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E. Varga

Economics

Survey of the World Economic Situation
in the 1st Quarter of 1923

(June 1923)

From International Press Correspondence, Vol. 3 No. 41 [23], 7 June 1923, pp. 393–396.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

VI. England

“Once again, as so often during the last 4 years, the hope of rapid economic improvement has been destroyed by the problem of German reparations ... The Disappointed arose in the first week of the new year, when the conference dramatically collapsed and was followed by the French invasion of the Ruhr, whose consequences have thrown all the other events of the last quarter of a year, into the shade, though these have been many. One of the most important of these other events is the agreement between England and the United States on the terms of consolidation of the greatest international debt in history ... As regards state finance, the revenues were unexpectedly excellent, to such an extent ... that the year ended with a surplus of 100 million pounds. On the other hand ... there is no hope of any considerable fresh decrease in taxation. Between December 1922 and March 1923, the number of employed fell by 168,900, but the rate of this decrease is less favorable than was hoped for in the autumn ... Foreign trade, which, during tire autumn showed many signs of expansion, retrogressed instead of rapidly developing ... No-one can deny that the harmful effects of the Ruhr occupation are spreading more and more, riot only in British industry, but in every sphere of international intercourse ... Uncertainly, lack of confidence, inconstancy, and every psychological tendency calculated to hinder the development of production and commerce, are again at work ...

“The press, and public opinion, are full of the advantages which the Ruhr occupation has brought our coal, iron, and steel industries ... But our textile industry is feeling the effect of the enormous withdrawal of continental orders; and the lack of demand for home freights from which our shipping is now suffering, indicates a shrinkage of international trade. The new crisis in Europe has diminished the purchasing power of an important area. And producers in other countries, who are also losing their customers on the continent, are not able to buy the products of English industry to any great extent. The breach in the circle of international trade has been widened again, and this widening is bound to be felt, sooner or later, by British commerce in almost every part of the earth.”

These words of the Economist aptly characterize the situation of English economics during the last quarter of a year, and the disfavor with which English capitalists regard the fresh disturbances brought about in the world’s markets by France’s military action. It only remains for us to add a few data to this general description.
 

Unemployment

During the period covered by this report, the number of unemployed has steadily decreased, though more slowly than was hoped for; the number had decreased by 201,000 between the beginning of the year and April 6; the total number on April 6 being, 1,285,000. The percentage of unemployed is as follows:

It will be seen that the improvement is very slow. The number of unemployed is still 5 to 6 times higher than under “normal” conditions. The unemployed problem is still the central problem of English social life. It must be borne in mind that the actual number of unemployed is greater than the number stated, as large numbers of workers are on part-time. A group of bourgeois economists, including Prof. Bowley and B. Seebohm, recently published a compilation, under the title: The third winter of unemployment, in which they show their independent investigations to have brought them to the conclusion. that in the Autumn of 1922, the shortage of working possibilities was not 11.9%, as is to be inferred from the number of unemployed insured, but between 20 and 22%.

A further difficulty consists in the fact that the number of unemployed is very unequally divided among the various trades. The majority of unemployed are in the ship-building trade, machine building, and above all in the metal industry. In some of these industries there are many more unemployed than the number of the increase of workers between 1914 and 1922. And it is exceedingly characteristic of most of the English economists, that they can suggest no other solution for the unemployed problem than emigration and limitation of population, we are experiencing a renaissance of Malthusianism. It is no other individual than Keynes, at the present lime lauded by the radical bourgeois press of the whole world, who writes as follows in the re-construction number 12 of the Manchester Guardian:

“In the light of present-day science, it is impossible for me to see any practical method of materially improving the fate of the average human being which does not include a plan for the limitation of the population. If, to use Malthusian phraseology, the ravages of poverty, disease, and war are removed, they must be substituted by something else. It may prove sufficient if we render the limitation of births easy and free from danger, and if we alter our customs and conventional morals a little.”

Precisely as Malthusianism originated during a period of transition to a new state of society, during a period in which the introduction of machinery had released so much man-power that England could not support her population; precisely in the same manner there is now a revival of Malthusianism, for the present period of transition from capitalism to socialism again causes the English economists to despair of being able to solve the problem of unemployment by economic means.

