Finance & Industry: If only prices would come down!
A woman reader of the Evening News (28/11/60) wrote referring to the old saying that what goes up must come down, and asked if this applies to the cost of living; “if so I haven’t noticed it”.
About 99 per cent. of the population would say, if asked, that they “want prices to come down”. They don’t really mean this. What they mean is that it would be very nice if the prices of the things they buy went down and the price of the thing they sell went up. The worker would like to sell his mental and physical energies to his employer at a higher price (a higher wage) and at the same time get more for each pound he spends, through lower prices in the shop. And manufacturers who sell industrial products would like to see those prices go up and all other prices (including wages) go down.
One exception to this general attitude is the common practice of trade unions of associating themselves with their employers in approving higher prices. Thus the railway unions approve higher fares and the coal miners higher prices for coal.
But coming back to the question in the Evening News, would workers be better off if prices were lower? France a few months ago and Russia this month gave one kind of answer to the question, the answer being that it did not make any difference. What happened was that France cut the face value of her currency by 100, and the Russians cut their rouble by 10. At the same time all prices, wages, fares, etc., were cut in the same proportion, so everyone was in just the same position as before.
But on some occasions prices have not been reduced by this kind of government action but have fallen under the influence of trading conditions. Did the workers gain then?
It happened in 1920-1922. Between November 1920 and December 1922 prices fell on average of 35 per cent.; like being able to buy for 13/- some article which had cost 20/-.
But in the same period wage rates fell on average by the same percentage (or perhaps a little more). So the worker who could buy articles at lower prices had fewer shillings in his wage packet to buy the articles with.
It was a time when unemployment was heavy and conditions were particularly unfavourable for trade union resistance to wage cuts.
New Russian Rouble
The declaration of the Russian government that as from 1 January 1961 the official rate of exchange of the rouble will be 2.52 to the £ which will make it of higher value than the dollar and equal to about 8/-, will not mean much in practice since (unlike the dollar) it is not tied to gold and is not freely convertible into pounds or dollars. Commentators in the newspapers mostly take the line that the aim of the Russian government is prestige, the satisfaction of having at least a nominal exchange rate greater than that of the dollar. In addition however there is already the long term purpose of making the rouble eventually a gold backed world currency acceptable in inter-national trade as the pound and dollar have been.
The Daily Worker (17/11/60) anticipates that “the new exchange rates and the change in the gold content of the rouble herald the opening up of peaceful competition between the rouble and the dollar”, and “Tt may not be long before the rouble begins to challenge the dollar for primacy in world trade”.
There was a time when even the Daily Worker would have recognised that the trade war between capitalist states is anything but “peaceful competition “.
Rouble Millionaires
The Daily Telegraph (6/12/60) tells of a Russian woman who got into the ranks of the rouble millionaires by a piece of private enterprise that landed her in jail for three years. She ran an organisation, complete with a lawyer as secretary, a “scientific consultant”, an accountant, and a network of agents selling cure-all herbs at 45/- a packet. When arrested she had 700,000 roubles (worth about £60,000 at the old rate of exchange) and had just bought a country house for 300,000 roubles. “Her daily earnings would sometimes amount to 5,000 roubles, or eight times a worker’s monthly wage”.
The Economic Horizon
A year ago most of the political and economic forecasters were happy about the boom time ahead and still confident that if anything went wrong the government could fairly easily take the steps that would put the economy back on expansion. Now they are not so sure. The fact that they are all asking the question is itself a pointer to growing uneasiness, made greater by the foreseeable but generally not foreseen collapse of motor exports.
Now it is accepted that America and Canada are likely to have unemployment greater than in any year since the end of the war and there is the natural fear that British export trade may fall further and the jobless increase in number.
Gone is the post-war optimism based on the belief that they could always dip into the Keynesian remedies and keep everything under control. One of the current activities is the setting up of export councils to boost the sale of British goods in overseas markets, including the Export Council for Europe set up by the Federation of British Industries and manned by “some of the most prominent men in British industry and commerce ” (Financial Times, 11/11/60).
But before anyone accepts that the export problems of British capitalism can readily be solved by pushing into other markets (and thereby crowding out some other would-be sellers) it has to be remembered that other sections of the capitalist class would have had the same idea. Canada has appointed a “super salesman” to head its export drive, in the person of a new Minister of Trade and Commerce, and the American government is trying to boost their exports. Sweden, too, is aiming to solve its problems by more exports, and their eyes are fixed on the market for their goods in Britain. And to add to the troubles of all of them Russian exports are finding their way into many of the world’s competitive markets.
Paul Bareau, the new economic editor of the Daily Mail (25/11/60) argues that the present troubles in this country are due to “the excessive optimism and rashness of the years 1958 and 1959. Restrictions on hire purchase should never have been completely removed. This freedom was abused and we are now paying the price”.
So you take your choice between those who say that there is no need to worry because the government can always take action to put things right, and those who say, like Mr. Bareau, that the government did take steps but they were the wrong ones and had the effect of making things worse.
However, Mr. Bareau is cautiously hopeful. “The coming year will provide plenty of problems; but they will not be the problems of a great slump”.
H.