Cooking the Books: No Marx without Adam Smith? (2026)

The Cooking the Books Column from the February 2026 issue of the Socialist Standard

Next month is the 250th anniversary of the publication of Adam Smith’s The Wealth of Nations. In the run-up to this, the Economist (18 December) carried an article by its ‘senior economics writer’, Callum Williams, in which he suggested that Smith had been ‘misinterpreted and his influence overstated’.

His case was that Smith wasn’t the originator of the ideas he expressed, that he copied from others and was a bad writer, and that he also made mistakes:

‘In the “Wealth of Nations”, he argued for the “labour theory of value” (the idea that the amount of work that goes into a product determines its price, rather than how useful that product is). This theory distracted economists for decades and laid the groundwork for Marxism. Exploitation, in Marx’s view, arose from the difference between how much workers had laboured to create a good and what they were paid for producing it. Without Smith, there could have been no Marx’.

The last sentence is ridiculous. There were others before Smith who put forward the view that the exchange-value of a product of labour depended on the amount of labour required to produce it. In a footnote early on in the opening chapter of Capital, Marx’s quotes Benjamin Franklin as having pointed out in 1729 that:

‘Trade in general being nothing else but the exchange of labour for labour, the value of all things is … justly measured by labour’.

Prior to Capital, in A Contribution to the Critique of Political Economy (1859), Marx credited Franklin as the person ‘who for the first time deliberately and clearly … reduces exchange-value to labour-time.’

In a podcast on the same subject on 1 January, Williams attempted to refute the labour theory of value by saying that, on the contrary, ‘what determines the price of a good is … how much demand there is for that good and how much of that good is supplied by the market’. This differs from what he had written in his article that a product’s price is determined by ‘how useful that product is’. That argument is easy to refute —there are a lot of things that are more useful than gold or diamonds yet gold and diamonds have a higher price; which, clearly, must have something to do with the fact that it is more difficult (takes more work and time) to produce gold and diamonds than it does to produce the other, more useful products.

Supply and demand determine the short-term market price but, in the longer term, supply will only continue if the suppliers — profit-seeking capitalist firms — cover their costs and make a profit. In bringing about the longer-term price the play of market forces will take into account the labour-time required to produce the product from start to finish.

Not that Marx did argue that under capitalism products exchanged at their labour-time value. He was well aware that the pursuit of profits resulted in this happening only accidentally but that the prices at which products sold could only be explained on the basis of a labour theory of value.

The reason why economists came to reject any labour theory of value (Smith’s as well as Marx’s) was that it led to the conclusion Marx reached who, said Williams, based ‘his entire theory of exploitation on the labour theory of value’. It was, he said, ‘precisely because Smith was so influential, his wrong-headedness about the labour theory of value was a big problem.’

This problem was solved, says Williams, when economic theory ‘gets wrestled back through the correct understanding of value by the marginalists at the end of the 19th century’. How convenient for the exploiters of labour, but it turned academic economics from a science into apologetics for capitalism.

The cardinal point in wages. (1911)

From the August 1911 issue of the Socialist Standard

Writing editorially in “The Gas World ” of July the 15th, a learned scribe asks how the cardinal point of wages in a certain locality and for a particular description of work, is determined.

Lord Robert Cecil, we are informed, delivered himself, at the last Co-partnership Conference, of some pearls of economic wisdom. The “ultimate” sanction of rates of wages payable, he said for instance, is the law of supply and demand, but the employers only know from time to time what wages they can afford to pay.

The clarity with which the scion of a noble house elaborated his case can only be compared with a good old-fashioned November fog. For he leaves the Editor of “The Gas World” rolling up the whites of his eyes and inquiring what determines wages.

“So far as we can see for the present,” says the editor, “the principle of co-partnership does not touch this dictum.”

May I ask the literary gentleman what laws determine the wages of the printers, compositors, and others whose labour produces that scintillating wonder of Bouverie Street, “The Gas World” ? If the supply of these workmen was not equal to the demand, they could secure higher wages. If the supply and demand were equal and there was no surplus either way, then supply and demand cancel each other. Now take conditions as they really are. There is, to-day, a greater supply of labour-power than there is demand for. According to Lord R. Cecil, wages fall steadily pro rata, as the balance of labour-power exceeds the demand.

It is clear, however, that this is absurd, that something else is necessary to determine wages.

Before touching this let us consider what is necessary to permit of the issuing of a single copy of “The Gas World.”

First we must have the raw material—paper, type, ink, etc. These, shovelled into a heap, would make a fearful mess, and though the resemblance to the editor’s economics might be striking, its resemblance to “The Gas World” would be undiscernible.

The thing essential to the assembling of the raw materials in such manner that they will lure the wily coppers out of the pockets of a wide and ever increasing clientele is human energy.

Now in reckoning out the selling price of the paper it has to be considered that if the price is too high a competitor will be let in. This fact will keep the price down, just as a superabundance of labour-power will keep wages down.

But suppose a competitor does appear—is that fact going to run the price of the journal down to zero ? No, you then begin to tot up the cost of production, and when you find that you are not making the necessary profit and have no chance of freezing out your rival, you think of the official receiver and cease publication. So supply and demand are not the only factors in the determination of price.

In the same manner wages, which are the price of labour-power, though fluctuating with supply and demand, find their “cardinal point” in something very different. That something is the necessary cost of subsistence—the cost, that is, of the production of the labour-power.

If the noble lord is left with only supply and demand to determine wages, then, with the application of science in industry continually displacing labour and making the supply increasingly in excess of the demand, a time would be reached when the workers’ wage would consist of air and daylight. This consummation of the dreams of the advocates of co-partnery is, however, too absurd for anybody but a lord.

"Southerner."

South Africa: metals before morals (1986)

From the Summer 1986 issue of the World Socialist

In July of last year at Helsinki there was a meeting of various foreign ministers called to discuss economic sanctions against South Africa. Delivered to the meeting room was a single sheet of paper from the South African government which carried a list of the metals it exports to the rest of the world. The message was crystal clear, and to gentlemen who deal in conniving it needed no explanation: they knew that sanctions against South Africa might provoke the government in Pretoria into cutting vital metal exports and that any pressure contributing to the downfall of the racist government could bring civil disturbances that would disrupt mineral supplies for the Western and other economies.

How desperately do the Western economies need South African metals and what would be the result of a ban in supplies?

Strategic stockpiles

Western Europe and Japan are the most heavily reliant on South African minerals. In most metals, world reliance is not particularly great because other production sources or mineral substitutes are available; but in two metals, chromium and platinum, a disruption of supplies would be grave. The only country to plan for a shortage of metals is the US. Its $38 billion (US) stockpile contains a 3-year supply of "strategic metals" defined as those coming mainly from unstable countries and at the same time being vital to industry and the military. Until recently stockpile planners made no allowance for South African instability, with the result that, in some important metals, stocks are inadequate. The US stockpile, for instance, is badly deficient in platinum.

There are five metals which South Africa produces enough of to seriously matter if output were disrupted: platinum, vanadium, gold, chromium and manganese.

