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E. Varga

Economics

Survey of the World Economic Situation
in the 4th Quarter of 1922

(February 1923)

From International Press Correspondence, Vol. 3 No. 22, 1 March 1923, pp. 170–172. [1]
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

IX. Belgium

Belgian politics and Belgian economics are so bound up with those of France, that the rate of exchange of the Belgian franc has run parallel to that of the French franc since the war; the Belgian franc is invariably a few points lower than the French. From an organizatory standpoint, the relations between the French and Belgian coal, iron and glass industries, have become very close. Economically considered, Belgium may almost be regarded as an appendage of France.

Economic conditions improved very much in Belgium last year. Unemployment decreased steadily. While in September 1921, there were 132,000 unemployed workers – 17.7% of the workers organized in trade unions – a year later, in September 1922, only 26,000 or 3.8% were out of work. Increasing numbers of Belgian workers find employment in France. According to the Matin, there were no fewer than 450,000 Belgian workers employed in France in August 1922.

Coal production has made tremendous strides of late. During the first 9 months of 1922, 16 million tons were produced as compared with 10.4 millions in the corresponding period of 1921. There is a shortage of workers in the coal mines. To this it must be observed, that the real wage of the Belgian worker is exceedingly low, the lowest in Western Europe, with the exception of the German. This gives rise to extensive emigration to France, so that wages were raised in November. Belgian coal and coke is very much in demand abroad, especially in France.

Iron production also shows great signs of improvement. The number of blast furnaces at work, increased from 17 in January to 32 in October; during the first 9 months of 1922 the output increased by 50% as compared with 1921. The state of the market is also satisfactory in the glass and china industry, and in the textile and ready made clothing industry.

The finances of the country still suffer from the consequences of the war. but financial conditions are better than in France. Prices develop parallel with those in France, like the rate of exchange. On the whole, it would appear as if Belgium’s financial position is much better than could have been expected after the long war. This is probably to be attributed to the circumstance that though Belgium was occupied, it was not actually the scene of war, so that the apparatus of actual production and the population suffered less, than in France.
 

England

Economic life in England continues to show the slow improvement which we were able to indicate in our last report. The English bourgeoisie has been tenaciously striving to bring the pound up to gold parity again, so that England may again become the central point of the financial transactions of the world. In the course of the last quarter of 1922, England has again succeeded in raising the value of the pound by some ten cents. At present the English pound is only about 5% under dollar parity, in spite of the fact that England has paid considerable sums to the United States, as interest on her American debt. The comparative rates of exchange were given in the introductory section of this report.

The improvement of the rate of exchange, and of economic conditions in general, has been achieved partly through high taxation of the propertied classes, but mostly at the expense of the working class. Wages have been pushed below the level conditioned by the high prices, and the competitive capacity of English industry on the world market somewhat restored.

This is particularly the case in one of England’s most important industries, coal production. Official reports [2] show the average weekly wage of the English pitman to have been 58% higher in October 1922 than during the first seven months of 1919.

The Ministry of Labor states the cost of living on October 1 to be 78% above that of July 1919, and on November 1, 80% higher.

“It is thus clear” writes the capitalist periodical: “that the present wages of the miners are considerably lower than in 1914, and it must not be forgotten that the average wage gives no real idea of the conditions obtaining in districts with lower wages.”

The complete defeat of the English miners becomes even more evident when we learn that, despite these wage reductions, the output has greatly increased. Before the great strike, 1,200,000 workers produced only 4.25 million tons weekly. After the breakdown of the strike, the output increased steadily. The weekly output figures are as follows:

And yet the number of miners has dropped from 1,200,000 before the strike to 1,114,695. The weekly output has already surpassed the pre-war figure; it has however been calculated that with English industrial undertakings running full speed, England needs 5 million tons of coal.

The business revival in the iron industry is far behind that of the coal industry. The slump in shipbuilding and building are responsible for this.

The figures for November are the highest since 1921. But still, only 57% of the average production has been reached in iron, 94 in steel, and only 50% of the present producing capacity of the country.

On the other hand, export of iron and steel, as well as of coal, has greatly increased during recent months, reaching the maximum of 372,000 tons in November; even in the most favorable year, 1920, there was no month in which exports attained such a height. To this the Economist makes the cool observation [2]:

“These figures show what great profits foreign trade has drawn from the great sacrifices in wages accepted by the workers of these industries. These two industries (coal and iron) have taken the lead in the painful process of returning to an economic basis. They are now beginning to reap the harvest. It is a pity that many of the other industries are so slow in following their example.”

