The Earth is not flat, Mr Francis

THE EDITOR: A article by Lennox Francis in Monday’s Newsday, headlined “The new economic order,” was equivalent in economics terms to arguing that the Earth is flat. Here is why.

Francis writes that supply and demand have “drifted away from the barter system, where things had value only when they were needed.” But money, whether in the form of cowrie shells or gold or black pepper or paper, was invented because transactions were impeded by lack of a standard measure of value.

Francis further compounds this error by asserting that “in the present system, things are given absolute value.” But it is exactly the opposite – under a free market system, the value of items is determined by the agreed price reached between seller and buyer.

Continuing to dig his hole, he then writes that “profit arises when we try to dispose of goods and/or sell services at a rate above cost called price.” But prices are the market’s signals which tell producers whether to supply more or less of their goods, while profit is the return on risk that they take.

Francis then redefines terms like “capital” and “entrepreneurship” to conclude that “there is only one factor of production – labour.” This Marxist concept has long been discredited, and even Marx noted that if labour is the measure of value, then labour and value are not synonymous. Since labourers are for sale only in a slave system, in a capitalist system the labourer is selling his labour power to the capitalist, which means that profit cannot be explained through exploitation of labour.

Tellingly, Francis then recommends that TT regains its “insularity” by seizing goods and instituting price controls. This, of course, is exactly the approach that now has our close neighbour Venezuela in its state of economic collapse.

ELTON SINGH, Couva