Source: Militant, no. 44 (December 1968)
Transcription: Francesco 2009
Proofread: Fred 2009
Markup: Manuel 2009
“The finance ministers and central bankers of the world are not able to control their own system”
Heavy new taxes in Britain, panic on the stock-exchange, the meeting of the Chancellors of the ten top capitalist nations, demands that Germany revalue and France devalue. The headlines in the press seem mysterious and remote, but they have a devastating effect on the lives of the working class of these countries and of the entire capitalist world.It is necessary for the most class-conscious workers and the active members of the labour and trade union movement to have some understanding of what has taken place, so that they can explain it to their fellows in the movement, and in their factories and workplaces generally.
The currency of a country is paper notes, issued by the government, which has to have the backing of a certain amount of gold and the production of commodities—goods—to cover these notes. These notes are mere promissory notes, and of infinitesimal value in themselves. The writing on the British banknotes make this clear—“I promise to pay the bearer the sum of…”—which has long been a fiction.
Pre-war, all currencies in capitalist countries were directly or indirectly linked to gold. After the Second World War, with the defeat of the major capitalist powers, except for America and Britain, the “Anglo-Saxons” were enabled to impose what was known as the “gold exchange standard”. The medium of world trade was no longer to be gold, but the dollar and the pound currencies. All currencies were to be linked to the dollar, which alone had a direct link with gold, at $35 to an ounce of gold.
The American imperialists could impose this system because of the enormous economic, military and financial power in comparison with their broken rivals—who were dependent on American bounty to restore their shattered economies. The last two decades have seen a big change in the economic and power relationships. America, as the policeman of the world, has wasted enormous sums and transformed a colossal favourable balance of payments into an enormous deficit by expenditure on war and armaments. (The weakness that this has engendered has forced them to the peace negotiations in Vietnam). The currency is a reflection of the economic relationships nationally and internationally.
Every capitalist country is dependent on the world market, and one of the main factors in the post-war growth of western capitalism has been the growth of interdependence, division of labour, and world trade. But at the same time the economic contradictions between the capitalist countries have been piling up. This in its turn is reflected in currency crisis and economic crisis in the different countries. One of the capitalist economists, Pierre Uri, shows how this process develops (in The Times of November 25th). He says:
“The most obvious lesson to draw from the present crisis is the intrinsic contradiction between the otherwise desirable freedom of rates and movements of capital, and the uncoordinated national, economic and monetary policies. Disequilibrium is inevitable as long as individual countries claim autonomy, when trends between one country and another slip out of line or when interest rates are manipulated without consultation, movements of capital amplify the degree of imbalance and it’s hard to control those. Speculation is always the whipping-boy; in most cases it is the natural effort to make a profit or avoid a loss; this is the rule of the market place. Thus speculation is usually a consequence and not a cause…”
What a nice way to describe an insane system, where there is a colossal scramble for the loot, and an unedifying swindle and a frantic grasping at the attempt to make wealth. It is “natural” to a capitalist economy, to the world of the stock-exchange sharks and currency speculators. Here it should be remembered what the scramble is about is the wealth extracted from the surplus labour of the world’s workers. When Britain devalued it meant a cut in real wages for the workers and without any effort a nice nest-egg of £250 million profit for the big combines in Britain. We know there has been a swindle in government subsidies and loans in Britain. The French capitalists have gone one better. Paris correspondent of the Observer, not noted for its revolutionary fervour, points out that:
“…there was money to burn. More 2 percent export credits were granted (by the French government) in the past few months than in the whole of 1967.
“Much of this money, intended to buy new plant and mop up unemployment, ended up in Swiss and German banks across the frontier—a scandal which must weigh heavily on the conscience of French industry.”
These irrationalities are the madness of the capitalist system. Your capitalist is not interested in pounds, marks or dollar notes; he is only interested in one sacred thing: profit. World trade is dominated by the half-dozen big powers—the US, UK, France, Germany, Italy and Japan, and financially, Switzerland. But the relations between these powers, economic and financial, are constantly in a state of flux. Yesterday Germany was battered and broken, and today “an incredible situation, where Germany alone, through its surplus, counterbalances the deficit of all other countries” (Pierre Uri).
The fluctuations in the balance of trade cause these crises in the different capitalist countries because the purpose of capitalism and of world trade is not in fact the production and exchange of goods, but the production of profits. Thus from a simple point of view the irrational desire to have a surplus in the balance of payments and therefore the cutting down of production, as in Britain and France now, cutting down the standards of living of the working class in order to increase profits. An observer from Mars would say that this was mad, but it is merely the irrationality of the capitalist system—a system which has long outlived itself.
Under capitalism it is the market which dominates, and the world market which is dominant above all. But under a market system commodities must be produced for sale and there must be one commodity through which all other commodities measure their value. That commodity is money. And the money commodity in modern times has been gold. It can only be replaced by a similar commodity. All talk of de-monetising gold is sheer balderdash. From a strictly “logical” point of view it seems absurd that this yellow metal dug from the ground and then carefully put into vaults with armed guards, should play the role in the economy which it does. But that is the insane rationale of capitalism: of a market economy.
In the last two decades the dollar and the pound have been undermined by the enormous expenditure on arms, expenditure which is completely barren, and produces only what Marx has called fictitious capital—i.e. no real wealth. However, despite the apparent strength of Germany, her economy still produces only one tenth that of the US. The inflation and swindling and the jockeying for position in the currency markets are a reflection of the processes of capitalist production. The Sunday Times economic humourist says seriously enough—“ironically, if you know that world-wide inflation is the order of things, you should know that it will proceed at different rates in different counties, and that this will compel periodical exchange adjustments”. These adjustments can only take place through the upheaval that we have seen in the recent period. This in a period of unprecedented prosperity. At such times it is usually possible to arrive at some sort of compromise, with the strongest jackal powers of course getting the biggest share. But the contradiction of the capitalist system is that while fighting each other for markets—and especially in view of their interdependence in the post-war period—their fates are bound together like criminals on a chain-gang.
The financial crisis casts a shadow over the crazy pattern of capitalist production. This crisis will no doubt be patched up—but will only prepare the way for the future crisis, looming ahead, of overproduction. This arises inevitably at a certain stage in capitalist production, because of the limits of the market, limits of investment, in comparison with the enormous productive powers created by the working class. Capitalism has done its job in creating the world market, but it is incapable of planning or controlling the world production of wealth. It can only stagger on through monetary, financial, political and economic upheavals. It is the working class which is affected in all these countries. Capital knows no boundaries. Only a rational organisation of production by dispossessing the capitalists and instituting a democratic plan of production nationally and internationally, can put an end to the instability and chronic disease of capitalism. While hundreds of millions starve, and even the “comfortably off” workers in the main centres of capitalist production face insecurity and anxiety, the world is overbrimming with potential wealth. It is left to a socialist society to make use of this potential.