[OPE-L:3869] Re: The Causes of Inflation

Gerald Lev (glevy@pratt.edu)
Sat, 21 Dec 1996 16:08:47 -0800 (PST)

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Rakesh asks in [OPE-L:3868]:

> Jerry, what do you make much of Lester Thurow's argument that inflation has
> become "an extinct volcano" (Chapter 9 in his Future of Capitalism)?

I don't know of any country in the capitalist world that isn't
experiencing inflation. It would seem, therefore, that the volcano is very
much "alive" and active. However, it is the case that the _rate_ of
inflation has gone down in many (but certainly not all) capitalist
economies since the early 1980's. I see no indication that there will not
continue to be _periods_ (_normally_ associated with the business cycle)
of time in which inflation will grow during the "future of capitalism."

> And how about Boskin's study: after all, Boskin attributed only a
> small percentage of the claimed upward bias in the BLS inflation rate to
> the failure to keep up with consumers as they shifted to cheaper
> products.

Do you mean that he is claiming that inflation is calculated in such a way
that those statistics overestimates its severity?

> Thurow uses Boskin's revisionist study as propaganda against the
> Fed's witch hunt against inflation, not for reductions in COLAS.

What "witch hunt" against inflation? Perhaps it would be more accurate to
say that the Fed's policies (and those of international lending agencies)
are largely a "witch hunt" against the working class. That is, part of the
Neo-liberalist strategy is to restore conditions for capitalist
profitability and this means, among other things, lowering inflation and
interest rates, reducing budget deficits, introducing austerity measures,
deregulation, decreasing costs of production including wages, etc. _ad

> Also,
> doesn't low inflation now serve to increase real interest rates, [...]

Inflation _and_ interest rates have both gone down in recent years in most
capitalist economies. Moreover, the Fed has acted to keep interest rates
low as a stimulus for further investment. In a sense, it is low interest
rates which have caused an increase in investment in stocks and bonds
since higher rates of return are anticipated on such investments rather
than savings.

> abet the
> bankruptcy of competitive capital and thus intensify the centralization of
> capital, [...]

a) High interest rates don't help to prevent the bankruptcy of capitalist

b) while bankruptcies would tend to intensify the centralization of
capital (usually though mergers), the outcome of this process in terms
of competitiveness would be very unclear within any individual
capitalist nation and would depend on a number of other contingent
factors and policies.

c) state industrial policies have also, in many cases, helped to prevent
the bankruptcy of units of capital.

> the most important mechanism by which monopoly capital staves off
> the fall in the profit rate?

I wouldn't say that this is "the most important mechanism" by which
"monopoly capital" (btw, what does the expression "monopoly
capital" mean?) attempts to prevent a decline in profitability.
Centralization does, however, frequently allow firms to be more
competitive and, thereby, obtain a larger share of the surplus value
produced within a branch of production. To the extent that this also
increases the organic composition of capital, it also hastens the fall in
the general rate of profit. Yet, individual firms are primarily concerned
with the profit rate for the firm rather than the general r. Moreover,
individual capitalist nations are more concerned with the profitabilty of
firms from their nations than the overall profitability of all firms
internationally. So, this process which might tend to depress the rate of
profit in most nations might simultaneously increase the rate of profit
in other nations as there is an international redistribution of surplus

In solidarity, Jerry