From Socialist Worker, No. 123, 22 May 1969, pp. 2–3.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.
FOUR BILLIONS dollars thundered across the exchanges from Germany last week.
It was the fifth major international currency speculation in 18 months, the biggest since the pound was devalued.
It has already edged Germany into the hot-spot of the Western power struggle where France stood not so long ago. It has cracked the unity of the German Coalition Cabinet.
It has pushed the German workers a step nearer the next big confrontation with Old Man Capital. In Britain it means another turn of Labour’s screw.
A lot of money is geared up to go on these raids. Big firms in the US and here, unsure of getting permission to expand abroad, leave their foreign profits there – as Euro-dollars, deposited outside their own countries on short term.
Continental banks and finance houses want to cash in on the world-wide hunger for capital and on local credit-squeezes, so they make funds available to all comers – as Euro-dollars.
Traders in the West’s increasingly volatile and integrated market want more and more to keep their balances in the only uncontrolled international currency available – Euro-dollars.
By the end of 1967 there was $16 billion worth of Euro-dollars floating around. By the end of 1968, according to Stopper of the Swiss National Bank, there was $24 billion worth.
Other estimates go as high as $30 billion – or 12 times Britain’s reserves of gold and foreign currency.
It was some of this huge mass of ready money that flooded into Germany. Comparatively little has trickled back. Speculators still believe that the D-marks they bought are going to be worth a great deal more in the near future.
There’s a lot of backing for that view. As German exports eat their way into British, French and US markets, particularly into the fast-growing European one, Western pressure on Germany to raise her export prices and cheapen her imports by changing the value of the D-mark becomes heavier and more insistent.
THE SPEC FEVER CHART |
|||
|
DATE |
SYMPTOMS |
TEMPERATURE |
RESULT |
|
September–November 1967 |
Flight from Sterling |
87 billion |
Devaluation of £ and other currencies |
|
February–March 1968 |
Gold rush |
$3 billion |
Partial demonetisation of the US $ |
|
May–June 1968 |
Flight from the French franc |
$1.5 billion |
Partial inconvertibility of the Franc; |
|
November 1968 |
Rush into D-marks |
£1.8 billion |
Backdoor revaluation of the D-mark |
|
May 1969 |
Rush into D-marks |
$4 billion |
? ? ? |
Inside Germany there are forces pushing in the same direction. The Social Democrats are finding the heavy Mark a key weapon in their current electoral campaign.
To their worker-supporters it is made to represent even more jobs, more overtime (even cheaper holidays abroad this pre-election summer) at the cost of slightly higher prices.
To their middle-class voters it is proof of the party’s sturdy independence of their Christian-Democrat partners – at the cost of slightly upsetting the small business and farm lobbies.
And to their NATO allies it is a promise of greater compliance in adjusting to general Western interests than can be expected from a Kiesinger-Strauss administration.
Yet so far the German government has not budged. It has 'recycled’ a small part of the speculative funds, lending it back to the countries of origin – at interest.
It has promised to discourage further speculative raids. But it hasn’t actually done anything and above all, it hasn’t revalued the D-mark.
Nor will it unless a fat price goes with revaluation. The Christian-Democrats can’t afford to give in easily to foreign and domestic blackmail. As it is, they will have to run hard against the right-wing NPD for its place as the party of small business and national assertion.
More important in the long run, if German capital can win this tangle, it has it made to become the unchallengeable boss of Europe. French capital will need years to recover the wage rises – and the confidence – shaken out of it by last year’s general strike. British capitalism is run down and not getting healthier. The US is preoccupied.
In its own European backyard and at current prices, German capital can outsell, outbid and outinvest most of its rivals most of the time. It is unlikely to give up that advantage quickly, or easily, or cheaply.
Nobody can force it to do so. If the rest gang up against Germany by concerting a world devaluation against the D-mark and gold, there’s nothing to prevent her doing the same.
Besides it is hardly likely. They are all so terrified of any move that might affect the relative strengths of different national currencies, that it has taken them 10 years of strenuous bargaining to agree – but not ratify – the most meagre monetary reform. For them now to click into place in an operation designed to affect these relative strengths would require a miracle.
Nor can they afford to wrap controls on the Eurodollar market. They would themselves have to find the $30 billion or so it now provides for lubricating world trade, world investments – and world speculation.
There really is little they can do. if German capital keeps its cool through the next couple of months, the burden of adjustment will rest squarely on the others’ necks.
Or rather our necks. Since German capital’s advantage over its rivals is expressed in a currency ‘undervalued’ by a tenth or more, British (or French, or US) exports will have to be a tenth cheaper than they are now in order to compete. This means,more or less, that British (and French, etc) workers will have to be made to earn a tenth less in real terms than their German counterparts. It’s a long way to fall.
And it could be only the beginning. For one of the consequences of competitive national cost-cutting of this sort is that deflation, wage freezes, legislative straitjackets and so on are exported from country to country.
And as that happens, world economic growth, international trade and their old ally, capital confidence, droop.
It hasn’t happened yet, but even before last week’s lurch it was on the cards. The best forecasts for this year – the OECD’s – envisaged a growth rate in the major countries of Western capitalism one-quarter down on last year’s (4 per cent as against 5¼).
They thought world trade would slow by a third (from a 12 per cent increase to 8 per cent). They were wrong then. But now they could turn out to be right, and if they are, all the signs will spin round to indicate competitive restraint.
Restraint – not depression. The system's economy is still functioning. At most there's a slight perforation in its gut; not all the wastes that should get out in the form of huge and stinking arms piles do get out – military expenditure has been declining slightly, both relative to total expenditure and even more in relation to society’s labour resources.
This could be a sign of hemorrhage to come; more likely it is a temporary upset, an adjustment between the massive outpourings of the past on nuclear delivery systems and the even more massive outpourings of the future on Anti-Ballistic-Missile systems.
But whichever way it goes, the purely economic prospect is beginning to look like an academic kickabout. Years of high employment and stability have loosened the system’s hold over the minds and hearts of a whole generation.
The current speculative shocks and precautionary squeezes, mild though they be, are propelling many in that generation from apathy to opposition, and some of them from mere opposition to revolutionary opposition.
Whatever happens to the economy in the future, the separation between them and us has been made. It is irreversible.
Last updated on 16 January 2021