1990s >> 1990 >> no-1026-february-1990

Letters to the Editors: Class, inflation

Class, inflation

Dear Editors.

You talk a lot about the battle between the workers and the ruling classes. How do you group people in these classifications? Is a member of the ruling class someone who is connected with the government. or someone who earns more than a certain amount a year, or someone who has inherited substantial wealth, etc.? Are workers those who rely solely on their wages and benefits to survive? Into what class fall the self-employed, working for and/or by themselves? My parents have worked all their lives as dedicated teachers; they have bought small amounts of shares in government privatisations—what class are they?

Secondly, your article “Four fallacies about inflation” (Socialist Standard, August). You state that raising interest rates actually raises inflation, and that it is money supply that is responsible for inflation. In the latter point, you are to a great extent, correct; as to the former you seem to have missed the point of raising interest rates. This main aim is not to actually take money from people (although it does have this side effect)—a government wanting to do this would find it far more efficient to raise taxes—but to discourage people from creating new money: in other words, to stop new, further borrowing, and thus stopping them, as you argue, increasing the money supply and thus in turn the inflation rate. Interest rates are thus a valid means of controlling inflation over the medium-term, as has been demonstrated time and time again, the world over.

John Everett


Class is defined by the position in which people stand with regard to the control of the use of the means of production. In present-day, capitalist society there are two main classes: those who monopolise the means of production whether through legal title (as in the West) or effective control through the state (as in Russia) and those who, excluded from such ownership and control, have to live by selling their mental and physical skills for a wage or salary: in short, the capitalist class and the working class. It is true that there also exist a comparatively small number of self-employed people who could be said to form a third class, but many of these are no better off than wage and salary workers in that they have to work hard and long to repay, with interest, the money they have borrowed.

The ruling class is the class that controls political power, today the capitalist class. Owning a few shares no more makes a wage and salary worker a capitalist than being paid for doing some work makes a capitalist a member of the working class.

You seem to have completely misread the article on inflation. We never stated that raising interest rates raises inflation; in fact we said the exact opposite: that inflation tends to cause interest rates to rise. We do indeed say that inflation is a question of the “money supply” but are always careful to define this precisely, as the supply of currency (notes and coins). Others, including yourself, wrongly include bank loans; which is absurd since it attributes to banks the power to create new purchasing power whereas all they can do is to redistribute existing purchasing power, from their depositors to their borrowers. Only the central state can create new purchasing power, in the form of more currency— which the Bank of England is doing all the time at a steady rate of around 5 per cent a year, even though the economy doesn’t need it. Hence, the decline in the purchasing power of the pound which shows itself as a continual rise in the general price level.

Trying to control inflation through high interest rates is one of the most absurd “anti-inflationary” policies ever to have been devised since interest rates do not, and cannot, have any effect whatsoever on the general price level. We know of no evidence of it having worked anywhere, certainly not in Britain over the past few years.


Dear Editors.

Alwyn Edgar’s “Diary of A Capitalist” is obviously not compiled in a particularly methodical manner. His article in your January 1990 issue informed us that Churchill died in the “early 1950s”, to be replaced as Prime Minister by Eden.

I fear that our capitalist’s diary entry at that point must have been inspired by fantasies similar to those of the demonstrators he was so disparaging of. In fact, Churchill managed to survive another ten years after his resignation from Prime Ministerial office, dying as recently as 24 January 1965.

Nevertheless, I am in full agreement with Edgar’s central point about the futility of socialists’ concentrating their criticisms on the role of individual leaders in the running of capitalism.

Steve Cooke

An underestimate

Dear Editors,

I recently discovered your fine publication and was impressed by the refreshing clarity and concise nature of your articles. A figure given in the September issue confused me, though. A reference to Jon Bennett’s Hunger Machine cited $21 million a year as being sufficient to nourish, house, educate, and provide health care for each individual on Earth. Certainly such a figure is way too high for each individual while being woefully inadequate for billions of people. Yet not even $21 billion a year would seem enough for the task. This would amount to about $21 a year per person assuming “only” one billion in need.

To demonstrate how puny a $21 million figure is in military matters consider this. World military expenses run over S2.5 billion a day! Of course only a fraction of this represents expenditures on actual hardware. In the US around half goes toward development and purchasing of weapons. The total US budget is about $300 billion for the military. This amounts to roughly 30 per cent of the world’s total. At the same time we represent only 5 per cent of the population. Our beloved master class doesn’t apparently believe in divine intervention to protect its material interests.

Frank Emerson


We think that you and the others who have written to us on the same point are right and that the figure given in Jon Bennett’s book (it is his figure, not ours) should have read $21 billion not $21 million.

The context in which Bennett uses the figure makes it clear that the resources represented by this sum are in addition to current spending on socially useful products and services. Although he does not quote a source for this figure, we think it probable that it is based on the work of Ruth Sivard who has for years produced various estimates of what could be done if the resources squandered on means of destruction were diverted to socially useful production to alleviate the suffering of the starving and the poorest of the poor. We are not in a position to seriously dispute her figures. As she was formerly chief of the economics division of the US Arms Control and Disarmament Agency her estimates must be regarded as having some authority.

What we would question is the probability of such a diversion of resources being made within the context of world capitalism with its overriding need to operate profitably and to defend vested interests. Where the motive for wealth production is the realisation of profit those without the means to buy suffer. Bennett highlights this in the context of food production when he writes:

Set against this harrowing catalogue of human misery is the startling fact that there is more than sufficient food currently available to feed every man, woman and child on the planet . . .  People die of hunger because they are poor, because they cannot afford to buy what food is available.

If this is so, then the establishment of socialism, as the common ownership and democratic control of the world’s productive resources where production will be geared to meeting needs, could solve the “problem” of hunger virtually overnight. Whether the remaining problems would need the extra resources represented under capitalism in money terms as $21 billion or some other figure must be set against the fact that capitalism is a system of artificial scarcity.