1920s >> 1929 >> no-294-february-1929

Book Review: “The Modern Case For Socialism.”

 “The Modern Case For Socialism.” By A. W. Humphrey. Price 12/6. George Allen and Unwin, Ltd.

This book is a welter of confused and contradictory ideas, relieved here and there by some useful information and argument.

It contains 268 pages divided into nine chapters. The author does not claim to cover the whole case for Socialism. He is wise. But he would have been wiser had he found out what the whole case for Socialism was before he started the book. The title of the book is certainly misleading. It is in no sense the “modern case for Socialism”—in fact, it is not the case for Socialism at all, as more than half of it is taken up with the case for Nationalisation and the so-called “Guild Socialism.”

The contradictions, omissions and errors, from the point of view of Socialism, are too many to cover in a review, so I can do no more than call attention to a few.

Before doing so, however, I must give him credit for having written some excellent sections on the concentration of capital, the position of inventors, and the nature and ramifications of the trusts, and also some useful information on the wages and conditions of labour, and profit-making at home and abroad.

At the front of the book there is a list of authorities quoted, but it is significant that in this list no mention is made of the most important book ever written connected with the subject, and that book is “Capital,” by Karl Marx. In fact, a glance over this list of authorities drives one to the conclusion that the author has obtained most of his information at secondhand and from pamphlets.

The first chapter on “The Source of Wealth” is fairly clear and fairly simple, but even here the author stumbles. On page 23 we read: “All wealth is the product of labour,” and on page 26 : “The moral law is rooted in the economic truth that labour is the source of all wealth.” The latter may be a very pretty sentence, but it is both untrue and empty. Human energy and natural resources are the source of wealth. The “moral law” is merely an empty phrase. ‘

On page 24 we read:—

Labour being, as we have seen, the only creative agency in that process, it follows that Labour is the source of all value.

Farther down on the same page we come across the following:—

    Meanwhile two of the commonest objections to this labour theory of value must be disposed of. One is that land has value but is not the product of labour. Land, however, has value under only two conditions: either it is cultivated, and therefore the value arises from the labour of the cultivator, or it acquires value by reason of the fact that labour carried on in its vicinity creates a demand for it.

There is, surely, a manifest contradiction between these two quotations. If “labour is the source of all value,” how can land upon which no labour has been spent have any value? It cannot, and has not. The author confuses value and price in the second quotation. Land upon which no labour has been spent may have a price, but it has no value.

A few pages later on the author confuses profit with surplus value, as if the two were identical. Under the heading “How Profit Arises,” on page 28, we find:—

Thus supposing the working day to be of eight hours, the worker may produce the value which he receives back in wages, in say, three hours, and the results of his work during the remaining five hours are annexed by the capitalist. The value created in this five hours is the surplus value, or profit, which the worker is compelled to leave in the possession of the capitalist.

The remaining five hours mentioned is surplus value, but all of this is not profit. Out of this five hours the Capitalist pays rent, interest and allots an amount for future production as well as taking his profit. The profit a given Capitalist concern makes (leaving aside for the moment any hidden or artificial reserves) is the amount they have over during a particular period of trading, after making allowances for necessary sinking fund, duties payable, ground or other rents, royalties, honorariums and other tributes to other Capitalists, besides advertising, etc., expenses, all of which come out of the surplus value produced by the workers in the particular concern.

Now, according to the quotation given above from page 28, the difference between what the worker gets and the value he produces is surplus value. On page 46 the author gets himself into a tangle again, with the following astonishing statement:—

The trade unions and the Labour Party are the means by which the workers defend their portion of the surplus value produced by their labour and strive to increase it.

We would assume that there is a printer’s error here, but taken in conjunction with other matter in the book, we are forced to the conclusion that it is only an expression of the author’s lack of grasp of economics, of which there is plenty of evidence throughout.

However, perhaps the few points mentioned from the opening sections are a sufficient illustration of the character of the author’s analysis, and we will only take one or two points that occur later on in the book.

From page 142 we take the following:—

   The banks do create credit; by creating credit they increase the supply of money, and thus influence prices and the volume of production . . . .
Money exchanges for goods. If the volume of money increases without a corresponding increase in the quantity of goods, then money, considered in relation to goods, will have declined in value. Because money has declined in value a given quantity of money will not exchange for the same amount of goods as formerly. To purchase that amount of goods more money will be needed, which is another way of saying that prices will rise. This is what in fact does occur. An increase in money without a corresponding increase in goods brings about a rise in prices. An increase in the quantity of money is called an inflation of the currency. Thus, we reach the position that inflation causes a rise in prices.

He then reverses the process to show a reversed result.

It is all very neat and pretty. However, neat arguments are not necessarily sound arguments.

In the first place, a mere increase in the quantity of money is not an inflation of the currency. An inflation of the currency can only occur under certain special conditions, which include weakness in the backing behind the currency. Now if there is one thing that practically everybody accepts to-day it is that crises, and in recent times the crises in the cotton, steel, shipbuilding and other industries, are brought about by the expansion of production beyond the effective demand, bringing in its train a fall in prices. Increased credit facilities have been blamed, in the main, for enabling manufacturers to flood the market. In consequence there is an all-round whine that prices are ruling too low, and Capitalists are looking to “rationalisation” as a royal road out of this difficulty.

