Economy In A POW (Prisoner of War) Camp

Development of a currency system depends on requirement of economy and available resources. Although In modern world
there are strong currency systems mostly based on flat currency owing to stable economic systems , but sometimes, there
are instances when complete new kind of economic conditions develop. Here we are presenting one of such instances ,
which occurred during world war-II in War Prisoner Camp. From economic point of view, these camps are unique in nature as
Prisoners of war camp are often isolated from the rest of the world. They are being denied use of National currency for any
transaction, even then they get some material goods from there rationing quota and some of the goods like biscuits, sugar,
chocolates, jam, butter etc along with Cigarettes by the means of Red Cross parcels. Every person in the camp received the
same parcel containing the same amount of each goods. However as we know the preference of individuals varies greatly.
Not everyone in the camp wanted everything in the parcel in the same amount. All though people can be better off if they
get more of the commodity they prefer more, for this to happen the exchange of the commodity was necessary. The early
economic activity started with direct barter system a good can be exchanged for another good or service (The service like
some prisoners offer to do the laundry in exchange for certain goods).Overtime the frequency of transaction in the prison
increased greatly and the scale of trading evolved as a cigarette may worth 2 chocolates,4 chocolates worth a bread etc. But
as we know the camp being spitted into different areas every area has different price for different commodities some
entrepreneurial prisons sensed it and started purchasing commodities from area where it is cheaper and selling it to area
where it is dearer and hence making a profit .

However soon the camp economy became more developed and use of barter system become very complicated and
need for having a common commodity for any exchange is felt throughout the camp and the common medium that has
evolved for exchange was cigarette i.e. it became the commodity money for the camp. At starting the system had some
glitches like as when the parcel from the red cross arrive people started calling out there offer like “bread for 5” meaning 1
bread for 5 cigarettes making it abuzz prison for the time, this form of verbal market was eventually replaced by “Exchange
and Mart” notice board. On the board in each area of camp a prisoners name along with room number would be listed along
with what is being offered by him in return of what. Through this the prices became generally well known and the prices then
start getting influenced by forces of supply and demand. In the prison some entrepreneurial efforts were being established by
some members like one prisoner sets up a coffee shop selling coffee, tea and a cocoa for 2 cigarettes a cup.

But soon pricing became somewhat difficult due to debasement of currency ,it refers to altering the nature of the thing
which is being used as currency some people started rolling the cigarettes’ between their fingers so as to pull out some
tobacco and making new cigarettes out of them degrading the quality of the cigarette. Traders start inspecting the cigarette
and value those having less tobacco less than the one having more tobacco In addition Red Cross would issue pipe tobacco in
lieu of cigarette they would receive 1 ounce of tobacco in lieu of 25 cigarettes. And the 1 ounce of tobacco will make 30
cigarettes. Hence some of the prisoners started taking tobacco and rolling out cigarettes’ that also leaded to debasement of
currency. Changes in the quantity of money (cigarettes) in the camp affects price levels in the camp. With the output of
goods in the prison are largely fixed “change in money supply” affects the price level in the camp. If the quantity of cigarettes
in the camp rise the prices also went up and if the the quantity of cigarettes fell. There were certain factors that can affect
the amount of money(cigarettes’) in the camp for example red cross supply interrupted less money,some cigarette used for
smoking less money declining the price levels in the camp(deflation). On the other hand when newer supply arise prices shot
up as the amount of cigarettes in the camp rose(Inflation) until the high amount of cigarette down again after smoking, when
there was some tension due to some reason more cigarettes will be consumed causing the amount of money in the camp to
decline, These where the some factors that would affect the “money supply” in the economy and cause the change in
average price level. However the price of independent commodity can fluctuate because of the forces of supply and demand
this is referred to as relative price changes. For example weather can change relative prices as demand for some of the
commodity could be more in a particular season. The prison of war camp shows any economy however small it may be sooner
or later would require money to facilitate exchanges and the prices of the commodities are proportional to the amount of
money in the economy as well as forces of demand and supply.

*Based on “The Economic Organisation of a P.O.W. Camp” by R.A. Radford.

Economica, vol. 12, no. 48, November 1945.