Entrepreneurial activity in prison camp

5th Sep 2013
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undercover
Economic institutions can arise in very strange and difficult circumstances, points out Tim Harford in ‘The Undercover Economist Strikes Back’ (Hachette). He cites the article by Robert A. Radford, ‘The Economic Organization of a P.O.W. Camp’ (Economica, November, 1945), in a chapter titled ‘The prison-camp recession.’

In the camp, though everyone received a roughly equal share of essentials, it was through trade that individual preferences were given expression and comfort increased, describes Radford. Parcels of food and cigarettes came from the Red Cross, and during shortages, trade happened, because prisoners did not have identical preferences. For instance, as Harford paraphrases, the Sikhs did not have much use for their rations of beef or razor blades, the French were desperate for more coffee, while the English wanted more tea.

There were also entrepreneurial services, recounts Radford, in the article he wrote after his release from a German prison camp. “There was a coffee stall owner who sold tea, coffee or cocoa at two cigarettes a cup, buying his raw materials at market prices and hiring labour to gather fuel and to stoke; he actually enjoyed the services of a chartered accountant at one stage.”

While cigarette as a currency is understandable, what can surprise many is that there was a futures market, too. A commodity, for example, could be offered ‘for four cigarettes now, or five next week’. Take the case of bread, which was issued on Thursday and Monday, four and three days' rations respectively; by Wednesday and Sunday night, it had risen at least one cigarette per ration, from seven to eight, by supper time, informs Radford’s article. BMk may sound like the name of a political party, but it was the name of the currency in the camp – the Bully Mark, backed 100 per cent by food.

Despite the absence of a central bank, barter within the prison camp had its own equations. Sample this, about an instance in February 1945, when the German soldier who drove the ration wagon was found to be willing to exchange loaves of bread at the rate of one loaf for a bar of chocolate: “Those in the know began selling bread and buying chocolate, by then almost unsaleable in a period of serious deflation. Bread, at about 40, fell slightly; chocolate rose from 15.”

Also remarkable is the view of Radford that prices did not move too far from what was regarded as reasonable, the just price. It can best be defined as the price usually fetched by an article in good times when cigarettes were plentiful, he explains. And he adds, “Everyone knew what the just price was, though no one could explain why it should be so.”

The book captures many tales of macroeconomic interest, drawn from research and policies, and presented in an easy style.

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