come distribution. If settles prices, and therewith incomes, in accordance with Supply and Demand where there is free competition, and in accordance with Power where there is organization. Free competition can be effective only in markets with a large number of small producers, in which no one has any real bargaining strength. As a Big Power system actually exists alongside the Free Competition system, the latter's incomes tend to lag behind, no matter h9w essential its services may be for society, including the Big Power System. Not surprisingly, the people trapped in the Free Competition system gradually grow wise to the brutal truth that they, too, can acquire power through organization, and that they must do so if they want a fair deal. As they get themselves organized, often very much against their normal inclinations, those who in fact provide essential services discover their essentiality and therewith their bargaining power. The services of the dustmen of a famous city, for instance, were found to be so essential that society was forced to grant them an income marginally higher than that of the senior lecturers at a nearby university. The lecturers complained, but the dustmen remained unmoved. "If you do not like it," they said, "come and join us." The case of the oil exporting countries is another telling example. Until fairly recently, these countries counted for nothing in the world. Immensely rich and powerful international oil companies controlled the world's oil business with virtually no regard to the economic interests of the producer countries, which finally saw no other way of defending themselves but by setting up the Organization of the Petroleum Exporting Countries (OPEC). OPEC's first Secretary General, Dr. Fuad Rouhani, referred to this in a speech delivered on July 1st, 1963, as follows: "There is a Persian proverb which says that if God so wills good will come out of evil. That is not a bad adage to apply to the birth of our Organization.... What was the evil source from which it sprang? It was the exercise by the oil companies of a unilateral ability to modify, without consultation with the producing countries, the posted prices of oil. In 1960 they modified these prices downwards for the second time in two years, thereby seriously cutting the per-unit revenues earned by those countries from their exports ... (At the same time) the prices of manufactured goods which our countries have to buy from the industrialized countries continue to increase year after year." There was never any lack of voices among the rich and powerful deploring the poverty of raw material producers in the Third World. President J. F. Kennedy said in June, 1963, in the course of his visit to Germany: "We can't help to be concerned by the fact that the price of raw materials of the underdeveloped world steadily declined relative to the price of manufactured goods, and therefore the economic position in some ways is worse in spite of all the aid we've given." But presidential concern failed to alter the situation. It took the oil exporting countries (and others) another ten years to become fully conscious of the essentiality of their role in the world economy and therewith of their power. The share of the cake When substantial groups of producers, who had previously been considered powerless-so considered by themselves as well as by their customers-discover and use their bargaining power, they put up the prices they charge for their goods and services solely and simply in order to obtain a bigger "share of the cake." It is, technically speaking, perfectly correct to say that the resultant rise in prices, called inflation, is due to their action. From their own point of view, however, whether they Nov 197 5 RAIN Page 15 (Courtesy E. F. Schumacher and Satish Kumar, editor, Resurgence. Subscriptions are $7 .00 U.S. surface mail, $10 airmail, from Resurgence, 275 Kings Road, Kingston, Surrey, U.K.) be dustmen or OPEC, the cause of inflation is something quite different: it is the ruthless determination of othe.rs to defend their own incomes by passing on higher costs and insisting on the maintenance of previously established relativities. Obviously, no substantial group can obtain a bigger "share of the cake" if the rest refuse to be content with a smaller "share of the cake." The rich (to use a convenient shorthand expression) have always been reluctant to acknowledge that bargaining power is the principal factor in the determination of income distribution, that people without the power have to be content with small incomes and people with a lot of power can hold out for high incomes. When power relativities change, it follows, as night follows day, that income relativities will change. The resistance against change in income relativities can take a variety of forms-the substitution of military or police power, to make up for the loss of economic power, or the escape into the cloud-cuckooland of inflation where increased money incomes are promptly eroded by increased prices. The latter is a process which will go on and on until a sufficiently large num- • her of people without effective bargaining power have "gone to the wall," and new income relativities, in line with the new power relativities, have thereby been established. There are many people who seem to believe that inflation is a monetary phenomenon and can be cured by various restrictive measures with regard to the supply of money and credit, for instance by the raising of interest rates. This, of course, is an extremely agreeable view for people whose income stems from the lending out of money, as they can feel that by enlarging their income they render a public service and combat the evil of inflation (which, as we have seen, is the result of other people's efforts to enlarge or defend their ipcomes). It is true, however, that inflation can be stopped by monetary means, just as a car can be stopped by the withdrawal of lubricants. The engine can be made to seize up. By reducing the availability of cash one can easily produce a run on the banks; by withholding credit one can easily bankrupt a large number of firms; and by creating unemployment and general paralysis one can easily destroy the bargaining powe_~ of many of the people who have to work in order to stay alive. The fact remains, however, that there is little merit in cures that kill the patient, and that, when the patient is a whole society, he will find political means of getting rid of doctors who are out to kill him. Although we all dislike and are bothered by price rises of the goods and services we have to buy, the people who actually provide essential goods and services and have discovered their bargaining power are, as a matter of fact, not unduly worried. To them, inflation is not the greatest evil; it is, rather, a challenge to the rest of society to concern itself with social justice. Insistence on the part of the rest of society on maintaining the previously established income relativities isto them-a denial of justice. Although the present situation lends itself also to ruthless exploitation, i.e. a denial of justice, it cannot be doubted that it stems from the neglect of social justice in the past-both internally and internationally. There is no "arithmetic of justice;" no one can work out what is "fair reward for fair work." But this stark fact is no excuse for pretending that the problem of social justice does not exist and the distribution of incomes can be left to so-called market forces. Until we concern ourselves seriously with social and economic justice, we shall find it impossible to conquer the problem of inflation.
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