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The Coming Slump: Does the Gold Standard Matter?

The correct answer to the question, "Why are the workers poor?" is: "They are poor because the means of production and distribution are owned and controlled by the capitalist class instead of by the whole community, and consequently so is the wealth produced by the workers." This is the starting point from which the working class should view all schemes for improving capitalist trade, currency systems, etc. It is naturally not the starting point for the defenders of capitalism. They take private ownership for granted and leave out of their enquiries any possibility of ending it. As a result, their attempts to find out why poverty, trade depression, unemployment and crises exist, and how to end them, are sterile and fruitless.

The workers are poor because over and above the period of their work in which they are producing the equivalent of their wages they are working further to produce surplus value (rent, interest and profit) for the propertied class. They suffer unemployment because the capitalists, in the limitless search for profits and accumulation of capital which the system imposes on each of them if they are to survive in the competitive struggle, are always seeking new methods and new machinery which will save labour and cheapen the product the capitalist owns and must sell. Every wage increase the workers are able to obtain when conditions favour their struggle gives the employers a new incentive to install labour-displacing machinery, add to the army of the unemployed, and thus create conditions in which the existence of large unemployment tends again to depress wages. In times of "good" trade and expansion capitalism floods the market with commodities for sale at a rate which increases far beyond the capacity of the workers in employment to purchase the goods they need but cannot afford.

In this is to be found the reason why "overproduction" occurs, with its ensuing crises and slumps, and the efforts of capitalists to remedy their own financial problems by driving down wages, by putting up tariffs to stop foreign competition, and by juggling with the currency only make the situation more acute.

When Mr. George Bell, Secretary of the General Federation of Trade Unions, says (Daily Express, September 7,1944) that a return to the gold standard after the war would inevitably bring depression and poverty, he is ignoring facts easily ascertainable. The workers have always suffered poverty, whatever the arrangements about gold. The version of the facts offered by the Daily Express in its year-long campaign against the pound sterling being formally linked to gold on the basis that existed before 1914 is that the unemployment and trade difficulties that existed from 1925 (when that basis was resumed) to the crisis of 1931, when it was again suspended, were all due to gold. A variation of this propaganda is that announced in a letter to the Prime Minister by Mr. Craven-Ellis, M.P., that “America’s almost complete cornering of gold since 1929 was the basic cause of the world slump and mass unemployment" (Daily Express, September 12. 1944). “We went to hell," he says. "on a gold standard in 1931 and we do not want to repeat the journey."

To answer this line of propaganda it is only necessary to point out that crises have been occurring intermittently for over 100 years, at a time when neither America nor any other country had cornered gold; and that the periods before 1925 and after 1931 were not different from other periods as far as the workers were concerned. Their poverty continued as before, capitalists then as before complained of trade depression, and unemployment during these periods followed much the same course as at other times. In the years after 1931 unemployment was mostly well above the 2,000,000 level, and just before the outbreak of war was still well above 1,000,000. Likewise, from 1919 to 1925 (the year in which the return to the pre-1914 gold basis was made) unemployment was nearly always well above 1,000,000. It is true that in 1930-31 it reached 2,500,000 or more; but so it did in 1921.

The representatives of the Allied Nations in their recent conference in U.S.A. have been divided, according to the City Editor of the Manchester Guardian (September 7, 1944), about the problem whether the Governments should first settle the currency question and the exchange relationship between the currencies of the different countries or whether they should first deal with trade problems and remove tariffs and embargoes by which Governments seek to protect home industries by keeping out foreign products. A similar division existed at the World Conference of 1933, with the interesting difference that the President of the U.S.A. now takes a changed attitude from the one he took in 1933. But both attitudes ignore the fact that "over-production" and trade depression necessarily arise out of capitalism, and the erection of tariffs and the schemes to give a fillip to the exports of certain countries by lowering the gold content of their currency and thus cheapening their exports in terms of currencies of countries that had not devalued, are alike symptoms of the exiting depression, not its prime causes.

A better view of capitalist trade problems is given by war, which is the one time when there is an unlimited sale for all the goods that the capitalists can put on the market. The capitalist newspapers have been commenting on the slump in share values that has recently occurred because of the approach of peace. The City Editor of the News-Chronicle (September 13, 1944) writes: —

       "The stock market slump—it is scarcely too strong a word—continued and if anything gained momentum yesterday . . ."

He goes-on to say that some of the “experts” are of opinion that “the proper money-making course" for stock exchange speculators is to sell out their shares now and be prepared to stay out for two years “presumably until the immediate post-war chaos period is over." The Daily Mail City Editor (September 12, 1944) asks the question, “Has the slump come?" and says that the investor “has been depressed by references of industrialists to the difficulties of the transition period from war to peace."

What is, however, most instructive is the explanation given by the News-Chronicle. The City Editor says that for three years or more the minds of investors "have been attuned to a war-time economic system in which profits are more or less stabilised and full production is assured over a particular range of commodities."

This is an inherent defect of capitalism. Except in war it can never guarantee continued full production. Periodically the flood of goods on the market will come up against the problem of finding buyers who can pay the price necessary to provide the profit which alone is the aim of capitalist production.

While we are not in a position to prophecy exactly when the next slump and trade crisis will come, come it will despite all the plans and conferences of capitalist Governments and Labour Parties. The only remedy for the poverty and crises of capitalism is to abolish capitalism.

Edgar Hardcastle