ABSTRACT
The policy of fixed maxima was consequently abandoned; and in its place a system known as “directive prices” was adopted: statements of purchasing price were given out from time to time to the buying organs to define the general trend of their buying policy, while the separate organs and their local agents were left free to vary the actual price they offered according to the variation of market conditions. If some prices are fixed, then inflation exercises its influence more strongly on the prices of others; if wholesale price is fixed, it increases retail and widens the margin between the two; if all prices, including retail, are fixed, it empties the shops, produces a “goods famine,” leads to the war-time queue system and the need for rationing to secure equity as between different consumers. The spending of reserves on construction work represented a real transfer of funds from circulating to fixed capital through an improved supply of the former.
