it was not. In part because, unlike the European Central Bank, the committee
are legally obliged to avoid both deflation and inflation3.
Where our proposal differs from British policy is in the goal it sets
— namely, fi xing the value of the Euro in terms of labour rather than in terms
of the cost of living index — and in advocating a democratic composition of
the Value Policy Committee which should control the ECB.
The aim would be to fi x the value of the Euro in terms of the average
number of hours of embodied labour that an hour of labour will purchase.
There exist well established techniques using national input output tables
by which the equivalence of money to labour time can be calculated. Our
colleague Stahmer explains these. If in 2009 an hour was worth roughly 30
Euros and the VPC wanted to stabilise this, they would have to adjust the
issue of Euros up or down to ensure that the exchange of embodied labour
against Euros remained constant.
Capitalist central banks try to control inflation by adjusting the interest
rate. If inflation is too high, they raise interest rates. The effect is to choke off
investment, reduce demand, and so reduce inflationary pressures. If interest
is banned, how is the price level to be regulated ? or, in the light of what we
said earlier how would the Value Policy Committee ensure that the value of
the Euro in terms of labour was held steady?
An alternative control mechanism would be to adjust the overall volume
of loans and/or the maximum term for which loans are made. The state bank
could set volume targets and maximum durations for loans. For example, if
the Value Policy Committee thought the value of the currency was in danger
of falling it could limit the availability of loans or shorten the period for which
loans could be had. If loan periods were reduced from 10 year to 5 years, then
monthly repayments rise, just as happens with interest rate rises today.
Another means of regulating prices is tax policy. Paper money, like the
Euro, is inherently worthless, just printed paper. It has value imputed to it,
from the fact that the state (or a confederation of states) will accept its own
currency for tax debts. The fact that people need money to pay their taxes,
forces them to value it. If governments tax less than they spend, the money
stock will rise leading to inflation. The second way to regulate prices during
the transition to socialism is thus to fine tune tax levels.
3
8
We would not fully endorse these objectives. In particu