demand for producer goods (that is, implements, fertilisers, etc.) was largely left unsatisfied, a fact which eroded the peasants' productive basis. The exchange with the peasantry became conditioned by the following three interlocking phenomena: (1) the reduction in relative and in absolute terms of official marketing of crops as result of the rapid expansion of parallel markets; (2) the galloping inflation of prices in the parallel markets; and (3) the consequent rapid depreciation of the currency and the increased reluctance to accept the metical in exchange for sale of goods. Although the surface appearances of these phenomena were generally recog-nised, the explanation of the underlying mechanisms was by no means clear. The dominant explanation of the problem came from the ministry of internal commerce which was in its day-to-day operation more directly con-fronted with the problem. According to this view the nature of the problem was the withdrawal from the market by the peasantry since money no longer bought goods. Hence, the payment of rural wages and the buying of cash crops channelled a volume of money into the economy far in excess of available pro-ducer and consumer goods directed to the peasantry. Cash balances therefore accumulated over time and the stimulus to further production was blunted. The fact that the supply of commodities destined to be traded with the peasantry was, in terms of value, far in excess of the official marketing of crops was the often quoted proof that peasants simply ran down cash balances to buy goods and did not produce more for exchange. This view often overlooked the impact of the demand springing from the wage bill and, hence, directly equated the difference between the supply of goods to the peasantry and the goods obtained in return with the running down of cash balances accumulated by the peasantry. The problem therefore was seen as one of an excessive volume of money being held in the rural areas: peasants had too much money relative to the available supply of goods. Therefore, they withdrew from the market and preferred to buy up any supplies forthcoming with the money in hand rather than through production. Implicit in this view was a conception of a single circuit of exchange between the state sector and the peasantry in which the state buys with money either cash crops or labour power, and subsequently the peasantry buys consumer and producer commodities from the state sector (with or without the intermediation of private trade). If both parts do not balance in value, idle balances of money will build up in the hands of the peasantry and over time blunt the incentive of production. The preoccupation was thus with the stock of money in the hands of the peasantry (as a measure of frustrated demand) and little attention was paid to its velocity since it was implicitly assumed that these balances remained idle (stuck in the peasants' pockets). Therefore, concerning economic policy, a solution was sought in the direction of neutralising the interference of accumulated balances by linking sale and purchase together. Hence, commodities would be sold to the peasantry only in exchange for the purchase of cash crops. Similarly, state farms would guarantee a certain part of the wage in kind to assure the flow of labour.

DOI link for demand for producer goods (that is, implements, fertilisers, etc.) was largely left unsatisfied, a fact which eroded the peasants' productive basis. The exchange with the peasantry became conditioned by the following three interlocking phenomena: (1) the reduction in relative and in absolute terms of official marketing of crops as result of the rapid expansion of parallel markets; (2) the galloping inflation of prices in the parallel markets; and (3) the consequent rapid depreciation of the currency and the increased reluctance to accept the metical in exchange for sale of goods. Although the surface appearances of these phenomena were generally recog-nised, the explanation of the underlying mechanisms was by no means clear. The dominant explanation of the problem came from the ministry of internal commerce which was in its day-to-day operation more directly con-fronted with the problem. According to this view the nature of the problem was the withdrawal from the market by the peasantry since money no longer bought goods. Hence, the payment of rural wages and the buying of cash crops channelled a volume of money into the economy far in excess of available pro-ducer and consumer goods directed to the peasantry. Cash balances therefore accumulated over time and the stimulus to further production was blunted. The fact that the supply of commodities destined to be traded with the peasantry was, in terms of value, far in excess of the official marketing of crops was the often quoted proof that peasants simply ran down cash balances to buy goods and did not produce more for exchange. This view often overlooked the impact of the demand springing from the wage bill and, hence, directly equated the difference between the supply of goods to the peasantry and the goods obtained in return with the running down of cash balances accumulated by the peasantry. The problem therefore was seen as one of an excessive volume of money being held in the rural areas: peasants had too much money relative to the available supply of goods. Therefore, they withdrew from the market and preferred to buy up any supplies forthcoming with the money in hand rather than through production. Implicit in this view was a conception of a single circuit of exchange between the state sector and the peasantry in which the state buys with money either cash crops or labour power, and subsequently the peasantry buys consumer and producer commodities from the state sector (with or without the intermediation of private trade). If both parts do not balance in value, idle balances of money will build up in the hands of the peasantry and over time blunt the incentive of production. The preoccupation was thus with the stock of money in the hands of the peasantry (as a measure of frustrated demand) and little attention was paid to its velocity since it was implicitly assumed that these balances remained idle (stuck in the peasants' pockets). Therefore, concerning economic policy, a solution was sought in the direction of neutralising the interference of accumulated balances by linking sale and purchase together. Hence, commodities would be sold to the peasantry only in exchange for the purchase of cash crops. Similarly, state farms would guarantee a certain part of the wage in kind to assure the flow of labour.

ABSTRACT

However, the key problem with this conception was that it did not take account of the very dynamic of the parallel markets and the accompanying process of the accumulation of commercial speculative capital. Speculation within this view was seen mainly as the activity of small producers and consumers to bypass the official channels in search of a higher price as far as the producers are concerned and in search for access to commodities as far as consumers were concerned. Money, however, did not remain idle in the hands of the peasantry but rather ended up as money capital in the hands of speculative traders. Speculative trade established alternative circuits of trade with the peasantry and between town and countryside and fed itself on diverting supplies originating from the state sector. Private trade was not merely an intermediary in the exchange between the peasantry and the state sector, but asserted itself as an independent actor propelled by its own capitalist (speculative) accumulation drive. Feeding on the imbalance between supply and demand private commerce accumulated rapidly through the galloping inflation on the parallel markets. The government controlled the issue of money (and attempted to accumulate on the basis of it), but the private traders through their action on the parallel markets effectively dominated the circulation of money and activated the money balances held by the peasantry, functionaries and workers by transforming them into money capital. As a result, real wages and the real terms of trade (vis-a-vis) the peasantry deteriorated rapidly, but its impact was much more devastating in the rural areas since in the towns the rationing systems assured access to commodities at official prices with regard to some basic minimum quantities.