It should not be forgotten that unemployment imposes heavy burdens on the English bourgeoisie. In 1922, state expenditure for unemployment doles amounted in round figures to 100 million £. This does not include poor law expenditure. A statement sent to the prime minister gives the following figures as to the increase of these burdens between 1914 and 1921:

Poor rate per 1 ton of steel produced by the firm of Bolkow Vaughan & Co.:

Total taxation, excepting income tax, for

Even if these data be some what exaggerated, it is none the less a fact that unemployment places very heavy burdens on the English bourgeoisie, and the slow improvement of English economics leaves little prospect that unemployment will return to its usual level this year. The English big industrialists addressed a communication to the minister of finance at the end of March, demanding that the income tax be reduced by a shilling in the pound for the coming fiscal year, and referring to the brilliant results of the past financial year, reported on in the general section of this report.
 

The State of the Market

As seen from the figures quoted in the introductory section, the state of the market has varied, but on the whole has improved. Among the most important branches of industry, that of coal shows the greatest improvement. The output has reached its pre-war standard, and amounts to something over 5½ million tons. There is great scarcity of coal in the southern coal district, and the works are provided with orders for some months in advance. Prices are rising rapidly.

Under these circumstances the discontentment of the English miners is easily understood, as at the present time their actual wages are much lower than before the war. As is well known, the English miners, or rather-their trade union leaders, came to an agreement with the capitalists After the failure of the betrayed miners, strike; this agreement provides that wages be adjusted quarterly to the state of business. Thus the miners have now had to look on while the capitalists are making brilliant profits, and they themselves are starving on low wages, and unemployment continues in spite of the better state of the market. This state of affairs has induced the miners during the last three months, to make various attempts to persuade the prime minister to have an investigation commission appointed for the coal industry, for the purpose of having a minimum wage decided upon. All these attempts have been opposed by the English government, but the miners have not yet resolved on any decided steps towards the improvement of 1heir wages.

Iron and steel industry has also experienced a considerable revival during this last period. The most important figures are as follows:

This improvement in the coal and iron industry is chiefly attributable to the Ruhr conflict. It is, however, not entirely due to this cause, for during the whole of 1922 a steady improvement was to be observed in these branches of industry.

Improvement is much slower in the ship-building and machine-building trades, which are so important for England. The freight markets are also showing but slight signs of improvement. But it is the cotton industry which appears to be suffering most severely; cotton spinners are working short-time, and during the second half of March the position in the cotton-weaving concerns had grown so bad that the question of short-time for the cotton weavers is also being mooted.
 

Price Movement

During the last few months prices in England have shown a tendency to rise, the rate of exchange of the pound and dollar remaining at the same time unchanged. The wholesale trade figures published by the Economist are as follows;

The course taken by cost of living does not correspond to this. The figures first calculated by the Ministry of Labor for each of these months are as follows:

Percentages above pre-war level.

While wholesale prices have been rising since December, the cost of living is alleged to have sunk.
 

Foreign Trade

Considering the great increase in the export of iron and coal, England’s foreign trade figures are lower than might have been expected. These are as follows:

Before forming a judgment on the February figures, we must take into consideration that February had 3 working days fewer than January. After allowing for this, England’s export of goods appears to have actually been as equally large in February as in January. The coal export has attained the pre-war standard again. The reduction of wages to beneath pre-war level has regained for English coal its full competitiveness in the world’s markets, to the great satisfaction of all capitalist circles in England.
 

Mighty Trade Union Struggles

The successes gained by the colliery-owners and the heavy industrial capitalists, with respect to wage reductions, now induce the other groups of English capitalists to attempt like reductions. At the present time mighty struggles are proceeding in England, and others are about to break out. The attempt being made by the master builders, to reduce wages and to extend the working week from 44 to 47 hours in summer, has led to the dismissal of 500,000 workers who have offered resistance to these measures. The movement among agricultural laborers is worthy of special attention, for it throws a bright light on the agrarian question in England. It is generally acknowledged, by all capitalist organs, that the wages of agricultural laborers are unbearably low. Thus the Times of March 19 writes:

“Whatever the terms on which an agreement is come to, the agricultural laborers of Norfolk are sure to receive wages which would be designated as miserable in any other branch of industry ... The agricultural laborers of Norfolk are quite right in their demands, but the farmers are not in a position to fulfil them.”

