The Socialist Forum
A correspondent writes asking what will be the incentive under Socialism.
“Human nature being as it is—what incentive for hard work do you propose to put in the place of the desire for freedom from financial worries (both for themselves and those they respect and love), which alone drives men and women of good-will to create (at great cost to themselves) wealth from the resources of nature.
If left to all to set a common standard of life, that standard (besides being an extremely dull one) would be at a lower level than the more advanced would rightly be content to live. Would you drag all humanity down to a low level beyond which so many would not be prepared to work hard enough to go?”
Human beings, whatever the social system under which they live, must either work to produce the necessities of life, get someone else to work for them, or die of starvation. Our correspondent apparently assumes that under capitalism the wealth and security of the rich results from their own efforts. This is not the case. The rich are rich simply by virtue of owning the means of production which are operated by the working class. We are faced, then, with the remarkable situation that the workers put up with a system in which they are working to enrich a propertied class. When they realise the nature of capitalism and the way in which it can be replaced by Socialism, we believe that they will take that way. We further believe that the members of society will not find it more difficult to co-operate in producing wealth for themselves than the workers now find it to produce wealth for the capitalist class. In view of the enormous and avoidable waste of capitalism, and in view of the admitted activities of capitalist Governments and industrial associations in restricting production, we are confident that life under Socialism will not be at a low standard. It is for our correspondent to give his, reasons for believing that it will.
A reader in St. John, N.B., Canada, asks a question about rent.
“Does the rent that the worker receives as part of his pay become part of surplus-value after the landlord gets it, or is it only the building labourers, etc., who are exploited bv the landlord.”
The worker is exploited when he works, not when he buys things—whether he buys food, clothing or shelter. The position as regards the rent paid by the workers is the same as in the case of other necessities of life bought with their wages. Rent is the price the workers pay for shelter, and it figures as part of their cost of living. Where rents are low, wages will tend to be low also. The landlord is in the position of other capitalists. Subject to various factors, which interfere with the tendency towards a uniform percentage return on all capitals invested, the landlords will tend to receive the same return on capital invested in house-building or house-purchase as they would receive if they invested in any other investment field.
Two readers (W. Nicholls and E. Wright) draw attention to the address delivered by Mr. McKenna at the shareholders’ meeting of the Midland Bank. In the course of the address Mr. McKenna said : “It is evident that more money was created than trade actually needed.” These two readers both ask who “created the money” if the banks did not.
What these readers have not allowed for is Mr. McKenna’s notoriously loose use of words. If we had only this phrase to go upon, we might believe (as our critics want us to) that Mr. McKenna still holds the view which he is once alleged to have expressed in the phrase, “Every bank loan creates a deposit,” i.e., the theory which. Mr. Wright puts as follows : “Banks create money and lend it, using it as capital and so get interest for nothing.”
If, however, we read the whole of the passage in which Mr. McKenna dealt with the subject, he makes it quite clear that he does not hold that absurd view. In his speech he pointed out that during 1930 the amount of loans by the Midland Bank decreased while deposits increased by many millions of pounds. (For the whole of the hanks on the London Clearing House, loans and advances in 1930 decreased by £50 million, while deposits increased by £72 million.)
What Mr. McKcnna really thinks can be seen from his speech at the shareholders’ meeting on January 22nd, 1930) (see Times, January 23rd, 1930) :—
“It is a common notion to judge from speeches and letters in the Press, that the banks have an inexhaustible power of lending money to industrial enterprises, and that any industry suffering from general depression could be restored to prosperity if only what is termed a more generous policy were adopted by the banks. (Laughter!) A moment’s reflection, however, will show that the banks have no inexhaustible fund to draw upon. The sums they lend are balanced by amounts due to depositors, who would certainly not rest content unless confident that their money was being wisely used and could be repaid to them at any time.”
The reply to the question, Who did “create,” if not the banks? is that the working class produce wealth by applying their labour-power to natural resources. The wealth when produced belongs to the capitalists. In the early days of capitalism rhey carried on the process of exchange (i.e., buying and selling) through the medium of gold. With the rise of the banks the latter, using a relatively smaller quantity of gold, act as intermediates between capitalist owners of various kinds of goods. Bank deposits represent in money terms some of the commodities which the working class have produced for the capitalists. Purchasing power arises from the ownership of wealth and cannot be “created.” Banks act as agents for facilitating exchange between owners.
ED. COMM.