In the textile industry the employers are also endeavoring to reduce wages. At a dinner given by the cotton industrial magnates, in Manchester, the vice-president declared it to be “cheaper to send the unfinished cotton web to Germany to be bleached, printed, and dyed, and then brought back again, than to have it finished in Lancashire”. Hence the offensive against wages.

Thus we observe, in every sphere of industrial economics, a generally successful endeavor on the part of the capitalists to reduce the wages of the workers below the pre-war level, the reason adduced being the necessity of rendering England capable to compete on the world markets.
 

Unemployment

Have the English workers at least created opportunities for work by their “readiness for self-sacrifice”?

Not at all!

The official data on unemployment are as follows:

The round number of unemployed has fallen from 1,900,000 at the beginning of the year to 1,400,000 at the end.

It must not be forgotten, however, that every worker struck from the list of dole recipients has not obtained work. Many are struck off, although still out of work, because they have lost the right to the dole. The great significance of this may be judged from the fact that the recipients of poor relief have increased in proportion as the decrease of the official number of unemployed [3], and have reached an hitherto unknown number:

A report issued by our English brother party observes, that poor relief is given only to those entirely without means of subsistence; on the other hand there are many districts in England where the workers rather sell their houses and furniture than “come on the parish”. Poor relief thus signifies absolute lack of any means of existence. And in the year 1922, about 5% of the population of England and Wales were such absolute paupers. Truly the English proletariat has enjoyed but little benefit up to now from the improvement in England’s economic situation.
 

The price movement

During the last quarter of 1922, the price movement was very steady. The index figures were as follows:

The fluctuation in the wholesale trade index did not amount to more than 3 to 4% in the course of the year. The increase of prices on the world market found its counterpart in the improvement in the rate of exchange of the pound.
 

Foreign trade

Foreign trade improved during the past year. The main figures are:

The data for the first eleven months of English foreign trade, as compared with 1921, are as follows:

The average monthly import surplus is 13 million pounds sterling as compared with 11 millions in 1913. It appears that the excess of imports is well covered by the “invisible export”, shipping freights, bankers’ and middlemen’s profits. Hence also the rise in the rate of exchange of the pound.
 

Economic policy

In the general section, we dealt in detail, with England’s attitude in the reparations question. Apart from this question, that of the debt owed to America has mainly occupied the economic crisis in England.

The unfavorable impression made by Balfour’s note in America, has been fairly neutralized during the period covered by this report. Firstly by McKenna’s speech at the conference of American bankers, then by the journey of the English minister of finance, Baldwin, to America. Both repeatedly emphasized England’s willingness to pay her American debt “to the last penny”. And as these two Anglo-Saxon powers have also effected a closer rapprochement in foreign politics, the negotiations on the postponement of payment of England’s debt to America were carried out in the most accommodating manner.
 

United States

At the present time the United States occupy such a prominent position in world economics that we were obliged to deal, in the general section, with the politico-economic currents in the United States, as those are decisive for Europe’s political economy. We shall therefore confine ourselves here to sketching the inner process of American economics.

All American reports are unanimous in declaring the state of the market to have been satisfactory during the last quarter of 1922. “Industry is active in general, practically all working powers are being employed, and the wages are rising to a high level”, this is approximately the report of the National City Bank for October. Almost every branch of industry: iron and steel, motor-cars, textiles, and the building industry, attained their best productive output of the year in November. We bring here only the most important figures:

These figures give some idea of the development of the market.

There is, however, no other country in the world where the economic statistics are so carefully kept as in the United States; no country where there is such a constant endeavor to improve these methods. It may be said that the bourgeoisie of the United States is striving to escape the consequences of capitalist anarchy by means of the most careful possible observation and registration of the economic facts.

The Federal Reserve Board recently attempted to create a collective index figure for estimating the economic situation. The most important branches of industry were estimated with regard to their significance for the collective economics: the production for the year 1919, of the article in question, was taken as “standard” and set at 100, etc. In this manner a single figure was obtained as the index designating the economic position!