Innumerable instances are adduced showing that the English farmer is absolutely unable to pay even the extremely low wages customary hitherto, as the free import of agricultural produce renders agriculture in England no longer worth while. There is a tendency to convert the arable land into pasture again, and to go in for cattle-raising on a large scale. It is interesting to note that the question of ground rents is never mentioned in this discussion. Only the capitalist farmer is spoken of, and the idea that the landowners rents, could be utilized to meet the agricultural laborer’s claims is one which is never even touched upon by bourgeois publicists. The demand made by the agricultural laborers, that a minimum wage be guaranteed out of state funds, was rejected by the prime minister. In the same manner the Labor Party failed to persuade Parliament to set up a minimum wage for the whole agricultural industry. The Labor Party speaker pointed out that there are districts in England where agricultural laborers on full-time are obliged to apply for poor relief. There are districts where the agricultural laborers receive a wage of 21 to 22 shillings weekly, and in the Norfolk district, wages of less than £1 per week are being forced on the workers by dismissals. It is characteristic of the situation that the motion brought in by the Labor Party, that an investigation commission be appointed for fixing a minimum wage, was only rejected by 13 votes.

Despite the fact that all bourgeois organs recognize the justice of the agricultural laborers’ claims, still the strike in Norfolk is running the usual course: the sons and daughters of poor farmers from other parts of England, as well as some workmen, are working as blacklegs in the strike area, and the unity between tenant farmers and workers, so praised at the beginning of the movement – the organizations of employers and employed sent a joint deputation to the prime minister begging for help – is getting nearer a breach every day. The bourgeois press is already complaining about acts of violence, and is calling or police reinforcements to be sent to the strike district

*

The United States

The economics of the United States have Bhown a decided upward tendency in the period covered by this report. The causes of this boom have already been dealt with in the general section. Here we shall merely give a brief resume of some data.

The March number of the Federal Reserve Bulletin states that during the last 5 months the production of the basic industries has increased by 20%, and that the January output had already exceeded the highest point of the year 1920.

The Ruhr occupation has also greatly contributed to the boom.

“The American secretary of commerce, Hoover, declared on April 4, when speaking of the reactive effects of the Ruhr occupation in America, that up to now America’s industrial activity has been rather furthered than hindered. This he stated to be especially the case in the iron and steel industry. He, however, considered it difficult to say whether this state of affairs would last long. On the other hand, the occupation of the Ruhr is of great disadvantage to America, as America wishes to sell agricultural produce to Germany. Before the new crops come in, Germany requires two million tons of American corn. There is however danger that Germany will not be able to raise the necessary credits for the purchase. Should this occur, a fall in American corn prices is inevitable.”

With regard to the various branches of industry, those contributing most to the boom are the investment industries – building trade, railway materials, locomotives, trucks, motorcars.

Production in the iron and steel industry was as follows:

The figures regarding the unexecuted orders of the steel trust mount higher every month. These are as follows (in 1,000 tons):

It is very remarkable that since 1919, the least iron and steel were exported in the year 1922; the home markets absorbed everything! Good business has been done in railway stock; at the end of February the number of locomotives on order was 2,200.

The textile industry has also attained a record, the number of spindles working exceeding 35 millions.

The vice president of the Guarantee Trust Company, Fr. H. Sisson, writes as follows:

“The revival of business activity in the United States has greatly increased in strength and extent, this being due to developments observable since the beginning of the year. The slump generally noticeable in the months of January and February has, in many cases, not appeared at all this year or is much less accentuated than in other years. Fresh record figures of freighted railway trucks (10% more during the first ten weeks of the year than during the same period last year), greater arrears in delivery, rising prices in the iron and steel industry, activity in the industry working up cotton, such as we have not known for a long time, considerable or at least increasing activity in other industries – all this is witness to an amount of production and sales far exceeding all expectations. It must however be observed that if the rise in prices of raw materials cannot be speedily stopped, a corresponding rise in the price of finished goods must be reckoned with before long.”

