Your wages are a problem (1962)

From the August 1962 issue of the Socialist Standard

Do wage increase put up prices?

One of capitalism’s toughest problems is the size of the wage which is paid to the working people who keep the system operating.

Basically, it is a problem of almost mathematical simplicity. The working class produce values which are higher than their wages. They produce a surplus value which goes to their employers. If the workers can force their wages up, there is less of the surplus left for their employers. On the other hand, if the employers can force wages down, more of the surplus will go to them. This must hold good, however the productivity of the worker may be altered by changes in natural conditions or in the intensity of his labour.

It is inevitable that capitalism’s governments should concern themselves in this dispute which, by the way, is known as a “class struggle” by Socialists, who have an uncomfortable habit of calling a capitalist spade a spade. Governments do their governing in the interests of the employing, owning class of capitalism. It is, therefore, equally inevitable that when they concern themselves with the class struggle over wages, governments should take the side of the capitalist class.

Thirty or forty years ago there was no great need for the government’s intervention to be especially vigorous. With capitalism in the doldrums, with never less than one million unemployed in this country, the working class were badly placed to push home any demand for better wages. If they did push any such demands the government had only to stand aside and watch the workers starve themselves onto their knees in a strike or a lock-out.

Since the war, conditions have been rather different. Wage rises must now be restrained by government action and appeals, rather than by the old method of both sides beating their heads together. Sometimes, indeed, conditions have defeated even the appeals and the government itself has surrendered, offering wage increases rather than face a strike. This has happened more than once over the railwaymen, much to the annoyance of newspapers like The Economist, which irritably demands at such times to know whether the government is serious in its desire to stop wages going up.

An essential part of the official campaign on wages has been the thinking up of responsible-sounding excuses for refusing the workers’ demands. These excuses must be epitomised in a snappy name for the refusals. This time last year it was the pay pause which, it seems clear, was designed to hold wages in check for a few months. There are signs that the pause was at least as successful as the government could have hoped. Apart from the rises which were denied to government employees, the engineers themselves forebore to press a wage claim last autumn. The engineering employers have now conceded a three per cent. rise, but in the opinion of at least one newspaper, this would have come earlier but for the pay pause.

Now the “guiding light” on wage increases has replaced the pause, although it is being somewhat buffeted by the arbitration tribunals.

It is safe to forecast that, for those who are willing to do a little research and remembering, the events of capitalism will expose the government’s excuses for what they are. Just after the war, for example, the Attlee government launched a great campaign on wages. There was a propaganda drive to convince everybody that rises were inadmissible because, among other things, Britain’s international balance of payments was in jeopardy. Ministers lost no chance of parading statistics which showed how the British capitalist class were spending more on their imports than they were receiving from their exports. We heard many homely analogies about the difficulties of families which spent more than their income and we were invited to regard ourselves as members of a big, British, capitalist family.

A lot has happened since then. The international trading situation of Britain has varied considerably over the years. Once before—during 1959—the British capitalist class actually had a favourable balance of payments. Now it has happened again. The Treasury has announced that the first quarter of this year yielded a payments surplus in Britain’s international trade of £21 millions. The terms of trade—the ratio of import to export prices—are set fair for British capitalism and have been so for some time. The Chancellor of the Exchequer has suggested that over the year the surplus in payments might come to something like £150 millions.

At the same time another of the difficulties which faced the Labour government has gone, to be replaced by its opposite. There is no longer a desperate need to rush into a gaping wide world market, a market waiting to be filled with any substandard commodities which could be produced fast enough to pump into it. Coal, for example, was one of the big needs of the post war years. But so much has the demand for coal decreased that the National Coal Board has closed many of its pits and intends to close still more.

The dilemma

NCB chairman Lord Robens, speaking at the last annual conference of the National Union of Mineworkers, put his finger on British capitalism’s present dilemma:

“This is not an era of coal at any price—that ended in 1957; we are in the era of hard selling based on price, quality and service, and in this situation the fundamental need is to be able to produce the right produce at the right price.”

Conditions, then, have decidedly changed since the 1945 Labour government and in doing so have wiped out the excuses which were used to justify the wage freeze and the other restrictions of Crippsian austerity. The government itself has changed. But government policy on wage increases remains unaltered. All that has happened is that the old excuses have been replaced by the new. The catch-phrases of the late forties have given way to those of the early sixties. A pay pause may sound different from a wage freeze, but in fact it means almost exactly the same.

In one respect the government has not been caught napping by the changes of the past seventeen years. They have not run out of excuses. Now, we are told that wage rises are inflationary. The argument which goes with this assertion has almost become part of the mystique of modern capitalism.

When wages rise, runs the argument, the costs of production go up and the employers automatically increase their prices to recoup this. Higher prices mean that any unit of currency is able to buy less than before, which means that more currency units are needed to circulate the same amount of commodities. Thus wages are supposed to be going up closely followed by prices which, as they rise, nullify the wage increases and cut the purchasing power of the pound. This, say the pundits, is inflation.

This argument ignores several basic facts of capitalist life. Wages are the price of the commodity labour power and generally will fluctuate in accordance with the state of the labour market. But a market for one commodity can be buoyant at the same time as for another it is depressed. Although the coal mines are having difficulty in selling their product it is still possible for miners to get rises because at the moment most of them could get another job without great difficulty. The prices of many of the commodities which will for ever be associated with the so-called Affluent Society—television sets, refrigerators, washing machines—have tumbled over the past few years. But, as we have seen, the wages of the electricians and the engineers who make these goods have increased.

Karl Marx made the point over a century ago and it is still valid today. Highly paid workers can produce cheap commodities, and vice versa. A wage rise need not, therefore, be followed by a price rise.

The Guardian recently challenged the starting point of the inflation theory. In an editorial published on June 25, they said: This is the same mode of thinking as the one that regards success in enforcing a pay pause as the overriding test of present British economic policy. But in fact labour costs in the United States have risen sharply in periods of falling production and have actually declined in periods of recovery in spite of bigger increases in wages. . . . There is much evidence that the same is true of Britain.

Where, now are the protestations of The Guardian—and of other papers—that wage increases must put up labour costs? Are they buried, along with the other stale excuses? If so, we may be sure that they will return, even if in reincarnation.

Yes, wages are a problem and like most problems they are fertile in paradoxes. Perhaps the biggest paradox of all is that the problem will not be solved by putting wages up, or down, but by getting rid of them altogether.

