Reading Assignment #9- The Economic Organisation of a P.O.W Camp

A.
Overall, I found this reading assignment to be very interesting. It opened my eyes to how a market develops spontaneously.

I'd have to say the most interesting thing I gleaned from the article was just that: the development of the market.

Truthfully, before I read this article, I never stopped to think about why or how a market comes into existence. It was amazing to me how the market developed spontaneously simply because people had desires and wants, which led to people exchanging, which in turn led to a market being developed.

I also found it fascinating how cigarettes became the currency used in the market because outside of the camp, cigarettes would not have had nearly the same value- it is interesting how one man's gold is worthless to others, as a cigarette for a normal citizen who was free at that time could not buy much in the free world.

One other thing I found interesting was how much the market thrived with little regulation- when the store and restaurant owners began regulating the prices and market, sales started dwindling. This exemplifies how little regulation (a-la laissez-faire) can help a society economically.

I also found it fascinating how when the Red Cross failed to deliver a certain number of cigarettes, prices dwindled and deflation/inflation occurred depending on the number of cigarettes in circulation. This perfectly compares to the currency we use in our society- money. When there is too much in circulation, inflation occurs, while deflation occurs when there is a small amount in circulation.

In essence, I thought this article was a very worthwhile read as it encompasses a number of different themes and topics we have learned/discussed thus far in ECON 108.


B.

1. What is it that leads to a market being created?
2. Is the market that was created in the POW camp an accurate representation of how markets in countries and around the world were created?
3. How does a market decide what the currency will be backed by? In the POW camp, currency was cigarettes. Does it just have to do with what, collectively, the most valued item is?

C.
The 11-page excerpt from a book, written by R.A. Radford, basically explained the development of a market in a Prisoner of War Camp (POW=Prisoners of War) during WWII in 1944. The market thrived for much of the story and was free from regulation until the end of the story, when regulation started taking place. And of course, the market was created spontaneously, which is a theme we have learned about through economics this semester.

The market described in the POW camps were all based on trade and exchange between food, attire/desirable items, and cigarettes, which turned out to be the most valuable currency (more to come on that later).

The article begins by explaining the development of the market. For the purpose of getting the point across, I am just going to explain what went on in the German camp, as several different camps were discussed in the excerpts but the German camp is where the majority of the action takes place.

Initially, when the writer arrived at the camp, prices and values started to develop for different foods and items. You see, the Red Cross would deliver rations of different necessities to the POW, so the rations can be referred to as the source of "income" for the POWs.

Trade values started to come into existence after these rations were delivered- certain foods/items were worth certain values, and thus, these foods/items were traded for other things. Diced carrots, for example, were worthless and a cigarette was worth several chocolates.

Eventually, everything was traded not in terms of other foods but in terms of cigarettes. Cigarettes, which were highly valued by the POWs, became the new currency of the POW Camp.

Additionally, an "Exchange and Mart Notice Board" was put up in the camp to list offers from different people, so people could be aware of what was up for sale. This, in a way, was a type of middleman, as it allowed for buyers and sellers to come together and see what means needed to be met to make a deal.

A lot of commercial organization developed in the German POW Camp, as a shop with public utility that was controlled by officers on a non-profit basis came into effect. With the new currency in cigarettes, bartering was now at a minimum and everything was bought like a real retail store with currency in the form of cigarettes.

Thus, a market came into existence without labor or production. It was all based on spontaneous operation, with prices being fixed by supply and demand (sometimes cigarette amounts were not as great for whatever reason which led to deflation and vice-versa).

There was some labor in the form of offering services for cigarettes, as well as the shop and eventually the restaurant, but ultimately this was a market based on no regulation that developed from the Red Cross dropping off rations at the POW Camp.

As I stated above, economic instability occurred when cigarette amounts dwindled. Weather conditions and rumors affected prices for items as well. Simply put, just like our economy, changes in conditions affected the price level and structure.

Later on, paper money began to get issued that was backed 100% by food. This paper money was called the Bully Mark (BMk).

Eventually, when the POW Camp was bombed, BMk began to fall because of the shortage of food. If BMk could've been tied to cigarettes, it would have been like a real money currency that we have today. Once the BMk came into existence, however, regulation in the market really took off.

Towards the end of the camp, the shop and restaurant that was created on the camp took over the "Exchange and Mart Notice Board" and started regulating the market. Prices increased as the "middleman" had to be compensated for his work.

Eventually, public opinion went against these middlemen and the idea of regulation fell and everything returned to as it had been before (at least somewhat to what it had been like before), with cigarettes being the main currency in society.

At the very end of the story, the 30th US Infantry Division arrived with elements. Radford used this occurrence to show how having infinite products causes economic organization and activity to be unnecessary since every "want" people had could be met without any effort or work.