In conclusion we quote the following extract from the last report issued by the Manchester Guardian Com. (5 April):

“The iron and steel works are practically working at full pressure; their production at this rate is assured for the next half year. Should the present rate of production be maintained, it will equal that of the first 9 months of 1920, the most active period ever experienced by the steel industry. The motor-car industry is working at 100% of its capacity, and cannot meet the demands. During the first two months 145,000 motor-cars more were built than during the corresponding period of last year, up to now a record year ... All industries producing raw materials – zinc, lead, copper-have exceedingly large demands to meet. The copper mines, practically at a standstill 18 months ago, are now working without limitation for the first time since the end of the war ...”

This boom in the motor-car trade is naturally attended by a large demand for rubber. This has led to sharp conflicts with the English and Dutch caoutchouc planters, who do net want to abandon their system of limited production. [1] Under these circumstances a boom in oil production and in the oil trade is a matter of course. The money market also indicates the beginning of a boom. The bank rate has been raised for the first time since the middle of 1921; the rise is from 4 to 4½%. The large amount of available money, characteristic of periods of slackness and of the earliest stages of economic improvement, has become considerably less. – Prices are rising generally; once more the bourgeoisie sees heaven opening out before It

It is of interest to note that although 1922 can be designated as a good year, as already shown in the general section, still many small undertakings were ruined.

“The American newspapers state that the year 1922 was a record year for business collapses. In no other year in the whole history of the country were there so many bankruptcies; 22,300 were registered as compared with 20,014 in 1921. Despite this, bankruptcy liabilities in 1921 exceed those of 1922 by 109 million dollars, for the total liabilities of the past year amounted only to 646,900,000 dollars, compared, with 755,700,000 in 1921.” (Ind. and Hand.-Ztg., 3 Feb.)

The gigantic gains being scooped in at present by American industry will be shared by ouly a few persons. Concentration is still proceeding.
 

Labor shortage?

The reports published by capitalist organs continually draw attention to the shortage of workers as an obstacle to the further development of the boom.

As early as the end of January the Iron Trade Review wrote as follows:

“The shortage of labor continues, and restricts output, so that some rolling mills have already reached their highest productive capacity. Negroes are being brought from the south to make up for the lacking workers.”

We read as follows in the New York Herald of 22nd Feb.:

“The country will be threatened with an economic disaster as a result of rising prices and strike of buyers, unless the immigration laws are not so modified that more workers can enter ... Senator Colt submitted a bill, authorizing the Minister of Labor, if he is convinced that there is a permanent shortage of workers in any branch of industry, to remove the present obstacles to immigration and to fill up the gap ...”

Sisson, in the above quoted article, writes as follows:

“A still greater obstacle to further ‘expansion’ of business life is furnished by the threatened shortage of labor. Amendments of the present immigration laws have been submitted to the Congress, but these are little adapted to remove the scarcity, and besides this, ignore what – at least from the standpoint of the economist (!) – is the most important factors in the selection of the different immigrants and types of immigrants; for it is impossible to make the best choice either by the proposed intelligence test of the individual immigrants, or by the present practice of admitting a certain percentage of emigrants. Above all, the reduction of the permissible number of immigrants, as desired by the trace unions in order to reduce absolutely the amount of available labor, is based on a completely false conception of the economic consequences of such a policy. An artificially induced scarcity of labor cannot be simply defended by the plea that the wages of a great number of workers are thus kept at a higher level than would be the case were there no intentional limitation of man-power offered. For this unwarrantable maintenance of high wages involves increased expense of wide-spread effect, which will have to be borne to a great extent by the recipients of wages themselves.”