Ivan

Would a Conservative Government be any better? (1976)

From the October 1976 issue of the Socialist Standard

The alternation of governing parties is usually represented as a free choice by the electorate: a political Judgement of Paris in which the voters composedly select the most beautiful, fair-spoken and wise. The actuality is something different. The party in charge has failed once more. Its inability to control the system has produced fresh grievances, its leaders are divided; and the opponent party, which itself was in this position not long ago, prepares to catch the Judges’ eye again. The voters don’t feel like masters of the situation. The widespread sentiment is that the existing régime is beyond hope, and to see if “the other lot” can do any better.

In these circumstances the Conservative Party is now looking at the prospect of winning the next general election. The Labour line, and that of the militant groups who attack the Labour Party but unfailingly support it at election times, is that the Conservatives stand for wealth and privilege and so must be kept out at all costs. It is much more fruitful to consider that many Conservatives, leaders and supporters alike, believe with Disraeli that they can and should “elevate the condition of the people”; and to see the reasons why they have failed and will fail.

State and Enterprise

The conspicuous difference between the two parties is that the Conservatives frankly accept the capitalist system, while Labour is committed to social-democratic ideas which mean running capitalism with a different vocabulary. The Conservative tradition is for “free enterprise” and against state intervention in production and distribution. In The Conservative Party (1949) Nigel Birch wrote: “They do not believe that the present type of central planning, which involves the attempt by the State to interfere in almost every aspect of human life and activity, can succeed or if it did succeed would lead to the good life.”

This passage goes on to quote J. M. Keynes— “The advantage to efficiency of the decentralisation of decisions and of individual responsibility is even greater perhaps than the nineteenth century supposed.” Most Conservatives would regard as ideal Keynes’s colourful statement in his General Theory:

If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal-mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig them up again . . . there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is.

The rôle of the state is thus confined to priming the pump, and the interplay of market forces provides not only the profits which are the rightful due of the capitalist class but benefits to the working class. This is seen as the practical alternative to state control and to a lot of welfare legislation. It embodies a taken-for-granted idea of justice: the most efficient industry and the most diligent workers get their reward.

Unfortunately, it doesn’t work. If it did, we should not have a trade depression with 1,500,000 unemployed in Britain today after thirty years of the application of Keynesian policies by Labour and Conservative governments alike. However, the Conservative Party has never been able in practice to reject “central planning” and, both before and since the war, has carried out more measures of state control of industry and social institutions than the Labour Party. It has to do so if it is to further the interests of capitalism. Prospect for Capitalism, a Conservative pamphlet published in 1958, urged action to restrain “the excesses of naked capitalism”, and in its introduction Lord Hailsham proposed the super-state as the unit for the future:

Moreover, the very size of modern units of production, and the prime cost even of the apparatus necessary for basic research, has limited the effectiveness of competition as a spur, and has provided an inevitable field even in Britain and America for the emergence of the State as a capitalist ... In some cases, the State itself has become too small a unit, and capital development has become the province of a consortium of States, as at CERN at Geneva.

Cutting Back

The outstanding matters for a Conservative government elected in the near future would be public expenditure and a wages policy. On the first of these, Conservatives have abandoned Keynes and latched on to the monetarist case put forward by Enoch Powell, Sir Keith Joseph, and the editor of The Times: that inflation can and must be stopped by containing the money supply. It is not denied that this would mean unemployment and bankruptcies as liquidity dried up. The monetarists argue that we have those now, as the result of the policies they aim to stop. A report in The Times of 27th August said:

The Prime Minister must reject the demands of trade union leaders when he sees them next week about the serious level of unemployment, Mr. Prior, the Conservative spokesman on employment, said yesterday . . . He said it appeared that the union leaders were going to Downing Street to seek an intensification of the very policies that had proved so disastrous for their members and for the nation.

Prior did not add that these policies were pushed by the Conservatives every bit as much as by Labour. In the years 1972 and 1973 under Anthony Barber, the Tory Chancellor of the Exchequer, the money supply increased by 24 and 26 per cent. respectively.

Given that the Conservatives have now changed their views, they are faced with the same problems as Labour. The reduction of the money supply means cutting government expenditure on roads, subsidies, schools and services—measures hardly likely to appeal to voters. On this, Conservative spokesmen are inevitably unspecific. In an article in The Observer on 22nd August Sir Keith Joseph said only that “Government spending is too high” and there must be “less Government spending”. But with the present-day importance of the car industry, for example, is it supposed that a Conservative government would have refused the “rescue operations” of putting massive sums of money into Leyland and Chrysler? It is unlikely.

In fact the belief that it is the money supply that is to blame is a mistaken one (see the article “The Financial Times and Inflation" on another page of this issue). But the greater fallacy is supposing that ending inflation would cure unemployment and solve the economic problems. Large-scale unemployment was chronic through the years up to 1939, when inflation was hardly known in most countries. In the early nineteen-twenties, at the same period as there was high unemployment with inflation in Germany, there was high unemployment without inflation in Britain. In his Observer article Sir Keith Joseph said: “The inequality of rewards by which a market economy functions is not unjust.” This implies not a cure, but a return to the disease as it was in the good old days.

Unions and Parties

The belief that a Conservative government could not live with the trade unions has no foundation. Obviously the unions have made their terms with Conservative governments for a large share of the post-war period. Both Wilson and Heath misjudged matters in this respect, and both their parties learned from that. An all-party Commons committee in 1974 unanimously rejected further attempts at a statutory incomes policy. After declaring that it would mean “an authoritarian state” (a fear not entertained when they were trying it):

Secondly, they argue that prices and incomes policies are liable to have all sorts of nasty side effects, including stagnation. This possibility, they say, should be closely investigated before anyone blindly advocates a statutory policy. Thirdly, “it is a fact of political life that a statutory policy cannot currently be imposed in Britain. The previous Government fell while doing so. “People who continue to advocate the solution,” they argue, are “living in a dream world, not the one that really exists.”

(Guardian, 14th Aug. 1974)

At the present time it is the relationship between the unions and the Labour government that is under strain, on account of rising unemployment. The speeches at last month’s Trade Union Congress repeatedly demanded government action for “an efficient manufacturing industry ... a more sustained and vigorous implementation of its economic strategy” (Hugh Scanlon). What the unions do depends more on the state of the economy than on ideological considerations; and that applies to governments equally. Given a change after the next election, government and unions will aim to make the best bargain they can in the circumstances. The TUC’s vote for a qualified return to free collective bargaining with employers in 1977 was a hope for conditions to improve, but also a message to whoever is in power a year from now.

Getting Anywhere ?

Another question which has made a battleground between Labour and Conservatives is education: comprehensive schools or a system of varied schools? The arguments about this range round the idea of “choice” and it is not the issue at all. The education system has failed throughout its history to find a formula satisfactory to the needs of capitalism, hence the repeated reorganisations. Over fifteen years the eleven-plus system was shown to be unsatisfactory, and the comprehensive system has turned out calamitous in an even shorter time.

