Review: “The Transition From War to Peace” (Pigou)
THE TRANSITION FROM WAR TO PEACE By A. G Pigou. (Oxford University Press, 6d.)
We have received the above for review. Professor Pigou deals almost solely with the post-war problem of the difficulty in finding employment for large masses of workers, who will find themselves out of a job when peace arrives. In various parts of the pamphlet he records accurately the facts and figures of the labour market after the last war, and on page 6 says:—
“The transition from war to peace, throwing as it must do, vast numbers of men and women out of direct and indirect forms of war work, is bound to create, as it did create in 1919, an assembly of persons, less vast indeed, but nevertheless large, for the moment deprived of employment and anxiously seeking after it in one or another civilian occupation.”
With regard to the immediate post-war situation, he remarks that “a vast process of re-stocking will be called for.” During this time—six months or so after the war, he estimates—it is probable that the problems will arise in the transfer of workers from one job to another and not in the actual finding of work.
He makes an important point with regard to this “period of transfer and adjustment” on page 9 when he says:-—
“With the large number of persons that must be then suddenly thrown on the labour market, there is a risk that wage earners, at all events in some occupations, will find themselves at a disadvantage in bargaining and so may be forced to accept large reductions in. rates of pay.”
To obviate this after the last war the Government passed Temporary Wage Regulation Acts in 1918 which were extended to 1920. He mentions that it would be sound policy for the Government to do this again after the present war—presumably for the same purpose of preventing unrest amongst the workers who come back from the battle fronts eagerly searching for the “Four Freedoms” or signs of the already moribund “Atlantic Charter.”
Manifesting in no uncertain fashion the character of post-war “reconstruction/’ the pamphlet continues (page 11) :
“The transition is bound to be a long drawn out affair, of which the first year or so of peace constitutes only the initial phase . . . Thus we should expect a second phase following the first—a phase of relatively contracted demand, in which a number of would-be workers may well find themselves without a job—a delayed post-war depression linked with and partly caused by the high activity of immediate post-war days.”
Here again he draws upon the history of the period following 1918 depicting clearly the catastrophic nature of the slump of 1920 and the years following, when prices came tumbling down, and wages following after.
Pigou (who, by the way, is a Professor of Political Economy at Cambridge) states, however, that “it is not inevitable that at the end of the present war these events should repeat themselves.” He says : “The moral of this history is fairly plain. After the war of 1914-18 money got out of hand.” (Page 17.) This is his explanation of the economic phenomena of slump and boom—his solution being that if money is kept in hand by the retention of certain war-time controls these things will not occur.
But the fact that slumps and booms can be controlled or abolished by controlling the movements of money is given the lie by Professor Pigou himself on page 15, where he points out that this boom broke in 1920, not as “a consequence of deflation by the banks, in the sense of a contraction of the quantity of money in existence.”
“It was a consequence of the decisions by business men not to use their money.” (Pigou’s emphasis.)
Why didn’t the capitalists wish to use their money and keep production going? Or, to put the question another way, why from 1918-20 did the capitalists want to use their money to the greatest possible extent, but not afterwards? Obviously we must seek the solution not in the movements of money but in the factors that cause capitalists at one period to wish to use their money in production, and at some other period not to do so. In other words, we must have recourse to the motive of capitalists in engaging in production. Knowing that, under capitalism, goods are produced with the intention of their being sold at a profit, it is easily seen that when the prospects of profit are great the capitalist will jump in on production and when the prospects of profit are very doubtful he will jump out again.
Applying this to the situation in 1918 it is clear that the capitalists fell over themselves to get in first during the “re-stocking” period when demand exceeded supply, prices were high and profits good. As soon as the markets by about 1920 had readjusted themselves (by means of the “healthy competition of private enterprise”) and the normal chaos of capitalist production had its effect, numerous industries were faced with declining demand for their products. Prices slumped, and the prospects of profit disappeared. Then the capitalists were forced to think more than twice about putting their money into further production.
This pamphlet, like others in the series of “Oxford Pamphlets on Home Affairs,” offers a good deal of sound factual information, but fails to offer a correct explanation or adequate solution of the problem with which it deals.
So long as capitalism exists with its private ownership of the means of production and its scramble for markets, so long will exist the economic phenomena of crises and booms, together with all the other problems which face the working-class, such as poverty, mass unemployment and wars.
No! The solution does not lie in the control of movements of money, but in the abolition of a system of society based on private ownership with its consequent need of money and the establishment of a system of society based on the common ownership of the means of wealth production where the need for money will disappear.
N. S.