Is it actually a fact that there is a shortage of labor in the United States? We scarcely believe it. It is true that a large number of industries have been obliged to raise wages, as otherwise their workers would have gone over to the building trade. Thus the steel trust – after raising wages by 20% in Sept, of last year – recently granted a further rise of 11%. There is thus – especially in heavy industry – a “labor shortage” from the standpoint of the capitalists, for these do not find the reserve industrial army large enough to obviate rises in wages, and to enable the whole excess profits of the boom to flow into the pockets of the capitalists. But it is scarcely possible to speak of a shortage putting a limit on production. The Economic News Service of the Federated Press, rejects this possibility. It draws attention to the last report issued by the Labor Office, according to which the various industries were occupied as follows:

At the same time there is a surplus of 200,000 pitmen in the coal-mines, and the railways have engaged thousands of superfluous half-trained workers as fighting troops against the organized working class.
 

How long will the boom last?

We shall end out report with the same question with which we began: how long will the isolated American boom last?

We have already pointed out that this economic prosperity is, to a considerable extent, founded on the flourishing agricultural conditions. But the crops in 1922 were considerably smaller than those of 1921, and the first reports on this year’s Crops are still less favorable. The average is as follows (100 equalling best):

The area under cultivation is also alleged to have diminished, but we possess no statistical data on this point.

The production of cotton has decreased of late years, not only in consequence of the crisis, but more as a result of the ravages of injurious insects, which the planters have not yet succeeded in exterminating.

If we further take into consideration that the outside markets are rendered less accessible than before by the weakened purchasing powers of Europe, as well as by the competition offered by Russian agricultural products now that Russia’s agriculture is regaining strength, then we cannot regard the boom as likely to be of long duration in so far as it arises from agriculture. Despite the boom, the situation of the American farmer is by no means enviable; this we pointed out in our last report, and it has been further described in detail by Prof. Tulgakov – if in a somewhat exaggerated manner. The establishment of 12 new farmers’ banks, each provided with 5 millions provided by the state, for the purpose of granting the farmers short-term credits up to 75% of the price of the products they have in stock, shows that agriculture is dependent on protection against finance capital, and does not possess the means of financing itself.

The other great factors in the present boom – the gigantic orders placed by the railways for rolling stock, the motor-car industry – will also cease to operate before long, when the demands have been met; the same applies io the building industry, already threatened by the high prices of building materials.

“Reports from many parts of the country, show that the high prices of building materials at present are proving a hindrance to building activity, and that the future of the building industry on the whole is endangered by possible further rises in prices” [2]

We not only see therefore that the general experience of the course of capitalist production renders us certain that the American boom will not last for ever – as the bourgeoisie foolishly fancies every time there is a boom – but there are also very concrete reasons for concluding that the boom will be but short. [3]

Certain sections of American opinion also calculate upon a short duration of the boom. Thus John Moody, one of the best observers of American economic life, writes as follows [4]:

“Every cautious observer must see that the coming months contain elements of uncertainty and irregularity ... Europe, Our greatest and steadiest buyer, is in the position of a commercial concern in financial difficulties. It requires reorganization ... Thus it would appear to be correct to conclude that the present American economics do not indicate a boom, and that the present revival will run down within a short time. The intelligent observer wilt predict a more or less marked falling on in business in the year 1923.”

And even the otherwise very optimistic American correspondent of the Manch. G. Commercial writes, on March 19:

“The events of each week strengthen the opinion that an industrial boom is approaching which may last for months, if not for the whole year.”

It may thus be seen that the duration of the boom is estimated to be at most till the end of the year. Should this prove correct, then the American boom will remain isolated, and Europe will never arrive at any phase of economic prosperity in this cycle. This would prove a fact of the utmost importance, not only from an economic viewpoint, but theoretically as well, and from the viewpoint of the communist movement.

*

Footnotes

1. The English and Dutch planters, about 2 years ago, concluded an international agreement for the limitation of production with the object of forcing up the disadvantageously low prices. This agreement still exists, to the detriment of the American motor-car industry.

2. The Economist, March 24.

3. The expansion of the American market to Asia and South America is proceeding. This is, however, a constant process, one whose force is absolutely inadequate to. maintain the American boom if the internal economic basis is wanting. We repeat: the exports of the United States amount to only 10%, the export into these districts is about 3 to 4% of the production, and the increase of their receptive capacity thus only a fraction of one per cent! For some individual industries the development of export is of great importance – but not for the collective economics of the United States.

4. The Economic News Service, 20 Jan. 1923.

 
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