Despite the elation over Thameside, it is unlikely that the Conservatives would go back to the old régime. An article by a Tory lecturer in social policy in The Spectator (31st Aug. 1973) attacked “artificial social impediments” provided by the public schools: “capitalist society requires greater social mobility if it is to survive in its present state”. This can be applied to separate-schools organization generally, and was the main Labour argument in 1958 for the introduction of comprehensive schools. What the Conservative Party is faced with is a fresh attempt to devise a formula for education, with the knowledge that the alternatives have all been tried.

The question put by Edward Heath as an unsuccessful election slogan, “Who governs Britain?” is the apposite one in looking at the Conservative Party. It stands for capitalism: the private ownership of the means of living, and production for profit. Conservatives approve those motives, and are made impotent by them. It is capitalism that inexorably produces unemployment, crises, and the social problems which defy solution. The capitalist system governs Britain, including the Conservative Party: on one hand forcing it to abandon ideas and policies, on the other making it as incapable as Labour of using political power in the interests of most of the population. Supporters of the Conservative Party would do well to ask themselves why they should go on accepting that state of affairs.

Robert Barltrop

The Crisis: Wilson's lame explanation (1975)

From the October 1975 issue of the Socialist Standard

On August 20th Harold Wilson made his long-awaited broadcast to the nation informing us of what his government proposed to do about the economic difficulties in which “our country” finds itself. It was an emotional appeal for us all to accept sacrifices, accompanied by the threat of what would happen if we did not. To be more specific, wage workers were told that they could no longer “get for themselves such a pay increase as to enable them to escape the rigours of inflation” and that “the limit on pay settlements is £6 a week”.

The whole harangue was preceded by what purported to be an explanation of the causes of our economic difficulties — an explanation which appeared to exonerate the government from all blame. No doubt, at the speed of the spoken word, the reasons given sounded plausible enough to most of those who listened.

Let us however examine more closely these “causes” which Wilson claimed to be known to us all. He gave three. First:

The whole industrial world faces the most virulent trade and employment depression since the thirties.

This is like saying that you are going to be out of work because there are not enough jobs to go round — and explains exactly nothing. It has, however, the built-in suggestion that trade depressions and unemployment are like cosmic disturbances, for which politicians cannot be held responsible. In fact later in his speech Wilson likened the situation to “the fact that the world has been knocked off its axis by a universal recession”. The second reason given was:

Industry’s failure over the past 20 years to invest in industry, new plant, machinery, factory buildings, industrial modernisation . . .

Presumably Wilson was referring to British industry : yet in West Germany where, due to war-time destruction of factories and plant, large investment and modernization were essential, there is more unemployment than in Britain. As a reason for our present difficulties this second cause seems suspect, to say the least — apart from the fact that every worker knows that more efficient production is aimed at reducing the labour force. And so we come to the third reason:

. . . the effect of inflation on industry’s ability to provide jobs for those established in industry, jobs for school-leavers . . . this year it has been almost entirely internal prices and costs, including pay, which have aggravated inflation . . .

Here the workers are intended to feel partly to blame for having “aggravated” inflation. But you cannot aggravate something which is not already there. So what causes inflation? We are not told.

So much for explanations which explain nothing. It is distressing that, as far as we can tell, such arguments can be accepted by the majority of the electorate. It is, however, understandable. Politicians have never informed the public of the true nature of the economic system which they try to administer. We do not learn about it at school or from the “mass media”. But at least we can take a hard look at what politicians such as Wilson tell us and see the worthlessness of their so-called explanations. It is then up to the workers to find their own explanations from an understanding of the nature of the capitalist economic system of production.

Let us then go back to Wilson’s three "causes”. Why in fact is there a trade depression in the “whole industrial world”? What is immediately apparent is that these countries have produced more commodities than they can sell at a profit. This is what “trade depression” means. But why should this be so? Capitalists, whether they control private companies or nationalized industries, employ the physical and mental abilities of wage-workers to produce commodities (or processed materials). The primary aim is to sell such commodities at a profit. This profit represents the difference between the value of the work provided by wage-workers and the wages they are paid. Employers know this only too well. The effort to restrain wage increases, the introduction of better machinery, the stream-lining of production methods, are all intended to reduce the “wage bill” and increase the margin of profit.

It follows therefore that the working class as a whole are not paid enough to buy back the goods they have produced. The “export drives” typical of all industrialized countries are evidence of this need to sell abroad the surplus which workers in the country of origin cannot afford to purchase. Likewise, in spite of what Wilson says, the bulk of profits are reinvested in industry — to produce more and more commodities in the hope that by price undercutting such goods can be sold abroad. But, like taking in each other’s washing, it is a futile endeavour when all countries are trying to do the same thing. The surplus car production at the present time is perhaps the most evident example of this. America, Europe and Japan are all fighting to sell their cars to each other — to the extent of “dumping” cars abroad at less than their internal prices.

It is true that, in part, export of commodities is required to provide the money to purchase food and raw materials not sufficiently available in the exporting country. But, globally, there is an excess of commodities, including food, over and above the purchasing power of the working class. This is what shows a world-wide trade depression to have other causes than interference from outer space. It is due to, in Marx’s phrase, “disproportion of production” which is inherent in capitalism.

That is not the end of the story. The “crisis of over-production” leads to a slowing down, or even halting, of production. Capitalists will not for long continue production of what they cannot sell, even at a reduced margin of profit. Reduction of production means unemployment. The ability of workers to buy back what they have produced is further curtailed. Production is reduced still further and unemployment increases.

This is the explanation of the nature of “the virulent trade and employment depression” which Wilson might have given. But then, having promised to administer capitalism better than Heath, he can hardly be expected to tell the electorate that trade depressions are endemic in the capitalist system. The electorate might want to change the system for one which produces commodities for distribution rather than sale at a profit.

What is really behind Mr. Wilson’s second “reason” for our economic difficulties: British industrial inefficiency? The explanation is to be found in what has been written above. British capitalism can only survive if it can export wealth. To do this, foreign competitors must be under-cut, or better value for money offered. By the more efficient processes outlined by Wilson in his speech industrial wage bills can be reduced, goods can be exported at lower prices while still maintaining the previous margin of profit. Some countries can, however, compete more successfully because labour is cheaper, and this is why “wage restraint” is so important to the employer. This leads on to the third of Wilson’s “reasons” in his reference to pay aggravating inflation. Industry’s concern about pay increases is not that they aggravate inflation but because they make it more difficult to sell products at a competitive price while still maintaining the customary margin of profit.

