The cumulative changes in the real value of the pound since the Second World War has been so great that most people are now completely disorientated when attempting to compare prices over any period of time. Have we become richer? Is the cost of that once-in-a-decade purchase reasonable? Far from telling us where we stand, our pay cheque has become an opiate to protect us from unpalatable reality.
In my own effort to regain my financial bearings I have become increasingly addicted to the Mars Bar. The Mars Bar is a currency for our time: it is a long-established basket of staple commodities (cocoa, vegetable fats, milk solids, sugar) packaged with great consistency in the form of an ingot. As such it is a reliable unit of account certainly more reliable than gold, which is prone to speculation and it preserves a remarkably constant real value. I have measured my wealth in Mars Bars since an early age, though the motive for doing so has changed.
The table shows some selected price changes since 1940. It may seem absurd that the pay of the young graduate joining ICI has gone from £275 in 1940 to £5,700 today. Yet in real, which is to say Mars Bar, terms his pay has advanced modestly, rising from MB 33,000 in 1940 to MB 38,000 today. This means the modern young man is only marginally better placed to buy his first small car. The Morris 8 would have cost him MB 19,200 in 1940 while the Mini costs 19,333 today.
It would be surprising, indeed suspicious, if everything displayed Mars Bar price stability. The Mars Bar standard helps us see where the young executive is worse and better off. His train ticket to Oxford has dropped in price from MB 50 to MB 35 over the forty years. But a helping of roast beef and Yorkshire pudding at Simpson in the Strand has risen from MB 24 to MB 39 today.
The chairman’s Rolls has become still more unattainable. In 1940 it cost MB 204,000 (£1,100 for the chassis, £600 for the body from Park Ward). By 1960 it cost £5,800, and today’s Silver Spirit sells for £52,000 or a discouraging MB 347,000.
If space allowed I would take the reader into the intricacies of Mars Bar money: international convertibility, transatlantic arbitrage, the euro-Mars Bar, the way money consumption automatically limits money supply, and variations of liquidity with temperature.
Suffice it to say that the real price stability of the Mars Bar is a triumphant vindication of Hayek’s theory of competitive currencies. Competition has forced the American-based issuing agency not to debase the coinage. Indeed, far from being clipped, the Mars Bar has recently been increased in weight from 57 to 59 grams.
There must be a moral behind this conundrum: the pound has plunged in real value despite all the efforts of government and Bank to preserve its apparent worth, yet the Mars Bar has held its worth despite the untiring efforts of the issuer to make it seem as cheap as possible. Monetary experts should chew this one over.