CONTINUED FROM LAST WEEK
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.
With the introduction of money, however, and with its inherent capacity as a store of value, one man can now, in the form of money, keep indefinitely, the equivalent of even one billion times one billion pieces of yam. ‘Individuals who agree to receive payments at future dates must be assured that the value they would receive will not be less than at the time of the transaction. It is this quality of money which makes credit possible.’ In other words, the yam producer or textile manufacturer may sell now to a buyer and agree to receive payment in say six months’ time at the rate of 10 yams for 201- and 6 yards of textile for 20/-. At the expiry of six months, the yam producer or textile manufacturer will receive 20/- each for the quantity of yam or textile sold. By the arrival of the sixth month, however, the price of textile may have risen whilst that of yam may have fallen.
But there is no doubt that in spite of this defect which is not denied, money serves as a standard of deferred payment more than any other commodity does. All commodities whether primary or secondary do deteriorate with time much more than does money. Now when yams are produced at X and the consumers live at Y which is 50 miles or more from X, then some arrangement must be made to bring the yams to the consumers at Y or vice versa. In backward economies, the practice is for the producers in X to carry the yams on their heads to consumers in Y, or conversely for consumers in Y to go to X to buy the yams, all depending on-the relative strength of supply and demand, at any given time.
In developed economies, however, where division of labour is very close to its best, it is the merchant, the middleman, and other ancillary services who see to it that the yams are brought from the producers as close as possible to the consumers. The procedure is that the middleman buys from the producers and, with the assistance of the transporters, brings the yams to a point – a market-place or a retail shop -where the consumers can conveniently go and buy them without travelling more than a few yards or, at the very most, a couple of miles. There are many instances in fact where the middleman brings the yams to the very door of the consumer.
Again, the manufacture of textile may be done at B whilst the cotton used in the manufacture is grown at A, and the manufactured products are required for consumption at A, B, C, and D. Here, as in the case of yam, it is the middleman and a host of ancillary services that intervene to ensure that raw cotton is bought at A and moved from there for delivery at B, where it is manufactured into textile, which is again moved from there as finished products and made available to consumers at A, B, C, and D.
From these illustrations, those in the distributive and transport occupations are seen openly at work. Those in the banking, insurance, clerical, legal, and other such-like ancillary occupations are not so manifest in their contributions to bringing the goods – the ‘yams or textiles – from the producers to the consumers. But they are very much there all the same. Without the credit which the banks provide, the underwriting of risks which the insurers assume, the meticulous records kept by the clerical staff, the cure of diseases by doctors, and the drawing up by lawyers of contracts and other commercial documents in correct legal forms, industry and commerce as we now know them would be impossible.
But all these merely help to mitigate the rigour of the main problem of exchange which, in essence, remains: namely, how do we determine the equity of the exchange of £1- worth of yams for £1 worth of textile, of £21 – worth of a doctor’s or a lawyer’s services for £21 – worth of yams, textile, maize, gari, or transportation? This problem is purported to be solved by the blind, impersonal, and inequitable forces generated by the constant collision between supply and demand. If supply could be precisely equated to demand, thus achieving a state of supply-demand equilibrium, something near equity would be attained. But then there are the all-important questions of elasticity and mobility.
Elasticity of demand or supply is the degree of responsiveness of demand or supply to changes in price; and mobility of factor is the ease with which such a factor can be moved from one place or one type of production to another for the satisfaction of wants. Besides, the qualities of the goods exchanged may not be equal; though each person in the transaction will protest that this is not the case, or that he has made a better concession to the other. Apart from all this, there are a number of subjective factors which cannot be openly and objectively demonstrated, such as the value which a particular individual attaches to the products of his labour.
CONTINUES NEXT WEEK
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