But this still does not explain the inflation which is “aggravated” and which largely caused, in the first place, the demands for higher wages. This kind of inflation — the devaluation of the pound — has been caused by the excessive printing of paper money by the Bank of England on the authority of successive governments since the war. No mention of this was made in Mr. Wilson’s speech. But he is not the only one to keep quiet about the effects of government monetary policy, both here and abroad, on the rate of inflation. In November 1974 Enoch Powell was complaining that:

. . . little attention had been given (in the press) to the epoch-making conclusions of the European Economic Community Countries’ finance ministers on measures to tackle inflation. To restore the general stability in the value of money they agreed that they should follow the principle ‘that increases in the supply of money should be cut back to the same level as the real growth in gross national product’, plus whatever might be accepted for the time being as the permissible rate of inflation, namely 4 per cent next year.

(The Times, 4th November 1974)

Our economic difficulties are not, as Wilson implies, a “bolt from the blue” but a direct result of the operation of a capitalist economy. When the electorate understands this it may seriously examine the case for establishing an alternative economic system based on production for use rather than production for sale, that is, Socialism as we mean it and not as Labour politicians use the word to conceal state capitalism.

John Moore

Both-ways Tories (1975)

From the October 1975 issue of the Socialist Standard

“The Conservatives will stand by the Government if its policy to beat inflation is challenged, Sir Geoffrey Howe, QC, Opposition spokesman on Treasury and economic affairs, said on Saturday.” 

(The Times, 1st September 1975) 

“Mrs. Thatcher gave a clear warning last night that the Labour Government cannot rely on unquestioning Conservative support for its anti-inflation policy.” 

(The Guardian, 9th September 1975)

The Liberals are believed to endorse their views.

Inflation and prices - Part 4 (1965)

From the October 1965 issue of the Socialist Standard

Link to Part 3.

In this last instalment it may be useful to make a few brief comments on the subject which we have been discussing.

A great many people think that higher prices are caused by higher wages; they look at what has been happening in the last 20 or 25 years and they think this proves their point. One fact is enough to dispel this belief. Between 1945 and 1951 the retail price index was more or less continually rising faster than wage rates, it was not a question of wages going up and prices following, but the reverse. Secondly, it has to be remembered that in a period of continuing inflation, when manufacturers can more or less confidently expect that there will be a steady rise of prices of, say, five per cent a year because of inflation, they would often prefer to give a wage increase when it is demanded than to risk a strike. And, of course, they never fail to represent the price rise which would take place anyway as having been due to the wage increase. They will often time their price increases to follow a wage increase to give this impression, although if market conditions are against them, they cannot put up their prices whether they want to or not and whether wages have gone up or not.

At the present time the Government in Great Britain talks in terms of having no more inflation, even if this might mean fighting the trade unions over wage claims and risking big strikes. It remains to be seen whether they will. While relatively full employment lasts, the trade unions are in a fairly strong position, rather different from the situation between the wars when there was always at least a million unemployed.

Governments do not always prefer inflation. In certain countries they carry out the reverse—a deflationary movement—as the British Government did after the First World War. On that occasion prices went down by about one-third, and wages came down with them. Russia since the Second World War has twice up-valued the rouble, replacing the old currency by a new and much reduced quantity of notes. France did the same in 1960. One of the reasons why in Great Britain the Government is unlikely to try to reduce prices to anything like their former level is that its obligation to pay hundreds of millions of pounds on the National Debt would become an enormously increased real burden, if they had to pay it in currency, the purchasing power of which was being increased by the deflationary fall of prices.

During the last 25 years the holders of Government securities have found that the real value of their holdings and the purchasing power of the interest they received on them are steadily being reduced by the falling value of the pound. This has suited the interests of the general body of capitalists in Great Britain.

When Russia in 1947 up-valued their rouble they got over that particular difficulty by simultaneously reducing the amount of bond holdings. A Russian, for example, who had Government bonds to the value of 1,000 roubles, found when the up-valuing of the rouble took place, that his holding of Government bonds was cut by one-third or one-half.

No city editor or orthodox economist accepts the Marxian view that the increase of a non-convertible note issue is a cause of inflation. Some of them, including some of the followers of the late Maynard Keynes, deny that the note issue has been excessive, and say that it has merely kept pace with the currency needs required by expanding trade. It is, however, for them to explain why it was necessary to multiply the note issue in Great Britain by nearly five times in face of the fact that the actual physical volume of production in Great Britain is now not more than about five per cent above the pre-war level. Obviously, these two facts do not square with the interpretation put on the note issue. It is a reasonable assumption that the excess issue has only been made necessary by the multiplied price level, which has itself been largely caused by the note issue. Another group of economists deny that the note issue matters any more, one way or the other. It is for them to explain why the Government troubled to multiply the note issue if it is not of sufficient importance to have any effect.

Edgar Hardcastle

(Concluded)

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)

Economic Theory (1971)

Book Review from the September 1971 issue of the Socialist Standard

Economic Theory in Retrospect. M. Blaug, Heinmann Education. Second Edition £2.75.

This work by Blaug, who formerly taught economics at Yale University and is now Professor of the Economics of Education at the University of London Institute of Education, will be both useful and harmful, depending on how it is used. Students who treat it as a source for “potted” versions of economic theories and accept uncritically the author’s comments on those theories will often be misled. Those who take very careful note of the author’s warnings in his Preface to the Revised edition and use the book as he intended may find it useful. Blaug writes:

“In order to encourage students to doubt all commentators, including the author of this book, this edition like the first one contains detailed Reader’s Guides to cover major works in the history of economic thought. But as some reviewers of the first edition felt that these were more welcomed as heaven-sent cribs than as stimuli to consult the original writers, I should warn readers again that the Guides are neither summaries nor precis; they are running commentaries and more concerned with what the great economists might have meant than what they actually said. In short, they are especially designed to be provocative . . .”

When it comes to Marxian economics the reader should certainly challenge some of Blaug’s comments and interpretations. A few examples will illustrate this.

Discussing Marx’s description of the poverty and inequality of the early nineteenth century, Blaug writes that “it would be absurd to believe that the conditions described . . . reflect exploitation of labour rather than the low output per head of the working population”.

Blaug’s own explanation is that “the deplorable material standards of most working people . . . had more to do with the birth pangs of industrialization than with capitalist methods of organising production”, and that “living standards of the British working class could not have been raised significantly even by a perfectly egalitarian distribution of income”.

This was and still is the line of propaganda used by the defenders of capitalism. It would be interesting if Blaug “the commentator” (as distinct from Blaug the defender of capitalism) would explain what it was other than exploitation which enabled the rich, and in many cases idle, members of the capitalist class, to avoid sharing the poverty—after all the output of most of them wasn’t even low !

