Vol. 6 · pages 451–455

436 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES It is obvious that if silver was falling faster than commodities, and if silver prices in India were lower than silver prices in England, we should have found it evidenced by an inflow of silver from England to India. What were the facts ? Not only was there no extraordinary flow of silver to India, but the imports of silver during 1871-93 were much smaller than in the twenty years previous to that period.* This is as complete a demonstration as could be had of the fact that the silver prices in India were the same as they were outside, and consequently the Indian producer had very little chance of a bounty on his trade. Although such must be said to be the a priori view of the question, the Indian producer was convinced that his prosperity was due to the bounty he received. Holding such a position he was naturally opposed to any reform of the Indian currency, for the falling exchange which the Government regarded a curse he considered a boon. But however plausible was the view of the Indian producer, much sympathy would not have been felt for it had it not been coupled with a notion, most commonly held, that the bounty arose from the export trade, so that it became an article of popular faith that the fall of exchange was a source of gain to the nation as a whole. Now was it true that the bounty arose from the export trade ? If it were so, then every fall of exchange ought to give a bounty. But supposing that the depreciation of silver had taken place in India before it had taken place in Europe could the fall of exchange thus brought about have given a bounty to the Indian exporter ? As was explained above, the Indian exporter stood a chance of getting a bounty only if with the silver he obtained for his produce he was able to buy more goods and services in India. To put the same in simpler language, his bounty was the difference between the price of his product and the price of his outlay. Bearing this in mind, we can confidently assert that in the supposed case of depreciation of silver having taken place in India first, such a fall in the Indian exchange would have been accompanied by a penalty instead of a bounty on his trade. In that case, the exporter from India would have found that though the Indian exchange, i.e. the gold price of silver, had fallen, yet the ratio which gold prices in England bore to silver prices in India had * Cf. figures for imports of silver in Chap. I. It will, however, be noted how closely the flow of silver into India between 1872 and 1893 followed the fall in gold price of silver.

437 THE SILVER STANDARD AND THE EVILS OF ITS INSTABILITY fallen more, i.e. the price he received for his product was smaller than the outlay he had incurred. It is not quite established whether silver had fallen in Europe before it had fallen in India.* But even if that were so the possibility of a penalty through the fall of exchange proves that the bounty, it there was any, was not a bounty on the export trade as such, but was an outcome of the disharmony between the general level of prices and the prices of particular goods and services within the country, and would have existed even if the country had no export trade. Thus the bounty was but an incident of the general depreciation of the currency. Its existence was felt because prices of all goods and services in India did not move in the same uniform manner. It is well known that at any one time prices of certain commodities will be rising, while the general price level is falling. On the other hand, certain goods will decline in price at the same time that the general price-level is rising. But such opposite movements are rare. What most often happens is that prices of some goods and services, though they move in the same direction, do not move at the same pace as the general price level. It is notorious that when general prices fall wages and other fixed incomes, which form the largest item in the total outlay of every employer, do not fall in the same proportion ; and when general prices rise they do not rise as fast as general prices, but generally lag behind. And this was just what was happening in a silverstandard country like India and a gold-standard country like England during the period of 1873-93 (see Chart IV). Prices had fallen in England, but wages had not fallen to the same extent. Prices had risen in India, but wages had not risen to the same extent. The English manufacturer was penalized, if at all, not by any act on the part of his Indian rival, but by reason of the wages of the former’s employees having remained the same, although the price of his products had fallen. The Indian producer got a bounty, if any, not because he had an English rival to feed upon, but because he did not have to pay higher wages, although the price of his product had risen. The conclusion, therefore, is that the falling exchange could not have disturbed established trade relations or displaced the * See infra. Chap. IV,

438 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES

439 THE SILVER STANDARD AND THE EVILS OF ITS INSTABILITY commodities that entered into international trade. The utmost that could be attributed to it is its incidence in economic incentive. But in so far as it supplied a motive force or took away the incentive, it did so by bringing about changes in the social distribution of wealth. In the case of England, where prices were falling, it was the employer who suffered ; in the case of India, where prices were rising, it was the wage-earner who suffered. In both cases there was an injustice done to a part of the community and an easy case for the reform of currency was made out. The need for a currency reform was recognized in England ; but in India many people seemed averse to it. To some the stability of the silver standard had made a powerful appeal, for they failed to find any evidence of Indian prices having risen above the level of 1873. To others the bounty of the falling exchange was too great a boon to be easily given away by stabilizing the exchange. The falsity of both the views is patent. Prices in India did rise and that, too, considerably. Bounty perhaps there was, but it was a penalty on the wage-earner. Thus viewed, the need for the reform of Indian currency was far more urgent than could have been said of the English currency. From a purely psychological point of view there is probably much to choose between rising prices and falling prices. But from the point of view of their incidence on the distribution of wealth, very little can be said in favour of a standard which changes in its value and which becomes the via media of tranferring wealth from the relatively poor to the relatively rich. Scrope said : “Without stability of value money is a fraud.” Surely, having regard to the magnitude of the interests affected, depreciated money must be regarded as a greater fraud. That being so, the prosperity of Indian trade and industry, far from being evidence of a sound currency, was sustained by reason of the fact that the currency was a diseased currency. The fall of exchange, in so far as it was a gain, registered a loss to a large section of the Indian people with fixed incomes who suffered from the instability of the silver standard equally with the Government and its European officers. So much for the fall of silver. But the financial difficulties and social injustices it caused did not sum up the evil effects produced by it. Far more disturbing than the fall were the fluctuations which accompanied the fall ( see Chart V). The fluctuations greatly aggravated the embarrassment of the Government of India caused by the fall in the exchange value

440 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES