disappear. Labour products will cease to be commodities. Their social character will be obvious at first sight and will need no translation into mystical terms of gold.

As it is at present, when we express the values of commodities, we do but state in a round-about way that they are products of so much social labour, in a word, our products. Money conceals the fact but does not alter it. It is itself a social product which has the power to command social labour. Accumulated in the hands of private individuals it enables them to exploit masses of their fellow men, in short, it becomes capital. Precisely how it does this will form the subject matter of a future article.

Eric Boden

[To be continued.]

Inflation and prices - Part 2 (1965)

From the August 1965 issue of the Socialist Standard

Link to Part 1

II. The influence of gold

In our first instalment, we examined the commodity’s value and we discussed two of the reasons for price fluctuations—the forces of supply and demand and the influence of monopoly conditions in supply. The examples were of fluctuations above and below what may be called the normal price and, as we have said, it would simplify matters if we could assume that the normal price is the value and that fluctuations due to supply and demand are variations above and below value.

In actual practice, the normal price is not always the same as value, and probably the great majority of commodities do not normally sell at their value, but at some point above or below it. Marx developed this question of what he called all the same thing as what the manufacturer calls his cost of production. It is arrived at from the labour theory of modifications to his theory and showed that the normal price of commodities in the market is not their value but what he called the price of production. The first thing to notice about this is that the Marxian price of production is not at value, but it takes into account the fact that there is a continuing tendency for the return on invested capital to be equalled in different industries so that if the average rate of profit for example is taken at 10 per cent, the capital invested in the oil industry or in agriculture or in shipping, will all tend to receive something approximating to the same 10 per cent average rate of profit.

The next point is that changes in the value of a commodity can cause changes in its price. The value of a commodity falls, for example, if through inventions and discoveries the amount of socially necessary labour needed for producing it is reduced. In that instance, the value would fall and the price would tend to fall with it. On the other hand, it is possible for the value of a commodity to rise because the amount of socially necessary labour required to produce it increases. This could happen to coal and other minerals. As the richer and more readily accessible seams of coal are exhausted and mines have to go deeper, more labour is required to produce a ton of coal than before, and the value rises, and as the value rises, the price will tend to rise with it. So, to take our example of 24 hours being the amount of socially necessary labour required to produce a bicycle, if it fell to 20 hours or rose to 40 hours, this would cause a fall or a rise in the price of bicycles.

So much for changes in the prices of individual commodities, but what about general changes of all prices? Why was it that in 1921 and 1922 the price level in Great Britain dropped by about a third and why is it that the present price levels are three or four times what they were in 1939? Why were prices rising at the end of the 19th century and in the early 20th century? To explain these movements, we have to come back to our example about the bicycle and the suit of clothes and one ounce of gold, which was by law cut up into four gold sovereigns each weighing about one-quarter ounce.

We have seen that gold has a value like all other commodities. So has silver or lead or brass or aluminium. The value of these and all other commodities are related to the amount of labour needed in their production. Because of this factor common to all commodities, the value of each commodity can be expressed in terms of any other commodity. In fact, historically, because of certain conveniences attaching to gold, the capitalist trading world came to accept gold as the universal equivalent, the money commodity and all commodities came to have their values expressed in terms of gold. We might imagine that the trading world could have made use of weights of gold and expressed the prices of all commodities in terms of a weight of gold—one-quarter, one-eighth or one-sixteenth of an ounce, etc., but this was obviously not so practical for purposes of internal trade as to have the gold turned into coins of legally fixed weights, although of course the particular weight differed in different countries.

In Great Britain, as already mentioned, gold coins were by law fixed at about one-quarter an ounce of gold. Actually the legal relationship was that one ounce of gold was priced at 77/10½d, but it is simpler to call it about one-quarter ounce per gold sovereign. Under the currency system as it was operated in Great Britain in the 19th century, and similarly in the U.S. with regard to the dollar, the value relationship between commodities in general and gold was preserved by what is called convertibility. Gold coins were in normal circulation alongside Bank of England notes, but there was a legal right at any time for a holder of notes to convert them into gold or to take gold bullion to the Bank of England for conversion into notes or coins. The gold bullion or coins were freely imported or exported.