Vandium, normally included in stockpiles, is a strong metal mainly used in steel for pipelines, bridges and high-rise buildings. According to Peter Robbins, director of the International Metal Trade, Unicoal Metals Ltd, a cut in South African vanadium supplies, "would not be an insoluble problem. Other metals such as molybdenum, can be substituted for vanadium. With the decline in pipeline building, there is lots of both metals around at the moment. China is also a big producer. So if there was a disruption of months rather than years in South Africa, it probably wouldn't affect the market at all" (Toronto Globe and Mail, October 1, 1985).

Similarly with manganese which is in glut and available elsewhere. Used in dry-cell batteries and as one of the main ingredients in alloy steel, it is a cheap metal; the quantities added to steel are small. Having to pay higher prices to alternative producers would not be crippling. Neither would there be drastic problems if South African gold production were hit, though gold prices would rise, according to Antony Murray of the Commodities Research Unit, one of the largest international minerals consulting firms:

More than 90 percent of all gold ever mined is still around on the gold markets. Known world gold stocks are more than 20,000 tonnes — equal to more than 30 years of South African production. In uranium, where there is over-supply, it would be a relief if South Africa stopped production. Diamonds are also an embarrassment. Industry need not worry about the diamond supply (Toronto Star, September 30, 1985).

But what about platinum?

The West seems able to cope with any South African disruption except chromium and platinum:

Chrome consumers who use the metal in making high quality steel for aerospace, petroleum and chemical industries, have already persuaded South African producers to store extra supplies abroad, and West German users are turning to the Philippines as an alternative supplier. Even with this added to government stockpiles, disruption would hurt badly, particularly in Western Europe. Though South Africa produces 30 percent of the world's chrome supplies, Britain, for example, depends on it for 60 percent of its consumption. The British government over the years, could, but didn't, find other suppliers such as Albania, which sells its chrome through an agent in Milan (Leslie Plommer, Toronto Globe and Mail, October 1, 1985).

The West could, perhaps, cope with a partial reduction in chromium supplies by substituting other metals where possible. One problem they would have is that the Soviet Union might withhold its chromium from the West, in its attempts to damage their economies. On the other hand, it might sell. During the Vietnam war, Russia sold nickel to the US (when there was a nickel-miners strike), knowing it was being used for production in the war against the North-Vietnamese, who they were backing. Commodities, including raw materials, are made (or mined) for sale at a profit on the market and one market is as good as another.

To what extent a cut-back in chromium supplies would affect Western economies, would be dependant on how long it would last. A one or two-month disruption would be no major problem, though it would force prices up. However, a 6-month break would create major difficulties.

Equally crucial are the expensive platinum group metals (PMG) of which the most important are platinum, palladium and rhodium. Their uses include catalysts for the petro-chemical industry and for reducing toxic-emissions from cars. Platinum is currently in good supply with prices low and palladium is in glut. Rhodium, however, is in short supply as Japanese and US car production has increased. Its price has quadrupled in a year. Demand for the platinum group is soon to increase further as the European community phases in new exhaust regulations for auto-makers starting in 1987. It could be that a disruption in South African supplies might force suspension of laws on auto-emissions in the US and Japan and a delay of the European measures. Rising prices could also induce jewellery owners - who absorb about 10 percent of world production — to sell their bangles for industrial use. At present no country keeps a stockpile of platinum and at the moment there is only a 3-month world supply in stock. Canada, the only significant Western source, produces one-tenth the volume mined by South Africa. With other metals, it may be possible to find ways of getting around shortages, but with platinum it's not possible. There would be a major industrial disruption, causing technology and industry to be redesigned completely.

Fear of losing supplies

Keith Shaw, senior mining analyst for Laing and Cruickshank, one of London's largest stockbrokers, believes Western dependence on South African supplies across a range of minerals is underestimated. "No country is indespensible", he said, "but, if the US gets tucked into Star Wars, there will be a big increase in the importance of South African metals. In an increasingly high-tech world, South Africa is a sensible supplier of these things" (Toronto Globe and Mail, October 2, 1985).

Experts point to another possibility. South Africa has the power to block mineral exports from Zambia, Zaire, and Zimbabwe. These countries, along the African mineral spine, which stretches from the Congo to the Cape, are huge producers of many of the same metals as South Africa and to export them they are dependant on South Africa for locomotives, sea access and port facilities. Any move against them by South Africa would not only ruin their economies, but increase world reliance on South Africa, even more than at present.

Given the profit-oriented nature of capitalism, there are a few basic points we can be sure of. Governments, elected or otherwise, exist primarily to administer the affairs of capitalism. Since capitalism's very death blood is the profit-motive it logically follows that major government decisions, like major business decisions, are with view to profit, both long term as well as short term. To keep business, hence profits, moving smoothly (or as smooth as possible in the anarchy that is capitalism) they must have the necessary raw materials.

No government gives a damn about ethical and moral considerations, not because they are composed of nasty people and not because many of them weren't concerned before they came to power, but because once in power, they quickly find out there is only one thing they can do — run the affairs of capitalism. The dog wags the tail, not the tail the dog. Whatever politicians say and whatever minor steps are taken against South Africa, there will be no major course of action against it for fear of losing needed supplies. Breaking off diplomatic relations can hardly be considered a major course of action if one still buys from them; that's like not having a chat with your butcher when you buy his meat. Nor would economic sanctions solve anything.

History has proven that racial prejudice cannot be eradicated within capitalism, a system which, by its very class divisions and the competitiveness these create, divides worker against worker. Only by recognizing that socialism (as defined below) alone is the answer to the major social problems and that political organization is the way to achieve it, can people really start to remove apartheid, racism and economic sanctions as well as all forms of economic blackmail.

Ray Rawlings

(Canada)

"Utility" Goods (1950)

From the June 1950 issue of the Socialist Standard

The 1939-45 Great War and His Majesty’s third Labour Government have made the people of this country “Utility” conscious, but long before 1939 such economists as Bohm Bawerk, Jevons and Marshall were searching in the realm of utility for an answer to the question why a pair of boots exchange for thirty shillings.

The fruit of their efforts is the much-boosted Marginal Theory of Value by which they attempted to explain the value of a commodity—an article produced for sale—as the point at which marginal utility (the utility derived from that unit for which the consumer is just prepared to pay) coincides with the marginal cost of production (the cost to a firm that just pays its way). Thus they claimed their theory of Value takes both demand and supply into account.

Long before Bohm Bawerk and his Utility school of thought, Marx had shown that the value of a commodity is determined by the socially necessary labour time embodied in its production.

The Marginal school criticised this theory of Value on the grounds that Marx had looked at Value from the point of view of the producers and had therefore chosen “labour time” as the basis of Value. They contended that Value should be looked upon from the point of view of the consumer also and that Utility should form part of the basis of Value.