It is not without interest to note the “importance” attached to the various branches of industry, as it permits of au excellent insight into the structure of American economics as a whole. The importance of any branch of industry was determined by: 1. The newly produced value created by the branch of production in question in the course of the year. 2. The number of workers employed. The “importance” ascribed to the different branches of industry was determined as follows:

• Iron and steel 24, textiles 22, foodstuffs 11.5, wood 11, coal 9, metals 5, leather 4.5, cement 3, petroleum 3, tobacco 2.

The development of the year 1922, expressed in this collective index figure, is as follows:

• January 89.6, February 91, March 95.2, April 85.5, May 92.3, June 94.4, July 94.7, August 93.6, September 100.3, October 107.

Unfortunately the data for the last two months are still lacking. These figures are worked out on a complicated method – which we cannot give here – so that the effect of seasonal influence is excluded. [4]

The table shows the rising tendency of the collective economics of the Union, but shows, at the same time, that the full capacity is by no means utilized. Production maintains the approximate output of 1919; this was however 3% lower than that of 1913. This means that, the whole increase of productive capacity during the last decade, 1913 to 1922, still remains unutilized. As a matter of fact the production of the steel trust is estimated at about 75 to 80% of its capacity. But in comparison with die year 1921, the situation is favorable, and what is more important, shows a tendency to further improvement.

The full development of the favorable conditions was hindered in the autumn by the effects of the miners’ and railwaymen’s strike.

The main cause of the improved economic situation may be found in the improved agricultural situation. The total value of agricultural produce this year, exceeded that of the year 1921 by 1,873 million dollars.

The higher proceeds of cattle raising are not included in this. This favorable figure signifies a considerable increase in the buying power of the farmer. The great difference in prices between industrial and agricultural products, has been diminished by an increase of prices on agricultural products. But the disproportion in prices has not been eliminated, and the farmer does not lie on a bed of roses. This unsatisfactory position of the farmer, and the confused state of affairs in European economics, render it a matter of great uncertainty whether improvement will continue in America. We have already dealt with both factors in the general section.
 

Foreign trade and foreign loans

The foreign trade of the United States has been much influenced during recent months by the new tariff, so that no reliable conclusions can be drawn from the figures. Expressed in millions of dollars, the figures are as follows:

The excess of exports over imports is covered increasingly by capital export. During the last four years the United States invested the following amounts in foreign loans:

To this must be added the purchase of shares in foreign undertakings, purchase of houses, estates, etc.

We thus see how the United States has evolved into the pure type of a highly capitalist country. High protective duties for the security of the home market, the highest possible concentration of industry in monopoly associations, capital export on a large scale. (Two features out of keeping with the whole: the favorable trade and the export of foodstuffs, are of a temporary nature; they will disappear – should the equilibrium of capitalist world economics be restored). The political consequences are inevitable: extension of colonial possessions, militarism, imperialism. American pacifism is a dead ideology, corresponding to the economic conditions of pre-war times, but not to those of today.
 

The other non-European countries

As our report has already become longer than was intended, we shall confine ourselves to outlining only the most essential economic features of the non-European countries.

1. Owing to the rise in prices for agricultural products – corn, meat, cotton, wool, rubber, coffee – the situation of countries producing raw materials has much improved during the last six months. The industries producing half-manufactured goods, wood, paper and unrefined sugar, are also improving.
    
2. The severe competition on the part of European industries renders the position of industries manufacturing finished articles very difficult. As a general rule we may say that the more a country is industrialized – with the exception of the United States – the more critical is its economic situation.
    
3. Despite this fact industrialization continues, above all in China, India, and South America.
    
4. The employment of American capital, for state loans and immediate investments, increases steadily, especially in Canada and South America. Not only the United States, but also England, has recently taken to investing a great deal of capital outside of Europe
    
5. There is a great demand for new immigrants in the English settlement colonies and in South America.
    
6. The centre of gravity of the worlds economics moves further and further from Europe!

* * *

Footnotes

1. This is the 9th and last section of comrade Varga’s quarterly economic report.

2. See Economist, 16 December 1922.

3. During the past year, poor relief reached the highest point known in the social history of the country. (The Times of December 23, 1922.) – The figures relate to England and Wales only, not to Scotland and Ireland.

4. We must emphasize that this economic index figure applies to industrial production only, and not to agriculture. The 11.5 pointe relating to “foodstuffs” comprise: mills, sugar production, and slaughter houses!

 
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