CAPITALISM

reached this point in any of the major capitalist countries, but it is a distinct possibility. A small shock could dislodge the pebbles which bring down the avalanche.

The 20th century is already rich in examples of runaway inflation. In the German inflation of the 1y2Us the printing presses aL -worked overtime to turn out notes which rapidly became worth no more than the paper they were printed on. Notes tor millions of marks were sold the London streets as curiosities for a few pennies - and at a Even the steady inflation which has been going on without serious interruption for 30 years causes serious problems. It is these cumulative effects, together with the tendency for prices to rise faster than before, which presents an immediate threat to the stability of the major currencies.

The extent of the inflation in some of the main industrial countries is illustrated by the accompanying table. This shows how money has depreciated in terms of the goods and services which a given unit can buy in the country concerned.

Taking the value of each currency as 100 in 1959 the table shows what it was worth in 1964 and 1969 and the annual rate of depreciation from 19591969, from 1968-1969 and from 1969-1970.

As will be seen, the rate has tended to rise. It is expected that depreciation will be higher than ever in the present year-at least 5 per cent and I in some cases over 10 per cent.

Depreciation of 1964 pound, UK 87 dollar, US 94 franc, France 82 mark, W. Germany 89 lira, Italy 80 kroner, Sweden 84 (Based on data in Monthly Ecc bank, New Yorl -While economists and commentators agreé that inflation is pernicious and, indeed, if it gets out of hand, can threaten the whole capitalist order with collapse, there is little agreement about its sources and even less about how to stop it.

It is, however, widely recognized that any application of the brakes is likely to precipitate a major crisis, that is to say, Slump with unemployment on the scale of the 1930s.

'Experts' are prone to say that governments will not contemplate measures which would cause a widespread depression. Thus a recent report of the Organization Help the Young Socialists make 1 make their for Economic Co-operation and Development wrote: 'No country today is likely to be prepared deliberately to provoke a severe bating inflation,, means of recession as a comThe trouble is, that when the whole monetary set-up is as precariously balanced as it is today, a severe shock may literally destroy confidence in the money and bring on a depression without being •prepared deliberately'.

Since that report was written, the press has released details of another OECD report which speaks still more urgently of the dangers of inflation, pointing, in particular, to the situation Britain.

Times reported in the Financial (November 9), it says 'countries should be prepared to accept a larger margin of unemployment or unused capacity than they have in the past to prevent inflation from accelerating'.

Recession

The paper adds, 'OECD experts clearly feel that the inflationary problem is now so severe that no possible weapon can be neglected'. It points to temporary wage and price controls as a possible check.

In other words, the experts who a few months ago said no government would be brepared noney: 1959=100 annual rate of depreciation 1969 1959-69 1968-69 1969-70 71 3.4 5.1 5.3 79 2.2 5.1 5.7 69 3.7 5.7 5.4 78 2.4 2.6 3.6 70 3.6 2.5 3.7 69 3.7 2.6 5.8 nomic Letter. First National City i, September 1970)

to provoke recession to combat inflation now say any weapon must be used - including and especially the creation of a pool of unemployed.

What they mean is: make the working class pay for the capitalists' inability to manage their own monetary system.

The alternative is hinted at in gloomy tones, but seldom spelled out.

The Belgian economist, F.

Baudhuin, expressed his fears as follows:

'We believe that the crisis could begin with an avalanche of confidence in A section of the massive crowd which gathered in Hyde Park on February 5, 1933, to protest against mounting unemployment.

15 % and immediate future of the United States. It would result in an uncontrolled depreciation of the dollar, 'bringing with it that of other currencies. The European markets are not capable of supporting speculative American (stock market) prices.' Of course, this is not the only way in which the blow up could come. In the meantime continued inflation builds up tremendous The OECD report quoted above, published a few months ago, continued by saying:

"The danger of a resumption of inflation on the present scale as, or soon after, normal growth rates are resumed is an equally unacceptable prospect. Apart from the social iniquities it creates, there is an endemic risk that, in practice, renewed inflation would turn out to accelerating inflation, which INFLATION newly-printed money was being pumped into circulation. There is no need to look further to discover the source of the inflation.

Inflation meant, therefore, a rising volume of government borrowing. The debt economy became rampant. Business borrowed on an increasing scale. Consumer credit was expanded enormously to make it possible to find a market for the growing volume of commodities being produced.

A whole pyramiding of credit came into existence on the basis of continuously rising prices.

As prices went up so did profits, often only paper profits which were a result of speculation and the discounting of future returns which might never materialize.

To overcome one contradiction - overproduction and slump -world capitalism plunged into another - inflationary price rises and permanent international monetary instability.

The only way to correct inflation was to hold prices down. That meant cutting back the money supply, raising interest rates and curtailing credit.

But, although mild efforts have been made in most countries along these lines, the cure has turned out to be worse than the disease.

On the one side it tips the economy into a recession and opens up the fear of a return to the 1930s. On the other it brings the state into conflict with the working class which has to bear the brunt of deflation in the shape of wage freeze, unemployment and cuts in social services.