Blaug’s observations may also indicate that he thinks Marx aimed at egalitarian capitalism — which really is absurd. What Blaug has to meet is Marx’s proposition that in a Socialist system of society the output of useful articles will be greatly increased.

On page 279 Blaug has a fifteen line comment on Chapter 19 of Marx’s Capital Vol. I. (Chapter 17 in the Allen and Unwin translation).

Blaug writes:

“Chapter 19 plays hard and fast with the distinction between labour and labour-power. ‘Labour is the substance and the immanent measure of value, but has itself no value’.”

Blaug’s comment on this is that Marx meant “that the worker has no value, it is only his services that are valuable”.

Marx didn’t say or mean what Blaug says he meant. He was dealing with the question whether what the worker sells is his labour or his labour-power, not, as Blaug seems to think, whether the worker sells himself. In that chapter Marx argued that it is labour-power that the worker sells and that is an embodiment of value (the quantity of labour necessary for its production). It is not his labour, or work, that the worker sells.

Blaug’s quotation is immediately preceded by the following which ought to have made Marx’s view clear.

“That which comes directly face to face with the possession of money on the market is in fact not labour, but the labourer. What the latter sells is his labour-power. As soon as his labour actually begins, it has already ceased to belong to him; it can no longer be sold by him.”

Some of Blaug’s book deals with Volume II and Volume III of Marx’s Capital. Unlike Volume I, which was completed for publication in his lifetime, the later volumes (and other material published after his death) were left incomplete, some of it in the form of mere notes. Engels who edited Volumes II and III drew particular attention to this in his Prefaces. In the Preface to Vol. Ill Engels wrote, for example, “nothing was available but a first draft, and it was very incomplete”. Some of the chapters were so incomplete that Engels left them as they were being unable to take on the task of getting them in proper shape. It is therefore often difficult to decide how far Marx’s first notes were really considered judgments. Blaug is not unaware of this but seems not always to have made due allowance for it.

In his ten line comment on ten chapters of Volume III (Page 290) Blaug makes statements which, to the reader not familiar with the originals may seem to indicate that Marx in Volume III was repudiating what he wrote in Volume I about the effect of an overissue of inconvertible paper currency on the general price level.

Fortunately, in this case, Engels spotted the possibility of misunderstanding and inserted a note in Vol. III pointing out that the material in Chapter XXXIII dealt only with the position in Britain at a time when the currency was primarily gold coin and convertible Bank of England notes, and not with the different situation of an inconvertible paper currency, the latter being as stated in Volume I. The note reads a follows:

“Inconvertible bank notes are not taken into consideration at all here; inconvertible bank notes can become universal means of circulation only under conditions in which they are actually backed up by National credit, as is the case of Russia at present. In that case they fall under the laws of the inconvertible National paper money, which have been developed already in Vol. I, Chapter III 2‘ Coins and Symbols of Value‘.

The chapter of Volume I referred to set out Marx’s view that, in accordance with the labour theory of value, the doubling of an issue of inconvertible paper currency merely serves to double the price level.

Blaug deals with Keynes and the neo-Keynesians in Chapter 15 and here his method shows its weakness. In thirty pages he gives a running commentary on Keynes and his critics and commentators, indicating here and there his own reservations. It might have been more useful if he had separately provided his own considered views on Keynesian theory and its practical application in the past thirty years.

Edgar Hardcastle

Cooking the Books: Economic leverage (2026)

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

‘Workers face worst squeeze on real pay since 2022’ was the headline of an article in the Times (20 May) by its Economics Editor Mehreen Khan. In the first three months of this year, average weekly earnings increased by 3.4 percent, which was more or less the same as the rise in the Consumer Prices Index. ‘However’, Khan writes,

‘while real incomes are on course to flatline this year, the jump in global oil prices is expected to push annual inflation close to 4 per cent in the coming months’.

If average earnings go up by 3.4 percent and consumer prices go up by 4 percent, that’s a reduction in real pay for workers. So why don’t they simply go on strike and push up wages to keep up?

The answer is that workers don’t have the power to put up the price of what they have for sale — their labour power — just because they want to, even to cover a rise in the cost of what they need to produce what they are selling. They, like all other sellers, can only charge ‘what the market will bear’. And, as Khan and the economists she quotes note, the current state of the labour market will not allow an increase:

‘Rising prices, combined with a weakening job market — where unemployment has risen to 5 per cent — means workers are losing their bargaining power to demand pay rises, economists said.’

One of the economists, Josie Anderson of the financial services group Namura, used the term ‘soft labour market’. This doesn’t mean what you might expect — surely, the current labour market is a ‘hard’ one as far as workers are concerned? — until you realise she was writing from the employers’ point of view as buyers of labour power. An AI definition of the term (cobbled together from other definitions) makes this clear:

‘A soft labor market (also called a “cooling” or “loose” labour market) is an economic environment where the supply of available workers outpaces the demand for labour. In this climate, hiring slows down, job seekers face stiffer competition, and employers regain negotiating leverage.’

Whether or by how much real pay goes up or down is a question of the respective bargaining strength of employers and workers, which in turn depends on the state of the labour market, but that is not something we are usually told by the media. Normally the story is of greedy workers causing inflation by forcing employers to agree to excessive wage demands.

Sometimes workers are in a favourable bargaining position and can maintain or push up real pay: when business is booming, finding a job is easy, and employers are making good profits; this ‘hard’ labour market for employers gives workers some ‘negotiating leverage’. That is the time to strike or threaten to strike. But the reverse of this is a ‘soft’ labour market for employers; it is they who are then in a stronger bargaining position, as at present and, according to one of the economists, for the fourth time ‘in less than two decades’.

We are talking here just about changes in bargaining leverage over the shortish-time price of labour power. Ultimately, over wages, the capitalist class have the upper hand as they monopolise productive resources. This gives them leverage to force workers to sell their labour-power for a wage in the first place. There is no bargaining about this; it’s just a fact of capitalist life that is imposed on workers. The way out for them is political not economic: to take political action to make the means of life commonly owned and democratically controlled by the whole community. Then there will be no labour market and no wages system.

He's telling us (1977)

From the December 1977 issue of the Socialist Standard

Since the quantity of money capable of being absorbed by the circulation is given for a given mean velocity of currency, all that is necessary in order to abstract a given number of sovereigns from the circulation is to throw the same number of pound notes into it, a trick well known to all bankers. 

(Karl Marx, Capital Vol. 1, p. 136, Kerr edition)

Notes by the Way: Do You Trust Colonel Nasser? (1956)

The Notes by the Way Column from the October 1956 issue of the Socialist Standard

Do You Trust Colonel Nasser?

