CAN CAPITALISM LAST?

Grey River Argus, 1 August 1940, Page 10

CAN CAPITALISM LAST?

Report of a lecture given to the Runanga (branch of the Labour Party on July 22, by Dr. B. H. S. Aylward of ; Blackball.

Dr. Aylward based his remarks on the book “Can Capitalism Last?” by Frederick Allen, and read the heading to the first chapter—a quotation from Engels—“ The limits of production are determined, not by the number of hungry bellies, but by the number of purses able to buy and to pay.” Dr. Aylward then went on to say that the population of the world, excluding Russia and China, is estimated to have increased by 13 per cent, between 1913 and 1929, while the production of wheat has only increased by 10 per cent. Yet strangely enough the stocks had swollen to twice their normal size. As the League of Nations Committee of Economic Experts put it, “If there was overproduction, therefore, it must have been caused by a falling off in demand.” So we will start by investigating the market. The market is the volume of purchases of finished products. Finished products are those upon which no further labour is expended except for maintenance, they have taken their final shape. Unfinished goods are often bought and sold many times inside the productive system before they are finally sold. When finished goods are bought, money finally and definitely goes back to production to pay wages, salaries and dividends, which become the community’s purchasing power. Purchasing power does not necessarily equal the volume of purchases. It may be used to buy consumers’ goods or finished capital goods, or it may be hoarded or invested. If a firm hoards it reduces purchasing power in the next phase. If a firm disgorges hoardings or borrows from the bank it increases purchasing power in the next phase. Consumers’ purchases govern the whole system, as it is impossible to produce only capital goods. The co-efficient of purchasing power, that is, the proportion of purchasing power used to buy finished goods, may be 100 per cent, or 0 per cent. For the working class it is about 100 per cent., for the rich much less. Money going to the stock exchange or the banks means contraction of the market. In the States, business men do 68 per cent, of the saving, and so determine the coefficient of purchasing power of the community. If the co-efficient of purchasing power is 100 per cent., there is no problem of overproduction. If the wealthy classes invest all their savings in new production, all would be well. If they invest in the stock exchange or hoard, that means surplus goods which cannot be sold. Raising wages to absorb the goods means less profits. State Deficiency Financing, the method used by Roosevelt in the States, expands the market byincreasing pensions and paying men on public works with new money created by the banks. This means increasing the national debt. The Swedish plan of deficiency financing during a slump, with extra taxation to pay off the debt in a boom, is all right if you get the boom. The banks create credit why not the State? When a worker is discharged, there is an immediate drop in the purchasing power of the community equal to his wages, but that is not all, as the workers employed producing the goods he consumed are also discharged, and they in their turn cause others to be put out of work, and so it goes on. Calculations made in the States indicated that for every worker discharged, about two others were thrown out of work.

The productivity of labour increases on an average between 2 and 3 per cent, every year. Unless this increase is handed on to the worker, which we know it is not, it means a shrink-, age of the market with repercussions. Either workers are discharged, as the market cannot absorb the increased output, or the larger output is put on to the unchanged market. The effect is marked under fascism where the wages are not allowed to rise. In order to counteract this shrinkage of the market due to increased productivity of labour, increased investment in new production must grow each year in geometrical ' progression. When a capitalist buys yachts or makes donations to hospitals, it does equally as well as making an investment without increasing the shrinkage. Any waste of money will do, but the best way out is war. The contraction of the home market soon

drove the early capitalist to explore the foreign The next stage of imperialism was to conquer the native and put him to work on a plantation producing raw materials. If he would not work he was taxed, and so had to work |o get the money to pay the tax. The. next stage is to industrialise the colqny, using cheap labour, which means taking away the market of the capitalists at home and increasing unemployment. Native capital may butt in, as in India, and foreign capital, as irj Canada. Finally, capitalist countries clash in their struggle for markets. As soon as overprocuction (scarcity of markets) arises, monopolies develop as agreements, interlocking directorates, control holding oi shares. Monopoly restricts the supmly of commodities to raise the price,! or limits purchases of raw materials to buy at a lower price. This mea?s higher profits and less wages, wlich again reduces the market. To counteract this reduction of tfte market, still greater outlets for investment in new production have to be fciincl than under free capitalism. Mompcly is more efficient and makes more use of scientific research, so speeding up the increasing productivity of labour, and in consequence the shrinrage of the market. The dangers of the contracting market are much greater under monopoly than undei free capitalism.

Dr. Aylward then revewed the crises of capitalism. Up to 1857 there was a crisis roughly every ten years. These crises were due to shortage of money and over-speculation There were any amount of openings for investment at high rate of profit, and capitalists over-speculatec and then found that they had no mmey to complete their factories <r ihilways. The crisis in 1857 was he I first to shew signs of over-prodw floq.i During the sixties, there wre several wars, Italian and Amcicav. Civil wars, Napoleon Ill’s a« venture in Mexico, Prussian invasions of Denmark and Austria, and he FrancoPrussian war. These w.rs provided ample markets, and caitalism expanded rapidly. 1873 saw new crisis. This crisis lasted 55 yeas, previous crises had lasted only a >w months. The type of crisis had cangefl, this was a crisis of over-prodetion. Until 1887 there were low profits and general over-production, 'he remedy was imperialism. Betwee; 1882 and 1893 the annual rate ofinvestment overseas was 75 millions. Iy 1900 the total 1 must have been aboii 2000 millions, bringing in interest f 100 millions. The rise in gold production from 1892 to 1910 was frol 180 tons to 712 tons. From 1880 t? 1900 real wages rose 41 per cent, ii! England, which means, with the Urease in population an expansion f 68 per cent. This was a period of ich rapid expansion that there wer4 no bad crises. After the last warrecovery was very slow, and indusfy never worked up to capacity or tnployed all the workers. By 1927, Excessive stocks of coffee had reducedAe price by 50 per cent. Between ’<26 and 1930, the world’s stocks of star haa near doubled. Wheat had do} much the same. In 1929 the eras- came. The value of the world’s trie fell during the 1873-74 crisis 5 pecent., 1883-84 crisis 4 per cent., 190718 crisis 7 per cent., 1929-33 crisis-4 per cent. This was a crisis of o\?-pro-ductioh held off and accentuajd by speculation on. the stock The shrinkage of the market Id become phenomenal. Certain palliatives have been*ried. Tariff protection transfers purcising power to home market, but ther countries do the same. The coiumer suffers by high prices. Gcernment subsidies by helping homl industries keep purchasing powerful ;the taxpayer suffers. Dumpinglretains the purchasing power, butthe home consumer pays for the loss Depreciation of currency retains iirchasing power, but means lower Sinard of living; it has much the she effect as cutting wages. All he methods capitalists have tried laly to bolster up the system are only ]flliatives at the expense of the Some way of getting rid of the enpmous stocks of surplus goods whfi cannot be bought must be found if the system is to carry on, and te only one discovered so far is war. 1