The main trouble, however, is that Mr. Humphrey is confusing credit facilities with currency. Money has many functions, and one of these functions is to act as’ currency. Before he started upon this neat little argument he should have shown how the volume of money that acts as currency is increased.

His confusion on this point leads him to the statement that:—

  The increased development of the use of credit in carrying on industrial operations has made the banks the controllers of the volume of money, and, therefore, in some degree of prices, which in turn affects the balance of trade. (p. 150.)

And also:—

The banks keep their balances at the Bank of England, and in the last resort their lending powers rest on the Bank of England’s gold, but this gold basis has for years been declining in importance, and to-day is of little significance, (p. 145.)

On the same day that this review was being written the writer read the annua) report of the Chairman (Mr. F. G. Goodenough) of Barclays Bank. From this report the following extracts are taken bearing upon the above remarks:—

  Another important factor affecting industry and trade has been the stabilisation of currencies in terms of gold by certain countries, and especially France, during the year. It may now be said that for all practical purposes the stabilisation of world currencies on a gold basis has been virtually completed, and this should prove a factor in the stabilisation of price levels as between one country and another.

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It is provided by the Currency and Bank Notes Act, 1928, that the Bank of England and the Treasury acting in agreement, may reduce the fiduciary limit as and when they may think fit, while provision is also made for an expansion in the fiduciary limit should the circumstances warrant. The power to reduce the fiduciary circulation would probably be utilised if, after a period, it was found that the currency available was permanently in excess of the country’s needs, as, for example, might prove to be the case in the event of an appreciable and permanent fall in price levels.    (The Sunday Times, 20/1/29.)

    (“The fiduciary limit’’ means the quantity of bank notes that may be issued without a gold backing )

In other words, the gold basis is very much in existence, and trade only absorbs the amount of currency required to facilitate business transactions, the rest lies in the Bank. This disposes of Mr. Humphrey’s illusion that currency is a fixed quantity which is split (gawd knows how!) in certain proportions over the goods being sold at a given moment. As a matter of fact, he is only bringing to life again the hoary old quantity theory of money which has been destroyed time after time.

The aim of his argument is shown in the climax. He is out for the nationalisation of the Banks. In fact, the last hundred pages of his book is mainly occupied with a glorification of nationalisation. As the subject has been often dealt with adequately in these columns during the last few months we will not pursue Mr. Humphrey on the subject, where he frequently mixes public ownership with Socialism and has a good deal to say about that mysterious entity, “the public ”!

In the opinion of the author, Socialist theory will be put into practice by the Guilds. And this is how they will do it:—

      The Guilds in being, there would fall to them the duty and privilege of running their respective industries. The Guild would decide the methods; it would be the owner of what was produced; it would divide the proceeds’ of the sale of its products among its members, according to principles and rates of pay which the members themselves would lay down. Out of its income the Guild would make provision for the maintenance of its members in sickness, unemployment, and old age. (pp. 256-257.)
The factory, mine, shipyard, or other centres of production would be the natural and fundamental unit of industrial democracy. This involves not only that the factory must be free, as far as possible, to manage its own affairs, but also that the democratic unit of the factory must be made the basis of the larger democracy of the Guild. The duties of the larger organisations of the Guild would consist chiefly of co-ordination of the production of the various units, making general regulations, supplying raw material, selling such products as were not disposed of locally, and representing the Guild in its relations with other Guilds and the community as a whole, (p. 258.)

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  As to the all-important question of prices, the instrument of taxation would be a means of checking any tendency on the part of a Guild to overcharge, supposing that in any instance or at any time the decisions jointly made with the State were not loyally observed. For taxation would be levied not on individuals but on Guilds, and as justice in taxation implies that those with most shall pay most, a Guild getting unduly wealthy by keeping up prices would And that its excessive surplus was skimmed off by the State for communal purposes.
The main point to be grasped at this point, however, is that, though the community would have the right to intervene in matters affecting the general welfare, the internal affairs of the Guild would be a matter for the Guild alone, (p. 261.)

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At this point it may be as well to make clear that it is not imagined that under the Guild system we should find the whole population to the last man in Guild membership. There is, for example, the case of artists and fine types of craftsmen. No one suggests that any such workers should be forced into a Guild against their will. They would, in all likelihood, be able to make an ample living working independently, for with the higher standard of living and of education which would be the rule in Socialist society, there would be a much greater demand for all beautiful things than there is to-day. (p. 262.)

Now, gentle and unsophisticated reader, you should have an adequate idea of Mr. Humphrey’s conception of Socialism, and therefore the value of his book as a contribution to the “Modern Case.” As you see above, there will be privileged classes, taxation, buying and selling, high and low prices, and other bric-a-brac of Capitalism ! as we know it to-day.