50 Years Ago – Floating to nowhere – the currency chaos
If of course the dollars were convertible into gold at $35 an ounce as they used to be, nobody would fear to hold dollars. At present the dollar and pound are described as ‘floating’. All this means is that instead of being devalued and immediately fixed at the lower level they were devalued and allowed to fluctuate about the lower level.
The pound was devalued in 1967 by the Wilson government and again in 1971 by the Heath government — on the latter occasion with the enthusiastic support of Tories, Labour and the trade unions on the ground that it would make exports cheaper to foreign buyers and thus encourage production for export. The other side of the coin is that devaluation makes all imports correspondingly dearer. So the Labour Party and trade unions which protest against the higher prices of imported goods are protesting against the inevitable result of an action they approved of.
The governments and capitalists are becoming aware of the fact that while the depreciation of currencies may seem to be of short-term advantage, at least to exporters, the competitive depreciation of currencies such as the dollar and pound creates a chaotic situation which may make all international trading operations more difficult. This is leading some capitalists and economists to see that in the long run capitalism will have to re-learn the need to have stable currencies and that there is no better way than to restore gold convertibility at a fixed rate, in short the end of inflation.
And what does this offer to the workers? In nineteenth-century British capitalism there was no inflation. Prices in 1914 were actually slightly lower than in 1814. In between, prices rose moderately in booms and fell in depressions. And what the workers got was exploitation and poverty all the time, relieved somewhat in booms and worsened in depressions, with unemployment similarly.
Nobody has produced — or will produce — any policy which will change the nature of capitalism. Those who really do learn the lesson of history will concentrate on getting rid of capitalism.
(Socialist Standard, August 1973)