Much of the propaganda about the Suez dispute has been concerned with whether Colonel Nasser is to be be trusted. Sir Anthony Eden says no; and the Colonel says he doesn’t trust the Western Powers. Many of the Labourites who oppose the Government’s policy affect to believe that British Capitalism can rest content with the Colonel’s promise not to interfere with the unfettered passage of the Canal.

Which of them is right? The answer is that they are all wrong. History is littered with binding treaties which turned out to be scraps of paper; with treacheries and forsworn promises even when the signatories, at the time they pledged their word; had every intention of keeping it.

The truth is that where vital economic and military interests are concerned it is so easy for the party to the agreement, who finds it becoming an obstacle, to convince himself that altered circumstances justify him in repudiating his obligations. (There is a lot to be said for the attitude of those Quakers who, on moral grounds, refuse to pledge their future conduct lest this should happen).

It was British governments which occupied Egypt "temporarily" and stayed there for over half a century and British governments which have not paid off the hundreds of millions of pounds they pledged themselves after her World War I to repay to America.

All governments, when they find it highly convenient to do so, and provided they can get away with it, break their promises. They do it, too, in home politics with election pledges and it is the height of simplicity or hypocrisy for Labour opponents of Eden to pretend that we all ought to trust one another. They are indeed “all honourable men.” but does the Labour Party trust Eden when he makes election pledges? or does he trust them?

About that High Dam and American Cotton

It happens that Egyptian plans for a new dam on the Nile provide an example of how promises come to be broken. What sparked off the Suez dispute was the action of Mr. Dulles in suddenly withdrawing the promise he had made to supply millions of American dollars to help Egypt meet the estimated £120 million cost of the new high dam at Aswan. The excuse given by Dulles was that the American Government believed Egypt's own financial resources to be insufficient to meet the rest of the cost, particularly since Egypt had been mortgaging its resources to buy costly arms from Russia. The British Government followed Dulles’ lead in withdrawing an offer of aid.

But an American reader of the Manchester Guardian, writing from San Francisco, gives a different reason. Mr. Dulles’ Republican Party, needs every vote it can in the forthcoming Presidential election, including the votes of American cotton growers, already worried about large unsold stocks of cotton, they do not like the idea of an Egyptian dam which will greatly extend the irrigated area on which Egyptian cotton can be grown and put on the world market in competition with American cotton. The San Francisco reader writes:—

"The reason given by Mr. Dulles for the last-minute refusal was that Egypt was not able to fulfil its part of the contract. Whether Egypt was able or not, I do not know, but the more likely reason is that the State Department heard protests from the cotton growers of Louisiana and Mississippi. This is the year of a Presidential election, and in election years American foreign policy is always uncertain." !

(Manchester Guardian, 29/8/56.) 

The same writer also dismissed any notion that Mr. Dulles has developed scruples about using force in international disputes, and 'that this explains his caution over Suez:—

"When American canal interests were endangered by a recent revolution in Guatemala, America acted not with caution but with decision, and the revolt was quickly put down."

And what about Colonel Nasser’s pretence that it is only the Western Powers whom he cannot trust and that the African Powers are full of mutual love and confidence? Does the Colonel trust his fellow religionists in the Sudan or his fellow Africans in Ethiopia? Not on your life! The Government of the Sudan does not like the Egyptian plan and can advance seemingly weighty technical reasons. They would prefer dams and irrigation schemes higher up the Nile and its tributaries, under a joint operation in which Ethiopia, Uganda, the Belgian Congo, would join with the Sudan and Egypt. But the Colonel does not trust them any more than British Capitalism trusts the Colonel. He fears quite reasonably, that if Egypt puts up a lot of money to build dams not inside Egyptian frontiers, his Sudanese brothers may be tempted to take advantage of it. Mr. C. L. Hartnoll, wrote on the subject in The Arab World, which is the organ of the Anglo-Arab Association and sympathetic to the Egyptian point of view, with the Egyptian Ambassador as one of its patrons. The article, written before the Suez dispute blew up. contains the following:—

“The most probable explanation of Egypt’s insistence on the superior merits of the High Dam is, therefore, most probably a political one. No doubt she feels that if she has to put up the money anyway, she might as well have full control of the whole undertakings on Egyptian territory rather than disperse control by foreign engineers at various points in the Sudan, Ethiopia Uganda and the Belgian Congo. Strategically she has always felt at the mercy of any power controlling the upper waters of the Nile but at least at Aswan she would have the control in her own hands. Also, of course, the prestige value of the High Dam to the Revolution and its leaders is not without its attraction." (The Arab World, July, 1956.)

For while Egyptian Capitalism masks its financial interests under a high falutin imperialist principle called “the natural unity of the Nile Valley,” which includes the ambition of Egyptian control of territories all the way up the River, some of the equally ambitious Sudanese have dreams of achieving this “natural unity” at Egypt’s expense.

The Sudanese do not like the idea of Nile control, vital to themselves, being in Egyptian hands at Aswan. And the Colonel for his part may reasonably fear that if Egypt puts up money for dams higher up the Nile the Sudan or Ethiopia might “do a Nasser on him.” This is what Capitalism does to human relations.

Unearthly Socialism

In Labour Party journals and on their platforms, lots of pens and voices are calling for means to recapture the “lost spirit of the movement.” One lifelong supporter knows an unexpected direction in which to look. Writing in The People (April 8, 19.56), Mr. Hannen Swaffer had this:—

“I am, in religion, a Spiritualist and a Socialist. To me both these words mean the same thing. By this I mean that I have learned from the Spirit world to understand something of the creative force which is behind all creation, and that, knowing it to be my duty to try to carry out. during my earth life, the furthering of that creative principle in this world, I can see only in the adoption of Socialist principles the means."

He went on to affirm his belief that “Spiritualism and Socialism, when joined in the practice of the lives of all of us, will abolish all creedal differences, and all class and caste hatreds, join us all in one great human family. . . ”

We can accept that Mr. Swaffer assiduously plugs Spiritualism and mixes it in with his already muddled notions of Socialism because it is the thing he really relieves it, but the same excuse cannot be made for the Daily Herald's recent addition of horoscopes to its columns. The worried workers, seeking respite from the daily harassments of the Welfare State, can now consult “Your Lucky Stars” as interpreted by Diana. Another recent addition to the horoscope Press is the News Chronicle (“Seeing Stars,” with the help of Leon Petulengro)..

If they change to the Express, the Mail, or the two morning picture papers, their needs are likewise cared for and almost all of the cheaper Sunday papers are in the heavenly swim. But why no horoscopes in the evening papers?

Before the war the Beaverbrook Press, high mindedly and with a loud banging of trumpets, announced that it would ,no longer pander to this “ignorant superstition but after a lapse of time the horoscopes crept back again.

