[OPE-L:3916] The Causes of Inflation (+ "extending Marx" + misc.)

Gerald Lev (glevy@pratt.edu)
Wed, 1 Jan 1997 09:46:27 -0800 (PST)

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Duncan wrote in [OPE-L:3915]:

> I think we have to be careful in thinking about what we mean by
> "inflation", since the meaning of the word seems to be shifting in
> different contexts. Each particular bundle of commodities one might use to
> define a price index defines a different concept of inflation. I adopt the
> point of view that "inflation" is a measure of the average rate of change
> of all prices and wages. This diverges from some uses of the term to
> describe a rise in the prices of commodities workers buy relative to the
> wages they receive, that is, a fall in the real wage.

Suppose [Z] contains "all prices and wages" in economy (U). Within set
[Z], suppose that there are two sub-sets: [F] and [J]. Let [F] be composed
of all commodities, measured in price, which are not purchased by workers
out of wages. Let [J] be composed of all commodities, measured in price,
which are purchased by workers out of wages.

Now, suppose that there is an increase in [J], but *not* [F]. Wouldn't the
increase in [J] cause an increase in [Z]?

> I'm not sure what "an increase in share capital" means.

>From #6 of the "Counteracting Factors" to the LTGRPD:

"As capitalist production advances, and with it accelerated accumulation,
one portion of capital is considered simply to be interest-bearing capital
and is invested as such. This is not in the sense in which any capitalist
who loans out capital is content to take the interest, while the
industrial capitalist pockets the entrepreneurial profit. Nor does it
affect the level of the general rate of profit, for as far as this is
concerned, profit = interest + profit of all kinds + ground-rent, its
distribution between these particular categories being a matter of
indifference. It is rather in the sense that these capitals, although
invested in large productive enterprises, simply yield an interest, great
or small, after all costs are deducted - so-called 'dividends'. This is
the case with railways, for example. They do not enter into the
equalization of the general rate of profit, since they yield a profit less
than the average. If they did go in, the average profit would fall much
lower. From a theoretical point of view, it is possible to include them,
and we should then obtain a profit rate lower than that which apparently
exists and is really decisive for the capitalists, since it is precisely
in these undertakings that the proportion of constant capital to variable
capital is at its greatest" (Penguin edition, pp. 347-348.

Would, or could, a change [positive or negative] in share capital cause
there to be a change [positive or negative] in the average rate of change
of all prices and wages in an economy?

> >If there is a depression of wage below their value and/or cheapening of
> >the elements of constant capital couldn't that affect average prices?
> Again, I'm somewhat in the dark because of the imprecision of the terms of
> the question. What is the "value of wages", and how can they be depressed
> below their value?

Again: I was simply listing one of the "counteracting factors" to the
LTGRPD and asking whether this process can cause a change in the level of
average prices. Interestingly, Marx writes that the "reduction of wages
below their value" ... has nothing to do with the general analysis of
capital, but has its place in an account of competition, which is *NOT
ed., p. 342, emphasis added, JL).

This raises a number of *very interesting questions indeed*.

(1) As Marx remarks, _Capital_ concerns the "general analysis of capital"
and "an account of competition' is "not dealt with in this work." Yet,
Marx clearly *intended* to discuss this subject. For instance, he writes
"WHEN WE come to 'Competition among Capitals' ... [p. 426, emphasis added,
JL]. Earlier in VIII, he writes in the section on the 'Revaluation and
Devaluation of Capital: Release and Tying-Up of Capital", "The phenomena
under investigation in this chapter assume for their full development the
very basis and living atmosphere of the capitalist mode of production.
These concrete forms of capitalist production, however, can be
comprehensively depicted only after the general nature of capital is
understood; it is therefore outside of the scope of this work to present
them -- they belong to a possible CONTINUATION" (p. 205, emphasis added,
JL). A footnote on p. 426 of the Penguin edition explains: "In 1865, when
the manuscript of Volume 3 was written, Marx evidently still intended a
special study on the phenomena of competition." So, it would seem that if
we are to understand "one of the most important factors in stemming the
tendency for the rate of profit to fall" ("reduction of wages below their
value") we must examine COMPETITION. Yet, Marx never wrote that
"continuation." Perhaps we need to recognize that this is a subject, which
by Marx's own standards, *needs* further theorization if we are to more
concretely understand the subject of the LTGRPD and its possible

(2) This factor, the "reduction of wages below their value", needs to be
analyzed within an "account of competition." What *else* does this process
need to be analyzed within the context of? What about the subject of
*Wage-Labour*? Don't we need to more concretely examine how workers and
capitalists *with subjectivity* can affect this process?

> Similarly,
> when one talks about the "cheapening of constant capital" it isn't clear
> what standard you are valuing constant capital in relation to. If there is
> a uniform decline in all money prices and wages, constant capital is
> "cheaper" in $ terms, but just as expensive relative to wages or
> consumption goods. I think Marx usually thinks of "cheaper" as a fall in
> the labor directly and indirectly required to produce a commodity. In this
> sense constant capital might become cheaper relative to labor whether
> average money prices and wages rose or fell.

What happens when the "value of the constant capital does not increase in
the same proportion as its material production" (p. 343)?

> The big distortions come from the treatment of depreciation and
> capital gains for tax purposes. Different sectors of capitalist
> production have different proportions of the cash flow in capital gains
> and depreciation and this leads them to experience sharply different tax
> effects of inflation.

It's January 1 and we are already talking again about depreciation.

> If we keep "inflation" to mean changes in the average level of all
> prices and wages, an increase in markups would lower the real wage,
> increase the rate of exploitation, but could correspond to a rise
> or fall in average wages and prices.

"Could". I like that.

> Whether it's oligopoly or just sectoral price changes, the cost of
> reproduction of labor power can be significantly affected by relative
> price changes.

The cost of reproduction of labour power -- not *that's* a topic we should
discuss in 1997. What determines the cost of reproduction of labour-power?

So many interesting topics to discuss. What a great way to begin the new

In solidarity, Jerry