THE CIGARETTE STANDARD

Press, Volume LXXXI, Issue 24741, 5 December 1945, Page 6

THE CIGARETTE STANDARD

.One of the peculiar results o’f the war has been the adoption of various goods as monetary units. on the Continent. There is. nothing new in this. Whenever, in the past, confidence in metallic or paper currencies became undermined through debasement or inflation, there was a tendency towards reverting to barter. And whenever an advanced community reverted to such a primitive method of trading, it did not take long before some common medium of exchange developed." One of the favourite articles of barter, which was the moat readily acceptable, came to fulfil to a limited degree the functions of money. Possibly several such articles assumed such functions; but usually there was one of them that overshadowed the rest.

After the war of 1914-18, during the period of advanced inflation in Central Europe, it was mostly grain that assumed the role of a t medium of exchange, and even more that of a standard of value. In Germany, rye became the standard for deferred payments, in terms of which future obligations were expressed. In fact, the Roggenrenten Bank, which issued obligations based on rye, was the first fixed point in the currency chaos, around which a certain degree of stability was achieved. There were, however, many other commodities which were used as common,denominators to facilitate barter or to secure claims against depreciation; and their very multiplicity prevented any one of them from being regarded as a currency proper.

During the war of 1939-45, on the other hand, there developed on the Continent a primitive currency s/stem that assumed all the main functions of a modern currency system. It may conveniently be described as the “cigarette standard.” It is true, there were other commodities besides cigarettes that became media of exchange in various parts of Europe. In France and Germany coffee was used for that purpose. In Greece the population adopted olive oil and wheat as its unit of account during the period of advanced inflation.'But in most liberated or occupied countries the cigarette became a very widely used monetary unit. While in the First World War it. played no monetary part, in ‘ the Second World War it easily overshadowed every other money-substi-tute. Indeed, in most countries the cigarette was the only unit' sufficiently widely accepted to justify its description as a primitive currency. The explanation of the difference between the practice in the two, World Wars lies in the increase of the smoking habit. In 1918 the number of woman smokers was relatively few. By 1945, most women, like most men, have acquired the habit. The long spells of stress alternating with long spells of inactivity that characterised the Second World War Induced those engaged in the serviced or in civil defence to .smoke a great deal. As a result, the demand for. cigarettes was m most places in excess of the supply. and it became easy for possessors of cigarettes, to unload any quantities they did not intend themselves to consume. Cigarettes became generally acceptable, for even those who did not smoke could easily find others will-mg-and eager to acquire them. The first communities which adopted the cigarette standard were internees and prisoners of war in Germany and German-controlled countries, r rom all accounts it appeared that in such camps a regular traffic developed in cigarettes. If anyone had anything for sale he was willing to accept cigarettes m payment. For services rendered the was in the form of cigarettes. “ j direct barter was resorted to. Even then, however, the cigarette unit was used as a common denominator to facilitate the transac- “°, n - .And if one object was more valuable than the other received in exchange, the difference was settled in the form of cigarettes. Anyone wantSS A« C £ UI1C -f u CoVeted ? b iect had to for it by accumulating the required number of cigarettes. Or even ii he had no definite object in mind it was advisable to accumulate a “cash reserve’’ in the form of a good supply

[By PAUL EINZIG in the "Banker.”!

of cigarettes, in case there should arise some unforeseen requirement •or opportunity. Cigarettes became a widely adopted form of store of wealth. At the same time they also-served as a standard for deferred payments. Owing to the regularity of the arrival of cigarettes in parcels—in addition to the meagre camp rations—it was possible to anticipate the forthcoming supplies and debts were contracted in cigarettes.

Finally, cigarettes were the favourite means for unilateral payments. Camp guards were bribed with the aid of cigarettes in order to secure various favours. In one cigarettes were usable for every purpose for which money normally is used.

After the Allied landing in Sicily md southern Italy, packets of Armyration cigarettes came to be adopted ss the currency in the place of the lira which, besides having depreciated was hardly accepted in payment lor land products. Itinerant merchants visited military camps with a barrowful of eggs, fruit, etc., and they left the camp with a bagful of cigarettes ; They did not acquire such quantities for their own consumption. These cigarettes were their working capital, whjch was used for the replenishment of their stock-in-trade—at a considerable profit.

In liberated France, too, cigarettes became the favourite means of payment. At the exchange rate of 200 francs to the pound, prices were simply prohibitive for the troops. But if they were' prepared to part with their cigarettes they were able to obtain almost everything available, at reasonable prices. Troops had the same experience in Belgium and Holland. Nor was the traffic confined to dealings between troops and civilians. Trade between civilians, too, was also often transacted on the basis of payment in cigarettes.

Lest, but by no means least, the cigarette standard came to be adopted in occupied Germany. The Reichsmark underwent a sharp depreciation, and prices of everything, except official rations, have risen to a very high level. What is worse, goods are almost impossible to obtain against payment in Reichsmarks and in Allied military marks, even at the fantastic prices quoted. On the other hand, such meagre supplies as are available are readily sold against payment in cigarettes. Barter among the Germans themselves is transacted largely on the basis of values expressed in cigarettes. The volume of cigarettes is not sufficiently large to .enable the civilian population to use them as a universal medium of exchange. But cigarettesare used as a stable monetary unit in terms of which prices are quoted. Just as in ancient Egypt copper served generally as a unit of account to facilitate ■ barter, and only exceptionally as an actual medium of exchange, so in present-day Germany cigarettes are largely used as a unit of account only. Cigarettes have many'of the charac* teristics that an object is required to ' have in order to be usable as money. They are comparatively uniform m quality; they can fairly easily be trans- ’ ported; they are easily recognisable and difficult to forge; the packets caii : be' subdivided, without loss of value; they are relatively durable, and the reserve can be turned over to avoid deterioration; and they are generally ;■ acceptable. It is for these reasons that the cigarette standard has developed spontaneously, without any official aid J or encouragement. v V, It is well worth considering whether • . it would be-advisable for the authorities in various countries where the cigarette stands rtf has developed td > take an interest in the system and to make use of it as a means for solving their monetary difficulties. Since the : system exists it might serve a useful purpose if it were subject to official , A regulations. Also,’ it might, provide ,4 ’ starting point for a stabilisation scheme, just as the rye-unit did iff -j Germany; alter the First World War. A In any case,, the system should be studied with care, even as a matter ol v#academic interest. • ‘ ..