The purpose, of course, is to whip up circulation and the publicity experts are clearly convinced that you can’t get into the big circulation without horoscopes.

The Reverend Donald Soper on Nasser

Among his admirers the Reverend Donald Soper is credited with understanding Socialism and being a Socialist. A speech delivered by him at Caxton Hall on August 14th, 1956, shows how little there is in the claim (speech published in the Arab News Letter Arab Students Union, September, 1956)).

On the superficial things such as the hypocrisy of the British Government; the failure of the Labour Party (of which he is a supporter) to see the real issues; the non-existence of the “international law” to which the Government appeals; and the failure of the Church to seek “peace on earth and goodwill among men,” on these he was plausible enough, but when it came to putting a Socialist point of view he was silent. He had absolutely nothing to say about world-wide Capitalism and the forces that drive all the nations into conflict. The nearest he got to reality—and this was seeing symptoms instead of causes—was to see evil in the existence of “nation states.” But his remedy for this is “world government” and United Nations; much as if to say that as banditry is bad let us hope that the bandits can unite into one central bandit and in the meantime let us make rules of conduct for the bandits. So he demanded that while these “nation states” endure “there must not be privileges for some and rejections of these privileges for others.” . In other words “Fair play for ail the bandits.”

He dwelt on the slums and poverty alongside great wealth in Cairo and, quite fairly, marked this up against the former British rulers of Egypt; but is he really so naive as to suppose that the ruling class behind dictator Nasser are taking the Canal for the sake of the Egyptian workers they exploit? Apparently he is that naive or had his tongue in his cheek, for he called on the Church to support Nasser.

“I want to say in the name of Christianity that this Nasser ought to be encouraged and not be repressed, because I believe the root of the matter in him is good, and because it is good, it is our business to evoke it by corresponding good, and not to repress it by threats of violence.”

What evidence can Mr. Soper bring forward for his implication that when a home grown ruling class runs Capitalism itself after ousting foreigners that their aim is any less the perpetuation of exploitation and the resulting poverty of the masses? British Capitalism has been run by home-grown rulers (including years of the Labour Party that Soper supports) and it hasn’t touched the class ownership of accumulated wealth. And Mr. Soper shouldn’t have far to look in his own neighbourhood to find some of the million slum dwellings.

He ended his speech with a call to throw out the Tory Government. His solitary piece of lip service to what he supposes is Socialism, being a plea for the introduction of “a truly Socialist Government.”

Embarrassed by his difficulty in fully endorsing the Labour Party he declared that “by the grace of God, even the Labour Party can become a Socialist Government which surely is hardly flattering to his God. Why must God (whose “will,” incidentally Mr. Soper claimed that he knows!) have to act in this roundabout fashion? Why can’t the “grace of God” turn the Tory Party into a “Socialist Government?” It shouldn’t be any more difficult.

Of course Mr. Soper knows that “divine grace” isn’t going to solve the problem. He also knows that delivering Socialist truths would help. What, then, is his excuse, as a self-styled Socialist, for not delivering them at that meeting?

Automation, 1830

The rich have always been able cheerfully and patiently to bear the hardship of the poor and urge them to be equally patient. We now have the politicians and economists telling the workers who may lose their jobs through “automation” to reflect that in the long run it will all be for the best, and anyway it is inevitable. In 1830 the Society for the Diffusion of Useful Knowledge published an Address to the Labourers on the subject of Destroying Machinery. Here is a typical passage: —

“It is undoubtedly true that all machinery which spares human labour, unavoidably, on its first invention and on beginning of its work, throws some persons out of the employment in which they had been engaged, and they must seek their means of support in some other way; this is the necessary consequence of the introduction into use of the most simple instrument, and of all improvements in art. But, on the whole, the public, and every individual in it, are in the end infinitely the gainers.”

A caustic cartoon, also published in 1830, and believed to have been the work of the brother of the better-known Cruikshank, dealt with the unemployment caused by the incoming machinery as one of a series called “Living Made Easy,” The “machines” it portrayed were “Charity tubes to convey the smell from the tables of the rich, for the benefit of poor operatives.”

It showed humble bare-headed workers permitted by a livened flunkey to stand over the open ends of iron tubes which conveyed the smell of food into the courtyard of some palatial mansion. It was “particularly recommended to the philanthropy of those who have made large fortunes by machinery.”

Mr. MacMillan on Paper Pounds

In a speech on inflation in which he warned that if wage increases went on the Government might devalue the pound again as did the Labour Government in 1949. He asked the trade unions

"Do you want more paper money to handle or more goods and services to enjoy? ”

(Daily Mail, August 30, 1956.)

This is indeed a classic example of the devil rebuking sin. It is not the trade unions but Mr. Macmillan and other Chancellors of the Exchequer who determine the amount of the note issue. And what is their record at setting the printing press at work making more and more paper money? In 1938 the amount in issue was £529 million and in 1945 £1,311 million. The Labour Government stepped it up to £1,383 million and the Tories since they came in in 1951 have added another £300 million, making the present total £1,662 million.

Not, of course, that it makes any material difference to the workers position under Capitalism. They were just as poor and just as much exploited in 1938 with pounds fewer and wages lower, as they are now with wages trebled and each pound buying about one third of what it then bought.

They Cant Afford a Holiday

The British Travel and Holidays Association in a survey of the holidays of Britain’s population tell us that “about half the population of Britain took no holiday away from home in 1955. Of those who did travel, only 8 per cent. went abroad: 77 per cent. of the population has never been outside Britain” (Manchester Guardian, August 31, 1956).

“Expense was given as the main reason why people stayed at home during their holidays.”

What Nina did not say

Nina, the Russian athlete, who was alleged to have taken hats worth 32s. 11d., missed a fine opportunity by not appearing in court. Why did she not get up and tell the British workers that under Socialism in Russia you just go along and take what hats you need without this Capitalist nonsense of paying for them?

The answer, in case anyone is in doubt, is of course that there isn’t any Socialism in Russia, the claim that there is being one of the lies of the Communists.

Mr. Nehru Again

In his attitude on the use of military force to crush the Naga independence movement in India Mr. Nehru gets more and more like Sir John Harding in Cyprus.

A Naga M.P. in the India Parliament made a long statement on the suppression of the Nagas.

“As a result of military operations, Mr. Keishang said, 2,000 people were forced to stay in the jungles. Most of the villages of the Mokukchang area had been burnt by the army, between 30 and 50 villages had been burnt in the Megkukchange area, and four-fifths of the villages in other areas had been burnt. He said that 397 Nagas had been killed, and troops had also killed Dr. N. Haralu, a respected doctor of Kohima, who had been “ hunted in the streets of Kohima and shot down.

