1920s >> 1923 >> no-222-february-1923
Letter: The Ostrich Policy
Your issue of December, 1922, contains a vituperative article by J. Fitzgerald, attacking the attitude of “Plebs” on the question of currency inflation. (How it is ever hoped to attain the noble ideal of a Socialist state of society by the use of abuse will to me forever be a mystery. Lack of solidity within the Christian Church has led many people to regard Christianity as false; a smaller number who have pursued the matter further have found that the lack of solidity is in all verity due to the falseness of Christianity. Lack of solidity amongst parties who vouch for the desirability of supplanting a capitalistic state of society by a socialistic one must lead many people to doubt the desirability; only a few take the trouble to probe the matter further and find out for themselves that dissension in this case is due to superficialities only, and not to fundamentals, as in Christianity.)
I write, however, to point out that your contributor has, in the instance I quote above, let his love of abuse over-ride his adherence to facts.
I am not an economic expert ; but my reason declines to accept his contention that the total of prices of commodities governs the amount of currency required at any given time. In page 246 (first column), he states that a sudden increase in prices necessities an increase of currency. Not at all; it is the increase in the quantity of currency, or the prospect of such increase, which causes the increase of prices. That is, the wily capitalist knows that (when war is declared), through an increase in non-productive work, and work on production of articles not for sale to the general public, the quantity of currency available to purchase articles on sale to the public is much greater in proportion than in normal times. He has a natural desire to become possessor of as large a share of this increased currency as possible, hence high prices.
What your contributor contends—that prices sometimes go up before the currency is available—is correct; but the prices only go up because there is every prospect of the currency being available My reason declines to accept the argument that any shopkeeper or vendor of commodities places a price on his goods higher than, so far as he can judge, the quantity or immediately prospective higher quantity of currency available justifies. To keep within this maximum is his sole chance of doing business. If an increase of prices causes an increase of currency, we can safely presume, speaking generally, that the amount of currency in circulation will be gauged so as to just meet the situation. How, then, does your contributor account for people (during the late war) being in possession of currency with which they desired to purchase, say, potatoes, butter, etc., when no such commodities were available, and there was no prospect of their becoming available? In other words, how does his theory account for the increased quantity of currency being there when there was no price to have caused such increase? The logicality of the reverse theory is, I contend, obvious.
Before closing, as a further instance of your contributor’s regrettable lack of adherence to facts, I would point to his quotation from “Plebs” in column 2 of page 246, and his misquotation (from that quotation) lower down the column contained in the sentence, “And where in England, may one ask, can more than 20 shillings be obtained for the £1 Treasury Note?” (The “Plebs” writer says distinctly “gold £1.” Incidentally, I have never handled a copy of the “Plebs.”
Mr. Hutchinson open his letter with an entirely unsupported charge—that the article on “Plebs and Pounds” was vituperative—and follows by ignoring the facts presented in that article, claiming that his “reason” is superior to those facts, and therefore he wall not accept them.
A similar policy was ascribed to the ostrich, but it always ended in failure—for the ostrich.
Mr. Hutchinson’s question as to how the “theory” put forward in the Socialist Standard can “account for the increased quantity of currency being there when there was no price to have caused such increase” contradicts his own contention that an increase of currency is the cause of the rise in prices. Our answer is that we do not pretend to explain non-existences. At no period of the war was the total level of prices below the amount of currency. The rationing of certain articles of food and the fixing of certain prices did not make the slightest difference to this particular point.
When Mr. Hutchinson is prepared to collect and examine the facts before applying what he calls his “reason,” he may reach some glimmering of the truth. While he holds to his present method his quest will be hopeless.
The printer’s error that Mr. Hutchinson calls a “misquotation” (though it was easily seen to be an error by the most casual reader of the article) was overlooked until the issue was printed. The necessary correction was given in the January issue of the Socialist Standard.