Monday, June 4, 2007

That Price Problem

From the Western Socialist (the old name for our magazine) September 1947

Capitalist economists are more entertaining than the average radio program. They are always face to face with some profound problem that gives them a chance to fall over themselves in essaying the wrong answer. The difficulties surrounding the subject, however, in no way alter their attempts to accomplish the impossible. They assemble data and juggle statistics with a dexterity worthy of a happier conclusion.

Of late, the economists are concentrating on the problem of prices.
These, they contend, are much too high and must be lowered to a level where we can see them better. The price of labor power, in particular, has attained a status that threatens the disruption of our economy. Stratospheric wages must be scaled to an atmospheric altitude.

When prices go up the economists see black spots before their eyes that spell "inflation". When the prices come down the same experts view the silhouette of another "recession." A price movement in either an up or down direction is dangerous if not ruinous to the social system they represent. If they could only devise some sort of an economic gadget to get the prices to move sideways, then, equilibrium might be temporarily attained. But such a solution still suffers an unseemly delay.

To the socialist, versed in the economics of another school, the problem of prices does not represent this formidable appearance. To him prices are a phenomenon that can be explained through an understanding of economic laws. A knowledge of the nature of value, and value in exchange, gives us a good idea of what to expect when this exchange value is translated into terms of money, or a reasonable facsimile thereof. Next, an acquaintance of market conditions is sufficient to expose the mystery that enshrouds the gyrations of price.

While there are various angles from which light can be thrown on the price problem, the one concerning market fluctuations offers the most profitable route for gauging the spiral curves that affect what we pay for commodities in every shop and store we enter. The law of supply and demand is the medium through which a variety of economic factors express themselves. This relation of supply to demand, as well as the other way around, provides the means for seeing what makes the market tick.

It does not require anything unusual, in the way of mental acumen, to grasp the fact that when a large quantity of an article is put on sale, and the demand for the same is not very keen, the price is certain to decline. When we use the term demand, in this connection, we mean of course an effective demand. There are unquestionably large number of "displaced persons" over the land, who could make use of the article so placed. Their demand is nullified by the lack of the means to consummate the transaction. In economics this kind of demand does not count. The only kind that does count is the kind that goes into the shop with the customers, lays the cash on the counter, and walks out with the article bought and paid for.

Just as a big supply of goods thrown on a market already groaning results in reduced prices, so does the reverse – a healthy demand running headlong into a piddling supply- have a tendency to make the cash register barometer go up. The market moves through natural causes in either direction, depending upon which side of the equation exerts the most pressure.

But it must also be noted that these two complimentary factors are not without their limitations. Neither has a roving commission to wander very far from the base; nor even to remain indefinitely in a given position. In a market that is not hampered by monopolistic restrictions, the natural flow of commodities will in a way balance the effect of the two factors.

Prices may rise sharply, but such an upward movement would tend to stimulate two things – buyers' resistance and more production. Prices may fall precipitately, but capitalism could not long function with the prices of commodities below the price of production and, at the same time, the lower price level induces more customers to move in the direction of the market. The center around which the spiral circulates can now be established as the price of production of the things involved.

And this, of course, presupposes capitalism in a relatively peaceful mood, and minus the periodic attacks of economic colitis to which it is always subject. When war occurs the circulatory mechanism is thrown out of gear. Even the law of supply and demand runs wilder than usual. Millions of men, in army and navy uniforms, make poor producers but good consumers. They are taken away from the field, the shop, and the factory but they must still be supplied with the means of life. The shortage of commodities which ensues, coupled with the fact that a larger civilian population has more in the way of dollars and cents to spend, forces prices if practically everything to move upward with seven league boots.

Here we must notice something anent the price of labor power, about which the excited experts are currently perturbed. True, wages have risen in the past seven years. Did the prices of hamburgers, potatoes, shoes and overalls remain anywhere near where they were when the war started? Then, we could consider that the workers economic status ended better than it began. But there's the rub. The pace of labor power moving upward has been dreadfully slow compared to that of the other commodities the workers must assimilate in order to exude the strength, endurance, and skill associated with such a productive entity.

Even the various governmental agencies concede that there is a marked differential between the recent advances of wages and other things. When prices are soaring labor power seems to suffer from a hesitancy in ascending the heights. When prices tumble labor power assumes facility for negotiating the bottom that is almost uncanny. This diminution in the "take home" pay is not necessarily accomplished by direct amputation of the wage scale. Other factors assist in attaining the same end, one potent example of which is unemployment.
J.A. McDonald
Western Socialist (September 1947)

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