When Marx stated that the only quality commodities have in common with each other is that they are the “products of labour,” the Utility school pointed out triumphantly that commodities also have this in common—they must be useful. On these grounds they have argued that it is merely arbitrary to say that Labour is the source of Value. Indeed they have gone further and stated that only some useful things are the products of labour but all products of labour, if they are to be commodities, capable of sale and exchange, must be useful. They have pointed gleefully to the solitary traveller in the desert picking up a piece of gold or a diamond. They have argued that surely this piece of gold or diamond must have Value but its Value is certainly not determined by socially necessary labour time.

So frequently have the apologists of Capitalism put forward this view, that it is now accepted by most text-books on economics and is usually advanced by lecturers in Universities and Commercial Colleges as the Theory of Value which has ousted that of Marx.

In practically all books dealing with the classification of the Sciences, Economics is classified as a Social Science. That being so, Economics must be concerned with social relationships—the social relationships dealing with the production and distribution of Wealth at that.

We have therefore to examine the means by which Men produce and distribute the wealth of society in order to find which of these theories correctly reflect the law by which boots exchange for Gold (in the form of pounds, shillings and pence).

In all previous systems of society, production had been for use and only the surplus had appeared in the form of commodities but under our capitalistic system of society, production becomes solely for sale—for the World Market. Capitalism is therefore distinguished by the fact that here wealth takes the form of commodities.

In a commodity producing society extensive division of labour and private property are essential factors. That is to say the aggregate labour force of society consists of the sum total of the labour of all the producers of the different types of commodities who carry on their work independently of each other. When therefore we say that a fur cape is equal in value to a wrist watch we are really equating the labour of the furrier with that of the jeweller. In the early days of Man’s history when any surplus product was being exchanged, the question which confronted the two parties or groups involved in the exchange, say of arrow heads for skins, was this—Would it take us as long (or as much labour time) to produce these skins as it took us to produce the arrow heads? If the answer was in the affirmative then the transaction was completed. In the same manner the value of a commodity is determined by the socially necessary labour time embodied in its production.

What confuses the critics is that in capitalism value appears to be a quantitative relationship between things. They only see 100 bricks exchanging for two tables and do not see the SOCIAL RELATIONSHIPS underlying this quantitative equation.

In modern society, however, exchange does not take place in the form of barter (one article for another article) but Money enters into the field. Articles in the shop window have their price tag—their money form. Price is the monetary expression of Value, that is to say Price means the amount of gold equivalent in Value to the article which is being priced.

It is precisely in this developed form of Value that the law of Value manifests itself as the regulating principle of capitalist production. When the supply of a commodity is greater than the demand the price of the commodity falls and conversely when the demand is greater than the supply the price rises. The Capitalist economists see in this the regulator of the markets— the so-called Law of Supply and Demand.

Here again however, the Labour Theory of Value comes into its own. In our commodity producing society, the labour contained in a commodity has two aspects. It is the private labour of the commodity producer and at the same time part of the collective labour of society. To meet the last condition it must satisfy a definite social want—it must be useful to society. The private commodity producer fails to see his labour in this aspect—the social aspect. He never knows how much of a commodity is coming on to the market and what demand there will be for it. He therefore keeps on churning out his product until the demand for it drops and prices fall. Then he curtails production but he never dreams that the cause of the falling prices could be the fall in value of his product—a fall in value occasioned by the fact that he has expended part of the collective labour of society—his own private labour —USELESSLY. The value of a commodity being determined by the amount of SOCIALLY NECESSARY labour time embodied in its production, he has therefore not added one jot of Value to the commodities he has produced in excess of demand. Thus, does Marx’s Labour Theory of Value take Utility into account.

R.R.

Invasion or Starvation? (1905)

From the July 1905 issue of the Socialist Standard

The man in the street is comforted. If ever he had any doubts concerning “his” country’s preparedness for and protection against any possible invasion of this tight little isle, these have been entirely dispelled by Mr. Balfour’s recent speech in the House of Commons. Not only have “we” sufficient battleships, not only are they up-to-date, but in the moment of danger they could be so quickly mobilized at any given spot that there exists no necessity for uneasiness. And so our friend of the short sight, who discerns nothing beyond the tip of his nose, is reassured, and proceeds to his daily avocation briskly, humming—

“We don’t want to fight,

But by Jingo if we do !

We’ve got the ships,

We’ve got the men,

We’ve got the money, too !”

It is true that some of our largest battleships have a nasty habit of ramming each other now and again, that our torpedo boat destroyers sometimes buckle, that in about twelve months three of our expensive submarines have come to grief with much loss of life to our own men, and that our guns sometimes burst, hurling our handy-men into the great unknown. These are mere incidents, or such accidents as will happen in the best regulated navies. Balfour says “all’s well.” Campbell Bannerman congratulates him upon his statement, and the pleased patriot perigrinates, at peace with all the world.

Someone has remarked that the Britisher cannot concentrate upon more than one thing at a time, a failing of which the “statesman,” of both the capitalist and “labour” order, has not been slow to take advantage. Hence it happens that the great “B.P.” rarely concerns itself with the substance, so intent is it in grasping the shadow. In the present connection, John Bull, entirely failing to note the economic development of recent years, still imagines that the enemy against whom it is necessary to guard is a foreign navy or a combination of foreign navies, ever on the watch to swoop down upon these shores. This may have been the position many years ago, when we produced our own foodstuffs, and “every rood maintained its man.” But with the development of manufactures, to the detriment of agriculture, a new foe has arisen. It is not the foreigner with his ships of war that we have to fear and to fight, but that product of capitalism, the financier, of no nation and of every nation, whose operations could at any time not only inflict severe hardships upon the people of this and every other country, but could bring Britain to its knees by withholding its food supplies.

Fifty years ago, during the financial year 1854-5, 20,546,000 quarters (of 480 lbs.) of wheat and wheat flour were consumed here, of which 17,563,000 quarters were home grown and only 2,983,000 were imported. At the time of writing, I am unable to obtain the exact year when we ceased to be self-supporting as far as foodstuffs are concerned, but it certainly must have been long after the commencement of the 19th century. An article which appeared in Blackwood’a Magazine for February, 1903, contained a Declaration signed by 26 of the leading corn merchants of the United Kingdom, in which it was stated that “as late as the Crimean War we were almost self-supporting but we now import four-fifths of our wheat.”

As this article showed, there are some among the capitalist-class who view with alarm our present dependent position, but the proposals they put forward are, as might be expected, totally inadequate. They do not desire the emancipation of the wage-earning class and therefore advocate nothing that would tend in that direction.

In 1898 a Committee was appointed “to inquire and report how far, and in what way, the proposed establishment of national stores of wheat would affect the interests of British Fanners.” It consisted of M.P’s and others, all supposed to possess a practical knowledge of agricultural matters, and the most important of their conclusions was, “It may be concluded, therefore, that for six months after the end of March in any year, the quantity of wheat and flour in the country seldom exceeds six weeks’ supply.” To-day we are more dependent than ever upon other countries, because our population has increased, whilst the home area under cultivation has considerably decreased.

With the recollection of the recent Leiter-Armour manipulation of the world’s wheat supply let us look the facts squarely in the face. Is it possible invasion or probable starvation that we free-born Britishers have to prepare for?