“More than five hundred Nagas are in prison, including students and children aged between 1 and 13. The Army tries to terrorise the Nagas by carrying a naked corpse, bound hand and foot, through the streets of Kohima, and bodies are burnt in spite of the fact that the Nagas never burn bodies. Is this behaviour of the Government better than that shown by the Nagas ? . .. The spirit of revenge will persist for generations, even if the Nagas are defeated.” (Manchester Guardian, August 24, 1956.)

Mr. Keishang chided Mr. Nehru with failing to show at home the “spirit of peaceful negotiation” he is always recommending to other governments. But Mr. Nehru was not to be moved. He won’t even discuss the matter.

“Mr. Nehru, winding up the debate, admitted that some mistakes had been made, but said that the attitude towards the Nagas had been human and not completely a military one. He repeated that the Government could not talk with the Nagas until they gave up their demand for an independent state.

“There is no question of prestige. India is far too big for her prestige to suffer in such dealings. We are not prepared to talk independence, and we demand that the Nagas must give up violence."

Mr. Nehru is another of the reformists to demonstrate that there aren’t any different ways of running Capitalism.

Edgar Hardcastle

Blogger's Note:

I believe that the 1830 cartoon that Hardcastle is referring to in his column is the one posted below. The only sticking point is that he mentions it was by Isaac Robert Cruikshank but the internet is telling me that it was by Thomas Mclean .

Letter: Forging ahead (1976)

Letter to the Editors from the September 1976 issue of the Socialist Standard

Forging ahead

Could you answer the following question: If there was a huge circulation of counterfeit money about, which could not be detected, what effect would it have on the economy?

J. W. Eastwood

London W.2.

Reply:

For the earlier part of your letter (not reproduced here) see the reply to D. J. Underwood, whose letter it closely resembles.

An excess of currency in circulation, made by private enterprise, has the same effect as an officially produced excess: it causes inflation. What you suggest as a hypothesis has happened several times. The outstanding example was “the great Portuguese note trick” of some years ago, when swindlers posing as representatives of the Portuguese government persuaded a British banknote-printing firm to produce an issue of notes for use in a Portuguese colony. In the subsequent action by the government of Portugal it was pointed out that the circulation of the notes had caused economic damage by pushing up prices in the colony.

During wartime, governments have introduced counterfeit notes into opponent countries with the object of causing disruption. The difficulty, as for the private forger, is finding means for the currency to get in circulation in sufficient quantities; the Portuguese swindlers had an accomplice in a bank. However, once notes are printed and accepted there are not separate sets of results for legal and illegal origins. An excess issue of an inconvertible paper currency causes prices to rise, regardless of who did the printing.

Editors.

Major Douglas in Alberta (1935)

From the August 1935 issue of the Socialist Standard

An interesting situation has arisen in Alberta with the acceptance by Major Douglas of post as adviser to the Government. The Government in the province is in the hands of the Party known as the United Farmers of Alberta, whose hold on the electorate has been seriously undermined by the rapid growth of a local Social Credit League run by a Mr. Aberhart. Fearful of being defeated at the next elections the Government, in the words of the Canadian correspondent of the Economist, “hit upon the idea of importing Major Douglas himself, the parent of Social Credit, to confound Mr. Aberhart” (Economist, June 29th).

Major Douglas and Mr. Aberhart have said some harsh things about each other, and each claims that his particular scheme is the genuine article, so that it seems highly probable that the move of the Alberta Government will succeed in splitting the Social Credit vote. Major Douglas is not giving his aid for nothing. He is to have a “generous fee.” According to the Vanguard (Toronto, June 1st, 1935) he gets a retaining fee of 5,000 dollars and a further payment of 2,000 dollars for every visit to Alberta.

He has recommended the formation of a coalition Government which shall seek a mandate for the following four “fundamental objectives” (Economist, June 29th).

A drastic reduction of taxation, particularly upon property.

A maintenance dividend as of right, probably small at first, and graded so as to be at the maximum after middle age.

Measures designed to produce a low price level within the Province with adequate remuneration to the producer and trader.

Development of internal resources based upon “physical capacity rather than upon financial considerations.”

It will be noticed that these objectives might be accepted easily by any Liberal-Labour Party anywhere. Where they are definite they are in line with capitalism. Where they are vague they are good vote-catching devices.

What is important about the Alberta episode is that it exposes the real nature of the Douglasite gospel. Major Douglas and his followers are most emphatic that their scheme is not inflation of the currency, but that, in fact, is precisely what it is. The whole Douglas theory is based on an ancient myth about a supposed deficiency of purchasing power. There is no such deficiency, and consequently the issue of Social Credit in the form of the payment of an allowance to all citizens, since it is not to be provided by increased taxation, could only be done by inflating the currency and thus causing the price level to rise. Major Douglas is most anxious to deny this because experiences of inflation in France, Germany and elsewhere have shown how useless that is except for the problems of certain sections of the capitalist class. Now we find him acting as adviser to the United Farmers of Alberta, one of the planks of whose programme, adopted at a conference two or three years ago (see Canadian Annual Review, 1933), is inflation of the currency to bring the dollar down to the level of the wheat-producing foreign competitors of the Alberta farmers! Like certain English economists who have been prepared to give conditional support to the Douglas scheme, the Alberta farmers will be willing to do so simply because it involves currency inflation which they believe will help to reduce the burden of their indebtedness to the Canadian banks, mortgage companies and insurance companies.

Douglas – Defender of Capitalism

Before leaving Major Douglas it may be worthwhile to remind those misguided workers who support him how essentially capitalistic is his movement. He is himself an unrepentant anti-Socialist. In his Monopoly of Credit (Chapman & Hall, 1931) he describes the relationship between capitalism and workers as “a perfectly equitable arrangement” (p. 34) and in his Draft Social Credit Scheme for Scotland he emphasised that there was to be no ” interference with existing ownerships, so called,” and there would continue to be profits, wages and capitalist ownership (see appendix to Social Credit, revised edition, 1933, Eyre & Spottiswoode). He constantly puts forward the absurd theory – but a very useful one to the industrial and commercial capitalists in hoodwinking the workers – that capitalists and workers are both exploited and impoverished by their common enemy, the banker. One of the journals which espouses his cause, the New English Weekly, tells us (May 26th, 1932) that Douglasism could be introduced only under two forms of government

“A dictatorship … or a Patriotic largely and predominantly composed ‘Tory aristocrats’…”

On January 26th, 1933, the same paper had the following frank admission about the aims of the Douglas movement:

“… if by capitalism is understood the system of competitive production for profit, it can be said that the required change would not involve its destruction but only its regulation.”

Edgar Hardcastle