Under these conditions there could never be any but minor variations between the purchasing power of Bank of England notes and the purchasing power of gold. Now we may ask how in such circumstances was it ever possible for the prices of commodities to undergo a general rise or a general fall. The answer is that, just as the value of commodities of any kind can rise and fall in certain circumstances, because more or less value is required to produce them, the same thing can happen to gold. The value of gold itself can undergo a change. If, for example, methods are devised which produce or refine gold more efficiently, then it is possible for the value of gold to fall, or, conversely, if it becomes more difficult to produce gold, then the value of gold would rise. The only thing to remember about this is that it operates in a sort of inverse direction, that is to say that a fall in the value of gold expresses itself as a rise in the price of all other commodities and vice versa.

Now let us come back to our examples of the bicycle and the ounce of gold. They had equal value because both of them take 24 hours of socially necessary labour for their production, but suppose that the labour required, to produce one ounce of gold was reduced from 24 hours to 12 hours. Twenty-four hours of labour would still be required for one bicycle, but 24 hours would now produce two ounces of gold instead of one ounce, so that one bicycle now has the same value as two ounces of gold. Under the requirements of the law in Great Britain, two ounces of gold were still divided into quarter ounces; so the bicycle now would equate with £8 instead of £4. Because the value of gold had fallen to one-half, the gold price of the bicycle would be doubled from £4 to £8, and of course the opposite could happen if the value of gold rose, that is to say, if more labour came to be required to produce one ounce of it than before.

A fall in the value of gold caused by new and more efficient production processes was in fact going on at the end of the 19th century and the beginning of the 20th century and, in accordance with the explanation already given, it showed itself as a general rise in the prices of other commodities. There is another circumstance in which, even with a convertible currency, you could have a general rise or general fall in prices. This is when booms and slumps occur. In a boom, every manufacturer is trying to buy raw materials, machinery and so on, with the result that the price of these things would rise and there would be a general rise in prices. In a slump on the other hand, the reverse takes place. Manufacturers and traders in a slump are all trying to sell goods at cut prices in order to get hold of money, and in these circumstances, you could have a more or less general fall in the price level.

Edgar Hardcastle

(To be continued.)

Finance and Industry: The experts are fallible (1962)

The Finance and Industry Column from the July 1962 issue of the Socialist Standard

The experts are fallible

The economic experts of capitalism—the City Editors, the economists, the financial seers—sit on something of a pedestal. Whatever twists and turns the economy may take, they are never caught without a remedy. Their readers, political parties, even governments, hang upon their words.

Which makes it very embarrassing for everybody, if the experts are shown to be as fallible as the rest.

Mr. Samuel Brittan is the Economic Editor of The Observer and last year, like all men in his position, he was expected to comment on the Selwyn Lloyd “pay pause” Budget. This is what he wrote, on September 3rd last:

I have a feeling that Mr. Selwyn Lloyd is going to surprise many people by his success in carrying out his economic policies . . . many of the people who are now most vociferous in denouncing him may be loudest in his praise a year from now.

Mr. Brittan went on to point out that in some ways the Lloyd policy was following behind events and then gave his reasons for thinking that ". . . Mr. Lloyd has been so much luckier than his predecessors . . ." 

Now—almost a year after—what does Mr. Brittan think of the Lloyd policies? Is he loud in his praise? He is not. He has been doing his homework in The Economist and has been impressed by an article in the 12th May issue of that weekly which drew some striking comparisons between the Lloyd squeeze, and what has followed it, and the Butler squeeze of 1957 and what followed that. This is what Mr. Brittan wrote in The Observer of 10th June this year:

On both occasions the same kind of arguments have led to the same mistakes. Mr. Selwyn Lloyd too often gives the impression of believing that history began in July, 1961, and has not devoted enough time to studying the mistakes of his predecessors.

And later in the same article:

Government financial measures have in recent years actually accentuated the trade fluctuations that they were supposed to control. 

If Mr. Brittan was wrong, a year ago, when he expected the Lloyd policies would be lucky enough to succeed, he could of course equally be wrong now that he is criticising the Chancellor. Capitalism is a baffling system which can catch out the experts. But if that is going to happen, there is no point in basing experts, is there?

By a few shares

A new campaign is announced by the Wider Share Ownership Committee, aimed as its name suggests to encourage more people to buy shares. It would seem to have timed its effort rather badly. After the recent Wall Street debacle we would imagine that many a small investor has gone back to his account in the Savings Bank or the old sock under the bed.

The number of shareholders in the U.K. has apparently increased over the past ten years from about a million to 3½ million. Much of this increase is presumably accounted for by firms like ICI distributing shares to their workers and to lots of small men being persuaded on to the stock exchange band-wagon by tales that capitalist inflation and prosperity were here to stay.