Some of those who gave evidence before the Agricultural Committee seemed to get very near to the truth, but just failed to grip, or to admit, the exact situation. Mr. James Birch thought that “in the event of war we should be practically in the hands of the plunging speculator,” but is war a necessary condition ? Mr. T. B. Home spoke of “the perilous position this country would be placed in for its food supply, should a combination of nations against Great Britain arise,” but substitute determined financiers or plunging speculators for “nations” and the peril is as great and probably the action would be more rapid, the effects more immediate and disastrous. Some of the witnesses admitted that “apart from a forcible interruption of supplies by enemies’ cruisers, there is a possibility that a nation—or a coalition of nations— intending to make war on this country might forestall the supply of wheat by the purchase of futures.” Mr. Proctor could quite imagine that “if Russia to-day were to be at war with us, our own supplies (from Russia) would be stopped, and, through German and other sources, she might buy, in America, practically all the American wheat.” And Mr. Seth Taylor, in reply to a question respecting the engine of offence which be used by those countries unable to compete with us on the seas, answered “they have nothing to do but sit on their stocks.”

Let us put it in another way. Apart from a forcible interruption of supplies by enemies’ cruisers, there is a possibility that a millionaire—or a coalition of millionaires—intending to bring this country to submission, might forestall the supply of wheat by the purchase of “futures.” Not in any way a remote or improbable contingency. According to the article in Blackwood’s, “the chief source of our supply is the United States, but the price of wheat on the American corn market can be raised artificially, and in the event of a European war, in which Great Britain was involved, it is quite possible, indeed probable, that it would be so raised.” And it could also be so raised, as has already been done, without a European war, as the working-class have good cause to remember.

When Mr. Joe Leiter, Lord Curzon’s brother-in-law, attempted the cornering of the world’s wheat supply, the capitalist Press said that he failed, but viewed as a failure, the effect upon the working-class was so disastrous that one can imagine what would have been the result had he succeeded. Not only did the price of wheat, flour and bread rise all over the world, but the inability of the workers in some parts of Southern Europe to obtain bread led to riots, and in Hungary the people, demanding bread, were given the usual capitalist answer—bullets. If, then, the operations of one man in Chicago, or, counting Armour, two men, could produce such world-wide results when those operations were supposed to have failed, it is easy to see that a combination of financiers could dictate their own terms, particularly to a country so dependent upon outside sources for its food supply as is Great Britain.

The proposals usually put forward are useless, because they all depend upon the continuance of the competitive system.

There is the tariff reformer, who, by a readjustment of fiscal conditions, would induce the growing of the Empire’s food supply within the Empire, but who can never show (I myself have challenged several) how that will prevent the financiers operating. Love laughs at locksmiths and Leiter, Armour, Rockefeller & Co. would laugh at tariff walls if they determined to get control of the food supply of this Empire or of any other part of the world.

The establishment of national granaries would not only not affect them but by creating an extra demand for the twelve month’s supply of wheat which it is proposed to store, would give the “plunging speculator” his opportunity.

Then there is the reformer, sometimes claiming to be a ”Socialist" who advocates small holdings or peasant proprietorship, either because he thinks, with the late Lord Salisbury, that “to increase the number of small holders of the soil is to secure the strongest bulwark against revolutionary change,” or because he honestly believes that to be the best proposal, But apart from the fact that the day of small things is past, that production on a small scale is wasteful, it is well known that the transformation from a tenant to a small proprietor, whilst freeing the cultivator from the domination of the farmer or landlord, drives him into the clutches of the ursurer. What has the tenant farmer of Ireland gained ? Is it better to be the victim of the gombeen man than of the landlord ? And none of the other proposals would be effective. What is wanted and what alone will suffice is a complete revolution. The class-proprietorship of the means of life must be abolished : they must be taken over and controlled by the people, all of whom shall be workers. With the substitution of common for private ownership of land, factories, railways, etc., the power of the capitalist, great and small, of gambling with the people’s food, of appropriating the product of the labourer, whether of the field, the mine or the workshop, will be destroyed and the people freed from their subjection to a class. The matter affects both town and country worker, of every land, of every creed. The men of capital are stronger than the men-of-war and their strength can only be taken from them by the organisation of the working-class into a separate and distinct revolutionary Socialist party, such as The Socialist Party of Great Britain.

Jack Kent

Life and Times: Winners and losers (2023)

The Life and Times column from the May 2023 issue of the Socialist Standard

‘I was drunk when I wrote the messages below and I apologize for the troll-like nature of my comments’, wrote Pete from Texas, USA, after filling in the Socialist Party’s online membership questionnaire and receiving a reply from me. I was impressed by his confession and therefore happy to carry on the conversation with him and respond to the further, apparently sober comments he was now making.

Previously he had written such things as ‘socialist experiments end with a substantial portion of the population sent off to death camps’, ‘ the idea of no one being in charge and no money, and free goods and services means no wealth will be generated’ and ‘the party is a direct competitor to religion, as it takes a profound level of religious belief and suspension of rational capacity to convince yourself you actually believe what you say you believe and, when a Christian tells me that they believe Jesus ACTUALLY walked on water, I see the same glossy eyed intellectual vapidity I see when a socialist blathers on about the idiocy of your platform.’ Strong and some of it pretty insulting stuff, even if written in an alcoholic haze. However, having apologised and said he appreciated the far more respectful way in which his points had been answered, Pete then went on to make, in several exchanges – and respectfully this time – a number of further points.

He made no bones about the fact that he was a supporter of capitalism, especially of the ‘Nordic’ type, since he saw it as ‘capable of producing innovation and improving quality of life for the vast majority of the population’. With regard to the moneyless, wageless world system that we view as socialism, he did not see how ‘a relatively modern society can exist without money and with free goods and services’, since how would we know what needed to be produced and how that would be organised? And what if people wanted more than could be produced? So he wondered whether we were proposing a return to ‘a pre-technology society … working together in small groups, sharing with each other, having a leader that was chosen due to respect and ability’. He asked further: ‘How would the democratic process work in a moneyless, wageless, marketless society?’ And he also stuck by the idea in his previous message that ‘USSR’s invasion of Afghanistan, China’s Great Leap Forward, The Killing Fields of Cambodia, etc have to be regarded as examples of socialism’ and ‘resulted in the MOST extreme humanitarian disasters of the 20th century’. He went on: ‘My argument is that when such systems are implemented, reality very quickly proves that they don’t work. But the people involved are religious zealots to the cause and as such refuse to believe that their theory is the cause of the failure…In the end, the Marxists put on their own version of the Spanish Inquisition.’

