The People’s Republic: The Forces At Work

CONTINUED FROM LAST WEEK

In its development, a society reaches a stage when A spends all his life producing what he does not want for himself but what B wants; and vice versa. If this is always the case, then exchange is simple, provided that what A produces is precisely equal to what B produces in value. But exchange between one man and another is now far from being as simple as this. We have now reached a stage in our development when A, who works as a clerk for B, who is a lawyer, wants the things which are produced by C, D, E, F, and G, who live in Nigeria and by H, I, J, K, and L who live in Britain, America, West Germany, Holland, and Japan.

On the basis of this analogy, exchange is complicated because A has no direct contact with and renders no direct service to C, D, E, F, and G of Nigeria or H,J, J, K, and L, who live in foreign countries, all of whom produce the things he wants. When A, the clerk, renders a full day’s service to his boss, the lawyer, he expects in return a full and fair value for the day’s service. In real terms, he expects to have, in return for his services, food, clothing, shelter, etc., which B being a lawyer does not produce, but which A can get from C, D, E, F, and G in Nigeria and H, I, J, K, and L in Europe, America, and Asia.

Three problems arise here:

(i) How is the full and fair value for A’s services determined?

(ii) How is it possible for A to make claims on the services of C, D, E, F, and G and H, I, J, K, and L who produce the things he wants?

(iii) How is it possible for A to make his claims on these other persons effective?

We shall deal with (i) under Distribution, but will proceed now to deal with (ii) and (iii). The two problems posed here are solved by the introduction of money and the intervention of the middleman, otherwise known as merchant or trader.

Money was primarily introduced into political economy as a medium of exchange. When A is paid, say, £20 at the end of the month by his employer, the legal practitioner B, the money he receives amounts simply to a certificate, approved and endorsed by society at large, to the effect that A has rendered to society services to the value of £20, and that anyone from whom he has received goods or services to the tune of £20 or less should accept in exchange the amount of £20 or any permissible and adequate fraction of it. Armed with this certificate, A can go out to the producers offood, clothing, shelter, etc., in Nigeria to get what he wants. In order to get what he wants from Britain, U.S.A., Japan, etc., all he has to do is to get the equivalents of the currencies of those countries in exchange for Nigerian currency, and then use those foreign currencies which have the same potency as Nigerian money to get what he wants from the said foreign countries. Money does more than this.

Apart from being a medium of exchange, it is also:

(i) a measure of value;

(ii) a store of value; and

(iii) a standard of deferred payment.

We shall, briefly, describe and evaluate these three characteristics of money before we proceed to the next topic. A piece of yam cannot be related to 6 yards of textile unless we relate both to money. As soon as we know that a piece of yam is 2/ – whilst 6 yards of textile is 20/-, then we are able to compare the value of a piece of yam with that of 6 yards of textile: the one being 1/ 10th of the other. Without the intervention of money, it is not easy to make this accurate comparison.

If you want 6 yards of textile, therefore, and you are a producer of yam, you know exactly what to do. You must sell 10 pieces of yam in order to satisfy your wants in regard to 6 yards of textile. Money is, therefore, a measure of value and a unit of account. The relative measure of value as between a piece of yam and 6 yards of textile is completely determined by the price mechanism with which we shall deal later. This mechanism does not concern itself with equity or fairness as to what is paid to the yam producer and the textile manufacturer. Indeed, this mechanism is so impersonal in its operations that it does not take any notice of the interests of those participating in consumption, production, and exchange.

If a piece of yam is kept for more than a few months, it will deteriorate so much that it will not be worth anything at all, not even as much as a farthing. So that if a man has 10 pieces of yam now, and wants 6 yards of textile in six months’ time, what he does is to sell the yams now for 201- which he can then keep in a bank, or in some other safe place. This 20/- will keep indefinitely, whilst the 10 pieces of yam will perish long before six months are out. To this extent then, money is a store of value. But this is about all that can be said for money in this particular role.

There is no guarantee that 20/- today will buy 6 yards of textile in six months’ time. The price of the latter may have risen to say 21/- or more in the meantime, while that of yam may have fallen to 19/9d. for 10 pieces. In spite of this defect, however, it must be admitted that money still serves as the only dependable store of value. For, as we have noted, while IO pieces of yam will deteriorate and even perish in a few months, and therefore be of little or no value at all, that quantity of yam sold now will be worth 20/- in hand in six months time; so that with the rise in the price of textile by 1/- on 6 yards, the yam producer is much better off than he would have been if, without the intervention of money, he had kept his 10 pieces of yam for all that period.

At this juncture, one significant point is worth stressing, as we shall have cause to refer to it later in another important context. As a store of value, money has helped to fan man’s greed and to inflame his propensity to cheat and to accumulate wealth and capital. Before the invention of money, a man would only take as much yam as he required for his immediate need in exchange for his own goods. The propensity to cheat in barter transactions was very limited. For if one man tricked the other fellow into giving him more yams than he required for immediate consumption, he would only be acquiring goods that he did not need and which would in any case perish before long.

CONTINUES NEXT WEEK

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