It will be interesting to see what success the campaign has and we hope the Committee will oblige us in due course with details of the number of shareholders in say six or twelve months time. They should make interesting reading, especially if there have been a few more stock exchange shocks in the interim.

At the same time, an analysis of how many hold how much would be useful as well as instructive. We have an idea that the greater part of those 3½  millions hardly matter when it comes to working out who really own stocks and shares.

Do they know?

Our editorial this month deals with the recent stock exchange shake-ups and makes the point that they basically reflect the general unease amongst capitalists concerning present economic prospects.

This unease has spread to most sectors of the economy and is obviously causing our politicians and their advisers some real headaches. Nor, in spite of the long words they like to use and their knowing looks, do they seem to have much idea of what to do about it all.

For example, hardly had Mr. Selwyn Lloyd finished warning us that he might have to lake fresh steps to tighten up demand than he calmly goes and cuts the minimum H.P. deposit from 20 to 10 per cent. Only a little while before, he had eased some of the restrictions on the banks. When it is remembered that he was apparently worried only a few weeks ago about a hire purchase boom, it all seems rather strange.

Some cynics have tried to explain the quick turn round as a by-election gimmick to help the Tories in their present political troubles. Perhaps so. But we have the shrewd suspicion that it only requires capitalism to go into the faintest suggestion of a spin for all the politicians and their economic experts to lose their balance. To be quite frank, we don't think really they have a clue.

The Gold Rush

One further thing we have heard for several years past from our experts is that with the new theories about money, credit, and the general control over capitalism, the importance of gold has become a thing of the past. Some of them have even gone so far as to regard it as a myth, a hoax that has been shown for what it really is by the new economic theory.

Unfortunately, our capitalists only seem to think there may be something in these theories when there is little chance of their being put to the test. Immediately things begin to get uncertain, they forget all about the theories and rush us quickly as they can into gold. Which explains the present sudden interest in gold mining shares and the heavy buying of the metal itself.

This is the classic way the capitalists have always acted in times of stress. Not currency, not stocks and shares; but lovely, shiny, golden, gold. As for economic theory, they will come back to that after the crisis has blown over.

Karl Marx, over a hundred years ago, would have found it a quite natural thing for the capitalists to do. He for one was under no delusion about the importance of gold to the capitalist system. The universal equivalent he called it, and universal equivalent it still is.

Stan Hampson

Self-made! (1909)

From the July 1909 issue of the Socialist Standard

A correspondent signing himself A Listener writes :

“Having participated as a humble listener in many discussions on Socialism, I have frequently heard your speakers say that no man can make his own fortune by himself alone. Would you kindly answer through the columns of your paper, the undermentioned questions?

“Now I know a man (a friend of mine) who went abroad, took a piece of land, his object being to discover gold, and fortunately it proved a success. Now this land was worked up by himself alone. 

“Do you not consider him to be a man that has made his own fortune by himself alone ?”

No, good “Listener,” your friend did not make his fortune “by himself alone.” By a fortune we understand such an accumulation of wealth as, through the control of other men’s labour that it gives, enables its owner to live without labouring himself.

In the first place there is the outstanding fact, that apart from property-founded society, wherein wealth monopoly gives some men control and mastery over the labour of other men, there can exist no fortune. Its main characteristic, the power of dominion that it imparts, is obviously conditional upon the existence of other men (and producers at that). Without these there can be no fortune.

In the second place, your friend had to be carried to the gold-bearing land, and so required the help of the steamship and railway workers and all the craftsmen and labourers who contribute to the construction of the means of transportation. He needed tools to work the land and, not less, the knowledge of where and how to get out the gold.

Thirdly, so soon as your gold-mining fortune-hunter had won a surplus over and above the amount required to purchase his means of subsistence, he doubtless, being wise in his generation, banked or otherwise invested it. That is to say, he put it to such use as entailed the exploitation of the wage workers. In the normal course of commerce, then, his property would grow by the accumulation of rent, interest or dividends, regardless of any exertion upon his part.

And so it stands demonstrated, that even in the exceptional case of your friend, the acquiring of his fortune was assisted and alone made possible, not only by the very existence and labour of countless other men, but by the accumulations of knowledge and implements made by the numberless generations of men who have preceded us. In other words, wealth accumulates to-day as a result of social activity without which the individual is utterly impotent. This is more easily seen than ever in modern industrial society, with which the Socialist is more particularly concerned when he says that no man makes (creates) his own fortune.

John H. Halls