In response to these entirely pertinent questions, I first made it clear that, while we might agree that ‘Nordic-style capitalism’ is arguably relatively benign as the system goes, it’s still based on money, buying and selling and the market and so has absolutely nothing whatever to do with what we are advocating. Nor were we advocating ‘living off the land’. In fact, we saw socialism as a world that would use the advanced technology developed by capitalism to give a decent comfortable life to everyone – something that capitalism fails to do. This would be possible because production would not be based on the profit imperative as at present but on human need, which would cut out much of the wastefulness of capitalism (administration of the money system, competitive production, weapons of war, etc.) as well as eliminating the insecurity of working for a wage to stay alive, the need to compete with our fellow human beings in myriad ways and the enmity between peoples living in different parts of the planet.

But what if, as Pete had conjectured, more people wanted a Ferrari or a Rolls-Royce than could be produced to go round? My answer to this was that, while in socialism you would be able to take freely what was reasonably necessary for a comfortable existence, you couldn’t have absolutely anything you happened to want just because you wanted it. And especially you couldn’t have something that society considered essential to its own fundamental collective wellbeing, where there wasn’t enough of it for free personal access. And this led me on to the essentially democratic nature of socialism. If it was clear that there was a social need for a scarce product or service to allow society to operate smoothly, efficiently and in the collective interest, then a democratic decision might be taken not to make it available for personal use. How would this be enforced? Well, socialism will be a free-access society but it won’t be a society without rules – democratically agreed ones – and also therefore the means of enforcing those rules (no doubt at the most benign level possible). On the matter of how ‘demand’ will be determined, I made no bones about the fact that this was a big question and I referred Pete to Chapters 4 and 5 of our pamphlet Socialism as a Practical Alternative. But I made the point that, first and foremost, demand will be real demand based on need not, as now, on ability to pay.

Finally, on to the question of so-called ‘past examples’ of socialism, the way I put it was that I don’t know what I’d need to do to convince Pete that Pol Pot, Mao Zedong and the Soviet invasion of Afghanistan were as far away as they could possibly be from the moneyless, stateless society of free access that for us was socialism. I went on (perhaps a little rudely): ‘Look. Hitler called himself a socialist (a national socialist, ie, Nazi) and surely you wouldn’t somehow want to tar us with that brush? If you’re just looking at labels, you could of course. But if what’s in the bottle is piss, even if the label says whisky, you know it’s not.’

A further exchange between us got on to America’s ‘gun culture’ of which Pete was a moderate advocate with the argument that there should be as few restrictions as possible on people’s behaviour. My reply was that, in a sane society, it would just seem mind-blowing for a person to carry around a weapon which, if something went wrong in the mind of that person, could be used to cause lethal mayhem. But that was when our discussion seemed to peter out. And I somehow don’t think Pete is going to become a member of the World Socialist Movement any time soon. You win some, you lose some.

Howard Moss

Inflation and prices - Part 1 (1965)

From the July 1965 issue of the Socialist Standard

Why do individual prices rise and fall and why, at certain times, is there an upward movement of prices, which is called inflation, or the opposite movement, a downward movement of prices, which is known as deflation? There is no need to stress the importance of the subject, but it may be useful to point out one or two of the difficulties that we come up against. There are, for example, people who think that capitalism would not be so bad if prices were not so high. They believe that prices are high simply because manufacturers and shopkeepers want them to be high and that the Government ought to tell them to stop it. On the other hand, there are people who think that prices are high because trade unions put up wages and that the Government ought to tell them to stop it too. The fact is that there are real economic causes of high prices that have not much to do with the wishes of the shopkeepers, trade unionists and others.

One particular reason for looking at the question of inflation is that in Great Britain and in a number of other countries, for the past 25 years, we have had prices rising more or less continuously; we cannot afford not to know why this happens. The subject is a somewhat difficult one; with three separate aspects. First, we have to consider what determines what we may call the normal price of each article that is sold, what Marx in some places called the natural price. Secondly we have to consider what causes deviations in the normal price of each article, and third, we have to consider what causes the broad general movements of prices up or down, affecting all prices equally and not merely the prices of particular articles. The next point that must be borne in mind is that you cannot study prices and inflation as something separate and distinct from other economic questions.

Before we can understand the movements of prices, we have to go back to the commodity’s value. Almost all of the things which have a price have it because they are the products of human labour and the amount of human labour required in their production is the measure of their value. The things bought and sold are also useful or have a use value, but that is a different quality, not to be confused with value. Value is a social relationship of capitalism, a relationship between persons that expresses itself as a relationship between the things produced for sale, which we call commodities. If, under average conditions of production in a given industry, it takes 24 hours of socially necessary labour to produce a certain commodity, then that commodity will have the same value as other commodities which also take 24 hours of socially necessary labour.

However, if one firm in that industry is inefficient and takes 30 hours, the value of its product will still be the social average of 24 hours. On the other hand, if an exceptionally efficient firm can do the job in 20 hours on average it is still the socially necessary labour that counts.

It has to be borne in mind that when we talk about producing a commodity, we mean all of the processes that are necessary for its production. Suppose we assume as an example that the socially necessary labour for producing a bicycle is 24 hours, this means not merely the time taken in assembling the bicycle but all the necessary processes, from obtaining the rubber and metal and other materials, right down to the finished product, including any necessary transporation of materials including wear and tear of factory machinery and the consumption of electricity or other power to drive the machinery, and so on. Having taken as an example that it takes 24 hours of socially necessary labour to produce a bicycle, let us now carry it a stage further and assume that a suit of clothes also takes 24 hours, then the bicycle and the suit of clothes would be of equal value.

Let us also assume that 24 hours of socially necessary labour would produce one ounce weight of gold; then we have three different kinds of articles with different uses and of different materials and different weights, but all having the same value. Now one stage further is to turn our one ounce of gold into money and to assume, which is approximately true in Great Britain before 1914, that the Government by law fixed the pound sterling, or the sovereign as it was called, at one quarter ounce weight of gold, then if you had 4 gold sovereigns, or £4, you had about one ounce of gold, and on our assumption, its value was the same as the bicycle or the suit of clothes.

Now it would be very simple if we could say that price and value are identical. We would then be able to explain all prices of all articles simply by saying that the price of the bicycle and of the suit of clothes was £4 and that the prices of all other commodities would be according to their value, measured in terms of the amount of socially necessary labour required in their production. Unfortunately, we cannot treat the matter as simply as that. We cannot say, in other words, that price and value of individual commodities are identical. In actual practice it is rarely so, because all sorts of other factors come into play.

When Marx dealt with this subject in Chapter 6 of his pamphlet Value, Price and Profit, and said that commodities on an average sell at their values, he added that this was apart from the effect of monopolies and some other modifications, although he did not deal with these modifications either in Value, Price and Profit or in the first volume of Capital. As the chief purpose of this series is to deal with the general rise of prices—that is to say, inflation—it is not necessary here to deal with all these modifications. It will be sufficient merely to refer to them briefly and to refer to sources of information on some of the others.

Now the first cause of deviations of prices from their normal price arises through what is called supply and demand, when although the value of a commodity remains unchanged, its price may rise or fall because of variations of supply and demand. To take an example, suppose that storms at sea prevent fishing trawlers from entering a port. This interrupts the supply of fish and immediately prices go up. When later on the trawlers do arrive, probably a large number of them together, and all land their catches of fish, then the prices will fall again. These are examples of variations in supply and demand.

