Institutional Economics: Its Place in Political Economy, Volume 2 by Malcolm Rutherford

Author:Malcolm Rutherford [Rutherford, Malcolm]
Language: eng
Format: azw3
Publisher: Taylor and Francis
Published: 2017-09-04T04:00:00+00:00

4 Prices

Doubtless the most far reaching and difficult of all stabilizations is banker stabilization. Banker control is world-wide and involves concerted action of the central banks of the world. It involves internationalism and cuts across the nationalistic tariff protective uprisings of masses of people. The first move for banker stabilization came, not from bankers or economists, but from politicians. In 1833, during the world-wide fall in prices, G. Poulett Scrope, member of the House of Commons from 1833 to 1868, addressed pamphlets to his constituents and then published in a book 139 his proposal to correct the fluctuations of the “legal standard of value” by a periodical publication of “an authentic price current,” so that all commercial classes could “regulate their pecuniary engagements by reference to this Tabular Standard.” This tabular standard afterwards came to be constructed on mathematical principles by Jevons and then to be known as index numbers of the average movement of prices.140

Scrope’s idea had been preceded by others, but more out of curiosity than practical proposals for business contracts,141 and he contemplated only voluntary agreements in long-term contracts. Not until Wicksell in 1898 and Fisher in 1911 was it proposed to stabilize the legal standard of money itself by Wicksell’s bank control over discount rates and Fisher’s control over changes in the weight of the dollar, so that not only long-term agreements but also short-term agreements of commercial banking should be made under collective control of a stabilized price level itself.

These proposals bring to the front the most important of all problems of public policy and reasonable value, for they are a worldwide aspect of the ethical question, arising out of conflicts of interest: whether individuals and classes should get rich by their own improvements in efficiency or by taking advantage of changes in the value of the unit that measures scarcity. In the all-controlling practices of the “paymasters” of a capitalistic civilization, they are the issue of efficiency profits versus scarcity profits.

The general level of wholesale prices in the United States fell more than 33 per cent from 1929 to 1932, and the level of farmers' prices fell about 55 per cent. But, taking 33 per cent as the average, the burden of all long-time debts was increased 50 per cent. This means that 50 per cent more commodities must be exported by foreign countries to the world market, in order to pay the gold debts of Europe to America, than were required in 1925 when the amount of the war debts was settled.

Likewise for our own people. It required in 1932 at least 50 per cent more commodities to be produced and sold in payment of interest and principal on public and private debts, contracted before 1929, than would have been required at the time when the debts were contracted.

This means financial exploitation of producers, here and abroad, to the extent of 50 per cent of their products, which they were now required to sell in order to pay debts and taxes in money,

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