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Two Systems: Inflation Vs. Stability

By VVAW

VVAW/WSO has been saying that the system of imperialism, because it is based on the insatiable drive for profits for the rich few, can never meet the needs of the people, and that this system will be in one crisis after another. The current crisis that the US is undergoing firmly demonstrates that this view is right. The inevitable had to happen: overproduction and inflation dovetailing into a recession has put the crunch on.

Once again, the system of imperialism presents the American people with bitter contradictions--a great picture of real abundance on the one hand, with commodities of every kind and description locked away in warehouses; while, on the other hand, masses of able-bodied men and women, laid-off from their jobs, are shoved down into poverty, going from unemployment to welfare to charity. Cities across the country are reporting a sharp increase in applicants for welfare, food stamps and other relief as the unemployment rolls mount and benefits are exhausted. Lines outside welfare and food stamp offices are stretching for many blocks, and hundreds are being turned away for lack of office staff to handle them. Even charity organizations are reporting huge lines at their soup kitchens.

How large is this glut of unsold production? The auto industry, open of the basis industries of the country, paints a graphic picture of abundance versus sales. Time magazine published a photo of the vast Michigan State Fairgrounds that showed it carpeted from fence to fence with unsold automobiles from 1974 lines. Production had been running at over 8 million units per year up until the massive layoffs started, and now it is down to 5.4 million units. That leaves a surplus of 3 million cars that nobody can afford to buy.

The whole OF industry is in a similar state. Business Week, a major voice for corporate interests, in its November survey of consumer demand, noted that the demand is shrinking, not growing. Good are not moving off the retail shelves (being priced out of reach); retailers slow down orders to wholesalers; wholesalers cease ordering from manufacturers; and manufacturers stop buying materials, parts and machinery from each other. At the same time, industry has overproduced in an effort to cash in on high prices. The US has the productive power to feed, clothe, and house the entire population of the US, with jobs for everyone, while still leaving a surplus, but is incapable of doing it while rune for the profits of the rich.

In deep contrast to the US current economic problems stands the Peoples Republic of China. This country of over 800 million people, industrially far behind the US, has had stable prices for over 25 years, while feeding, clothing, educating the entire country. The People's Republic inherited an economy rampant with inflation from the earlier Chiang Kai-shek regime--several hundred percent a year. Yet they brought this under control in a few short years and they kept prices down ever since. Any changes that have taken place, apart from some seasonal variations of some food stuffs, have been downward.

The sharpest reductions have been in the costs of medicines, the prices of which average only 20% of what they were in 1950. As part of the national policy of raising living standards in the countryside, and encouraging agricultural productions, the state has several times increased the prices it pays for farm and sidelines products (non-agricultural goods produced by commune members) and at the same time reduced the prices of such production aids as farm machinery, chemical fertilizer, pesticides and diesel oil. The prices paid by the state to the communes for cereals doubled since 1950 while retail prices have remained stable.

In the US, people are inclined (and encouraged) to view inflation as inevitable. How has China solved the problem? First and fundamentally, by socialist planning and socialist production. Output quotas and prices are set and adjusted to meet the needs of the people and of the developing economy. Both industrial and agricultural production have soared in the past quarter-century, and this growth has provided a solid material foundation for a stable currency and stable market prices.

The national budgets are balanced, with small surplus, permitting careful regulation of the amount of currency in circulation. Reflecting the peoples' confidence in its stability, bank deposits by individuals have grown tremendously. The domestic economies of many other countries are at the mercy of foreign trade, but China, while promoting trade with some 150 countries, has insulated its domestic market. Imported consumer goods are sold at prices comparable to those of Chinese-produced goods, while exports are sold at world market prices.

Even though wages and living standards are behind those in the US, China is a developing country, moving ahead to match the needs of its people. But the Chinese have what working people everywhere wish they had: assurance of the necessities of life while producing some of the not-so-necessary.

Comparing the two country's economies clearly point out the difference between a system run in the interests of the masses of people and one that leaves its people at the mercy of profit-seeking companies whose only interest is in getting richer. As long as imperialism exists, this can never change for the people of the United States.

(Thanks to China And US, a publication of the US-China Peoples Friendship Association for some of the material in this article.)