The other factor referred to by Marx was monopoly. Monopoly is a particular form of interruption of supply. If a company controls all or most of the supply of an article, it can force up the price until such time as new sources of supply come into operation or until substitute articles come on the market and break the monopoly. In Great Britain for many years, there have been monopolies in alcohol and tobacco which are created not by the companies but by the Government. The Government controls the production and import of alcohol and tobacco and can thus establish a monopoly price far above the value of these commodities and can use that monopoly price as a means of skimming off excess profit for government revenue. There is also a kind of opposite example, and that is government subsidies. Whereas a monopoly such as those referred to operated by the government can force up the prices far above value, the government can and has for many years subsidised certain foodstuffs so that they can be sold well below their value. What happens in effect is that the government pays the producers to sell the article cheaply.

Edgar Hardcastle

(To be continued.)

Cooking the Books: Passing on costs (2008)

The Cooking the Books column from the July 2008 issue of the Socialist Standard

On May the index of the factory gate price of manufactured goods rose by 1.6 percent. As this was the biggest monthly rise since March 1981, the media began to talk of “a summer of inflation” (Times, 10 June). Since they mistakenly regard any price rise, however caused, as inflation what they meant was that a spate of price rises could be expected this summer which will affect not just those who buy producer goods but the rest of us too who buy consumer goods.

The manufacturers are arguing that they have to increase their prices because their costs have risen. It is true that their costs, particularly energy, have risen but manufacturers cannot increase their prices just because they have to pay more for their raw materials or energy (or, for that matter, wages). Prices are not determined by what the manufacturers would like but by what the market for their product will bear.

All firms aim to make as much profit as possible but will be satisfied if they can cover their costs and make the going rate of profit. This is the normal situation and is brought about by competition. If a firm tries to make a bigger profit by increasing its price above cost plus normal profit it won’t succeed. Its product won’t sell as those who use it will turn to other, cheaper suppliers.

This does not mean that they can never raise prices, or rather that the market will never allow them to do so. It is official government policy to inflate the currency so that the general price level rises at around 2 percent a year. So, other things being equal, firms can safely increase their price by this amount. As everybody will be doing it, it is something the market can bear.

Sometimes, due to an unexpected fall or interruption of supply, suppliers can increase their price to take advantage of this. This is the operation of the law of supply and demand: there are more paying demanders than suppliers so the price goes up. But this will only be temporary. Supplies will eventually be restored, even if by new suppliers being attracted by the higher profits, and prices (and profits) will fall again.

So, cost increases do not automatically lead to price increases (and this applies to wage increases as well as to other costs). This will only happen if the market will bear it. If the market won’t then the capitalist firm, whether manufacturing or retailing, cannot pass the increased cost on to consumers. They have to “absorb” it, as reduced profits.

The figures for factory gate prices from the Office for National Statistics illustrate this well. They show that the index of “input prices” (i.e. costs) of manufactured goods has been rising faster than that for “output prices”. While the index for these latter rose by 1.6 percent in May that for input prices rose by 3.8 percent. In the year ending May 2008 the index of input prices rose by a record 27.9 percent but the index for output prices rose by only 8.9 percent. (www.statistics.gov.uk/pdfdir/ppibrief0608.pdf)

Clearly, to maintain their profits, manufacturers would have liked to raise the price at which they sold their products as fast as their costs. The fact that they didn’t is sufficient proof that they couldn’t. But there are limits to how far their profits can be squeezed. As Gary Duncan, economics editor of the Times pointed out:

“The double whammy of stalled spending by struggling households alongside rising costs for every kind of business means that companies’ sales and profits are going to be under growing strain. This will spell cutbacks and layoffs. This raises the spectre that the economy could slide into a vicious downward spiral”.

Cooking the Books: Must prices rise? (2021)

The Cooking the Books column from the December 2021 issue of the Socialist Standard

The Times (22 October) reported Alan Jope, the CEO of Unilever, warning that the price of many household goods would have to go up:

‘He highlighted how the cost of palm oil – the Anglo-Dutch company uses a million tonnes a year in its Dove soap and moisturisers – had increased by 82 per cent in two years due to labour shortages in Indonesia. Soya bean oil, used in its Hellmann’s mayonnaise, had risen by two thirds due to poor crop production in Brazil.’

To say that in such circumstances sellers are ‘forced’ to put up their price is misleading. Faced with an increase in the cost of producing their product, a seller cannot simply decide to increase its price to compensate. They could try but, if they misjudged the market, they would end up losing sales and profits. If the market won’t take an increase, they have to lump it and take a cut in profit margins.

As the Times went on to report, the supermarkets selling Unilever products won’t necessarily be able to pass on any price increase to buyers:

‘A retail source said that the intensely competitive food retail market meant it was hard for supermarkets to pass on higher prices, as shoppers might desert them for the likes of Aldi or Lidl.’

In short, when costs go up, it is the law of supply and demand that will bring about any price increase, but only as long as demand is maintained. Businesses do not have a free hand when it comes to fixing prices; it is the market that decides.

There is, however, one circumstance in which prices must go up. As long as it is government policy to depreciate the currency, the general price level has to increase. The reason is simple. Prices are expressed in a unit of currency and, if that unit depreciates, then more units will be needed to express a price.

It is government policy, not just in Britain but co-ordinated with the other members of the G7 (USA, Japan, Germany, France, Italy and Canada), that their currencies should depreciate by around 2 percent a year. They don’t put it that way but that is what it is. They present it as keeping prices from rising above or falling below this figure.

The justification for this is that a slowly rising price level is the best situation to encourage firms to invest and consumers to spend. Falling prices (which, due to increasing productivity, would otherwise be the case) would mean that firms and people would tend to hold off spending in the hope of a lower price. This is not always necessarily true as capitalism can, and did until the outbreak of WW2, function with falling as well as rising prices.

But Keynes noted another advantage for employers:

‘Keynes expressed, in numerous passages in The General Theory, the view that wages were “sticky” in terms of money. He noted, for example, that workers and unions tended to fight tooth-and-nail against any attempts by employers to reduce money wages (the actual sum of money workers receive, as opposed to the real purchasing power of these wages, taking account of changes in the cost of living), even by a little bit, in a way they did not fight for increases in wages every time there was a small rise in the cost of living eroding their “real wages”’ (bit.ly/3qBbVbD).

It’s not workers that cause rising prices. That’s another problem they have to face, forcing them to run fast to try to catch up. Keynes’s other policies have been discredited and abandoned but not this one.

So, must prices go up? Yes, in the case of currency depreciation. Not necessarily, in the case of the cost of supplies going up.

'Can we panic now, Captain Mainwaring?' (2021)

From the November 2021 issue of the Socialist Standard

In the halcyon summer days of 1914 when all was right with the world and God was in his place in the British empire, dependent upon your social status in the scheme of things of course, the shock caused by the assassination of some minor Austrian prince was seen as an opportunity to bare Albion’s teeth to Johnny Foreigner, and everywhere the cry echoed down the expansive avenues and the meanest back alleys: ‘It will all be over by Christmas!’ Plus ça change, plus c’est la meme chose. Isn’t it just?