Working-class strength has therefore made continued high government expenditure and inflation seem the lesser evil. To deal with inflation requires a serious confrontation with the working class.

But, at the same time, both inflation and its opposite aggravate conflict between the ruling class and the working class and have serious repercussions for the different sectiohs of the middle class.

If inflation represents one form which the contradictions of capitalism express themselves, the attempts to suppress it only bring others into play.

There is no way of escape for capitalism which makes it possible to combine stable prices with expansion.

There is no way of harmonizing the divergent national interests of the rival capitalist classes which express themselves in konflicts between their currencies as well as in trade wars.

Continuous rising prices, or depreciation of the money, have different effects on different classes and sections of classes. On the whole the big monopolies stand to gain. They are able to pass on increases in costs to the consumer and are able to pay off long-term loans in a depreciated money.

Worst hit

Worst hit are those on fixed incomes, or incomes which rise only sluggishly in the face of rising prices. Pensioners are the main sufferers.. But all those members of the middle class who have bank deposits or fixed interest savings see part of their savings amputated as prices go up and the spending power of money falls.

Inflation tends to shift income to the big monopolies and those who benefit from them. Big fortunes are to be made in speculation in land and share prices. A general concentration of property takes place.

Inflation is favourable for those who are buying and selling on a large scale.

Inflation • subsidizes the rich and hits the poor.

As long as it can be kept under control, therefore, capitalist governments have come to accept inflation as necessary. What they fear is that it should get out of hand and swallow them up.

All the signs are that the present inflation is reaching danger point. In any case, for some years now, as experience in Britain shows most clearly, it is possible to have inflation together with stagnation in production and unemployment.

The US recession has not stopped inflation. The prospect of slump plus inflation now becomes a possibility; measures to tackle SUNDAY, FEBRUAR inflation may not only fail, they may also precipitate a crisis of overproduction.

Such measures, carried out within a certain relationship of forces, cannot be relied on. Wages policy of the old type has broken down in most countries and especially in Britain. Workers are no longer so ready to accept productivity deals now that they can see the strings attached.

Moreover, in the face of inflation it is difficult to find arguments against wage increases, as the Scamp award to the council men showed.

The strength of the working class remains unbroken and stands in the way of a return to 'controlled inflation'.

Capitalist propaganda continues • to blame wage demands for rising prices when it is patently clear that the inflationary process originates in government spending.

Workers are attacked for trying to defend their standard of living. But behind this attack is a determined attempt to shift the relationship of forces favour of the capitalists. This means dealing with the working class as a class by destroying the organizations which enable it to resist inflationary cuts in its standards.

Hypocritical®

The capitalist struggle against inflation, which is hypocritical in the extreme, is directed against the working class.

The argument about wage increases causing inflation hollow. Wages have historically followed, not led, the inflationary spiral.

If firms which are obliged to grant wage increases put up prices, this is to maintain their profit rate. If a percentage mark up is used the employers' gain is greater than that of the workers. But this can only apply where there is an element of monopoly.

The monopolies are always quick to pass on any increase in costs. The big problem arises when goods have to be sold on the world market in competition with foreign producers.

Here inflation at home is a big disadvantage, it means rising 14, 1971. 11 a.m.

Young Socialists and All Trades Unions Alliance GREAT NATIONAL RALLY AGAINST TORYISM ATE GERMAN INFLATION 1920:

A housewife stages a solitary protest. Her month's wages stuck to her clothes was barely enough 1o buy half a loaf of bread. costs and, unless prices can be put up, a fall in profit margins.

But if prices are put up too much customers will turn to cheaper suppliers and orders will be lost. If this happens on any scale exports will fall.

At the same time raising money incomes will make imported goods appear cheaper in Britain so that imports will rise. The consequence of an inflation which gets out of line with that in other countries is a balance of payments crisis.

This means a run on sterling, another devaluation, a severe shock to the international monetary system, speculation against the dollar and the avalanche feared by the Belgian economist quoted earlier.

All sorts of fears are in the minds of those who write in the capitalist press about inflation although they may not always express them. Anthony Bambridge in 'The Observer', , November 8, is typical in calling attenment must get tough with the working class and quickly.

The anxiety about inflation conceals fears about the strength of the working class which the partial victory of the council men and the determination of the miners have highlighted. The ruling class in Britain, with the backing of international capital, needs to change the relationship of forces to its advantage.

In fact it does not want to stop inflation, but to stop wage increases. Spokesmen the ruling class are always careful to speak about the control of inflation. Some inflation is as necessary to capitalism as a fix is to a drug addict: too much could be a killing dose.

For a generation the capitalist ruling class have accepted that measure of inflation needed to maintain profitability, avert slump and promote class harmony.

It is when inflation gets out of hand and threatens to undermine confidence in money and provoke a social crisis that the capitalists get seriously worried.

Bourgeois economists are not only confused about the cause of the long-term inflationary process, but they have come up with no sure-fire remedy to bring it under Governments faced with such