We all know Marx’s remark that history repeats itself, the first time as tragedy and the second time as farce. Marx had in mind the tragedy of Napoleon’s regime and the later farcical reign of his nephew Napoleon III. Back in the 1960s, Herbert Marcuse remarked that the lesson of Nazism seemed to be the opposite way round: first as a farce (throughout the 1920s, Hitler and his gang were mostly taken as a bunch of marginal political clowns), then as a tragedy (when Hitler effectively took power). Unfortunately, Karl, old boy, history seems to be in a place whereby it’s repeating constantly, like a three-week-old pickled egg. It’s doesn’t feel the least bit humorous this time round.

Crystal balls are not de rigeur for writers in this journal, but, this from the Socialist Standard, December 2020, seems a little prescient: ‘Eat, drink’ depends on whether the supply chains are still intact and irrational locust behaviour hasn’t swept the shelves cleaner than vultures on a wildebeest carcass in the Serengeti. Be merry? The human spirit is always able to find something positive in the most dire of circumstances. Acceptance of a bad situation whilst saying, gosh it’s terrible but there’s nothing we can do about it, is not acceptable however. After one of the most dramatic years which continuing on may have profound negative societal changes in global society it is no longer good enough to complainingly accept what is being implemented. Contrary to what a Tory leader once said, there is an alternative’.

At present the supply chains seem to be under considerable strain and there are apocalyptic warnings that toys, electricals and luxury goods all the way from China may not be lining the shelves of those stores and outlets which rely on the Christmas period in a ‘normal’ year to provide them with a hefty addition to their annual turnover. Had they but known then, the Ypres Times would have been running op-eds on how much better off they all were stuck in the trenches at Christmas, rather than the terrible deprivation of not getting your overpriced disposable trash-trinkets delivered in time.

The Mail Online, September 2021 has: ‘Panic buying is back! Shoppers queue to fill up trolleys with toilet roll and other essentials after one in six couldn’t find what they wanted on the shelves as supermarket bosses are told to co-operate to save Christmas and petrol shortages continue’ and ‘Shelves empty across UK on sell-out Saturday as supply crisis leaves one in six Britons claiming they have been ‘unable to buy essential food’ – and a third start Christmas stockpiling – ahead of winter squeeze’.

The sense of déjà vu cannot have long left the memory. As the Institute of Economic Affairs noted in sanguine tones, in the days when we didn’t even need to wait until Christmas because this would all be well over within three weeks: ‘No-one can have failed to notice the half-empty supermarket shelves and long queues for essentials. Loo rolls even rivalled flowers as the Mother’s Day gift of choice. Fortunately, this is one phase of the coronavirus crisis which should be over soon' (March 2020). Up to a point, Lord Copper, up to a point. The IEA didn’t borrow the services of Corporal Jones in order to tell us all ‘Don’t panic! Don’t panic!’ A stiff-upper-lipped ‘Keep calm and carry on’ seemed to be their advice. What have we here? Were they employing the economic tenets of Adam Smith or Malthus? Panic buying? Fine chaps, no problem! Carry on, as you were.

The IEA: ‘To be fair, panic buying is not necessarily irrational, for two reasons. The first is that the fear of empty shelves may be correct because it is self-fulfilling. Panic buying is similar. It would be best if no-one does it. But if you are worried that supplies might run out because other people will beat you to it, then it makes sense for you to rush to the shops too… However, there is also a second factor to consider here: even if there are plenty of goods in the pipeline and shops will soon be well stocked, some people may be unable to get to them. As the new coronavirus spreads, any household in the UK could be obliged to self-isolate for a period of several weeks, or even longer, at a moment’s notice. It may then make sense for every household to buy several weeks of essentials, just in case.’

Hang on there Jack, as the economists have it, ‘ceteris paribus,’ we’re not on an equal and fair playing field here are we? If you’ve the sufficient disposable income, the transport, the freezer space, the storage space for your six months or more supplies, plus the utter contempt for the plight of others less fortunate, then good for you Jack. That’s a rational capitalist economic decision. Foxtrot Uniform, I’m alright. This form of economic selfishness no doubt has opponents of socialism (who generally misunderstand what that is anyway) leaping about like the ten lords in the Christmas carol, waving their fingers and chanting in E flat Major, human nature! human nature! The Socialist Party’s demolition of this spurious straw man is amply demonstrated elsewhere. 2021 was certainly another year seeing profound negative societal changes in global society. And as amply demonstrated by us, there is an alternative.

Dave Coggan

Cooking the Books: Is inflation going to increase? (2021)

The Cooking the Books column from the July 2021 issue of the Socialist Standard

‘Markets were right to be spooked by the threat of rising inflation’ was the headline of an article by Philip Aldrick, Economics Editor of the Times on 15 May. Nowadays the word has come to mean simply ‘an increase in the general level of prices’ (David Smith, Times, 2 June).

Originally, as the word suggests, inflation referred to an over-issue of a paper currency in the sense of printing more than the economy needed for its transactions; in which case the currency depreciated, resulting in a rise in the general price level.

The price of individual products can go up for various reasons such as an increase in paying demand compared to supply or to a fall in productivity. In fact, for most products, the tendency is for their real price to fall due to increasing productivity, though this is masked by the depreciation of the currency causing the money price to rise.

A rise in the general price level is something different. It is a rise that affects all products. The most common cause of this is a depreciation of the currency due to too much being issued. Currently the policy of monetary authorities nearly everywhere is to bring about a rise in the general price level of about 2 percent a year. This is why prices rise continuously from year to year. Inflation already exists; what is worrying some economic commentators is that it might rise above this level.

Over-issuing the currency is not the only reason why the general price level can go up. It can also go up when, as in a boom, the demand for all goods runs ahead of supply as capitalist enterprises seek to make hay while the sun shines, producing more to sell, so increasing the demand for raw materials and labour (it always ends in overproduction and so a fall – a slump –in production),

Something similar is what some economists are expecting to occur when the Covid restrictions are finally removed. Andy Haldane, the Bank of England’s Chief Economist, has written of a ‘move from bounce-back to boom without passing “go”’ (Times, 10 June). Unused consumer purchasing power has built-up because shops have not been fully open and because many people have been working from home, so saving travel and lunch costs. It’s going to be a sellers’ market, where businesses can put up their prices without risking losing customers. As Smith put it with reference to restaurants:

  ‘Businesses are responding logically to the release of pent-up demand. If they can raise prices and restrict the special offers they used to need to attract customers, they will do so.’

Aldrick adds that businesses will also be in a position to pass on increased transport and materials costs:

  ‘In the short term, business will want to raise prices. They could absorb higher costs by squeezing margins, but with more debt to service and many cash-rich households able to pay up, why would they?’

The implicit assumption behind both these comments is that businesses don’t have a free hand but can only increase prices when ‘the market can bear it’. They can’t raise prices above this level (at least not without losing customers) even if taxes, wages or other costs go up. If the market won’t bear it, then they have to let their profit margins be squeezed. On the other hand, if the market will bear it they can increase their price even if their costs haven’t gone up.

What the economists are saying is that, due to the demand built up during the Covid restrictions, the market will be able to bear it and the general price level will rise as a result.

Food burners at work again (1965)

From the February 1965 issue of the Socialist Standard

Ever since socialists first appeared and made the case for abolishing capitalism, they have had to contend with opponents voicing variations on the common theme of retaining that system. The different groups did not admit or always realise that they were at one in defending capitalism, and outwardly they did not even seem to be united. There were those who said that capitalism would be quite satisfactory if only governments would stop interfering and impeding—we have a relic still in Mr. Enoch Powell. Others thought that it would work well if people would mend their ways and not be greedy. This group is always with us. And those who thought that the crying need is for better or wiser men at the helm of state — Liberals or Labour when the government is Conservative and Liberal and Conservative when the government is Labour. And those who believe that the system is essentially sound but that its abuses must be tackled as they show themselves in the light of new ideas and through new acts of Parliament. Actually this last category takes in almost all those who in practice hinder the movement to Socialism, including that most ineffectual band who for a century have been saying that Socialism is absolutely necessary but not just now, not until this or that evil has been removed.

All of these reformers agree with each other in rejecting the Socialist argument that we can and should have a social system which will have no place for prices, wages, profits etc. They say that the human race cannot do without these things, and in any event has no need to waste time trying to do so because there is nothing wrong with them in principle, only with the way they are used. So at each General Election we start a new round of schemes supposed to rid us of worries about prices, wages, strikes, monopolies and so on.

And each succeeding election finds things just the same except that the government and opposition may have changed places.

Just at the moment it is prices which occupy pride of place in the list of public complaints.

The most common complaint is that prices are “too high” and everybody blames everybody else for it. (Not least the newspapers which have put up their own prices during the past 12 months). All the complainers agree that somebody ought to do something about it, without explaining exactly what should be done and what level of prices would be regarded as just the right one.

The very rash might rush in and say that the right level is the lowest level but in the midst of the hullabaloo about prices that are too high there are some agonised cries about prices that are too low.

There are several aspects of the problem of prices. First there are the economic laws which explain why different articles have different prices—why an ounce of gold has a higher price than the same weight of silver, and lead a higher price than coal. Basically this is explained by the amount of human labour necessary for the prediction of each kind of article.

Then there are the laws which explain the upward or downward movements of the price level as a whole—why for example the general price level here is three or more times what it was in 1938, or why the price level fell heavily and continually for 10 years or more in the Nineteen twenties and thirties.

Also there are the upward and downward movements of the price of any article which came under the head of fluctuations due to variations in supply and demand. It is these fluctuations that concern us here.

If the supply of an article falls in relation to "demand" prices will go up; and if demand falls in relation to supply they will go down. It works against the background that everyone wants high prices for what he sells and low prices for what he buys and will take advantage of any circumstances which help him to get what he wants. Greedy and anti-social? Maybe, but that is what capitalism is and how it works, and the working of capitalism needs price fluctuations, as a corrective for over and under supply in relation to the demand of the market.

Governments do from time to time imagine they can have a price system without its “abuses": they try to control and reduce prices irrespective of the market conditions, only to find that they have created a “black market."

The people who want a price system but do not want to let it operate are constantly being shocked by demonstrations of the system functioning normally.

So it was that between the wars we were told how iniquitous it was that with millions of people in want of food, wheat was being burned. It was burned because there was so much more than the market would absorb that its price had fallen to unprofitable levels. The same was true of coffee and some other commodities. From a human standpoint of course it was iniquitous but how else can capitalism, which produces for the market, operate except in terms of the market ?

An alternative to actual destruction is to let the depressed price have direct effect by ruining the producers and thus reducing production. Another it to hold the surplus off the market as has happened with coffee, wheat and other products when the interests concerned are sufficiently influential to get governments to intervene and bear the cost—as in U.S.A.

A “simple” solution that is suggested is for governments to give away the surplus, but this aggravates the problem since it both depresses prices and deprives other would-be sellers of a market.

The one thing that all the reformers agreed on was that destruction and restriction, and unemployed men and resources, must never again be allowed to happen. Expansion and abundance were on the banners and Keynes the prophet.

But capitalism has not changed. Though, as the authorities agree, the number of malnourished people in the world is increasing, burning and restriction are still with us. Last Autumn it was reported from Southern Rhodesia that, following a bumper tobacco crop and falling prices a scheme for restricting production had been adopted. The same wind struck Australia and some 200 tons of good tobacco were burned near Brisbane in December last.

Cocoa too has run into trouble. Too much has been produced for the demands of the market and in November last the six countries in the Cocoa Producers Alliance, Ghana, Nigeria, Brazil, the Ivory Coast, Cameroon and Togo decided to destroy cocoa stocks to help keep up the price. The following was reported by the Times on 12th December from Accra:

  Sir Tsibu Darku, the Chairman of Ghana’s Cocoa Marketing Board, today put the torch to about 500 tons of cocoa which went up in flames hear here. He said the bonfire was the first of a series which would go on until they had completely destroyed two per cent of Ghana’s basic quota, to give effect to a decision of the alliance of cocoa producing countries.

But a Financial Times correspondent last December doubted if this would be effective—"most dealers feel that far more than the present suggestion of two per cent of the six member’s basic quota should be burnt." He thought they would have to choose between accepting lower prices and restricting production.

This, of course, will not prevent the Financial Times from urging greater production as the right policy for Britain and other countries.

Brazil is one of the cocoa group worried about the “overproduction,” committed to destruction of some of the surplus. In 1943 the Brazilian Government thought to solve its cocoa problem by nationalising the export of cocoa but gave up the idea in 1952.

It was Brazil that was mostly involved in the destruction of coffee before the war. As it is now reported that efforts of coffee producers to keep up prices in a falling market were failing, they may soon again be destroying coffee as well as cocoa.

Next on the list may be bananas. Fierce competition of West Indian banana producers has pronounced what is described in The Times (29th December) as "a collapse of the banana market.”

A spokesman of the Jamaica Banana Board said:

  This is the most calamitous situation the Jamaican banana industry has faced since the war and could be as bad as anything that has ever happened in all our banana history.

These are examples of over supply and calamity through depressed prices. But capitalism is nothing if not varied. The People (10th January 1965) has a lament of the opposite kind. There has recently been a shortage of bricks and some other building materials, with the consequence that building orders are subject to long delays in delivery. The result has been a big emergence of a “black market.” You can get a certain type of brick at £12 10s. a 1,000 if you can wait up to a year. But if you like to pay £20 or more you can get immediate delivery.

What we shall go on getting is the same old complaints, protests, speeches, committees of enquiry and so on. And capitalism's price system will continue to operate in the only way it can until the workers get to understand that there really is a solution, to get rid of the price system along with capitalism of which it is a part.

Edgar Hardcastle