A colleague keeps sending me articles about the dangers of inflation, including this op-ed today by Larry Summers. What's a good way to refute the argument Summers is laying out. I don't really know econ/finance stuff particularly well.

  • hazefoley [he/him]
    ·
    3 years ago

    The reason we haven't seen inflation (among other things) is because of wage stagnation. The idea that pure money supply drives inflation so complete bullshit. That said I think we will see inflation if wages start to rise. It sucks but it 100% fits into marxism.

    ELI5 why wages drive inflation:

    1. Inflation isn't in a vaccumn, it is only felt when the price of things go up

    2. Higher wages mean things cost more

    3. Higher wages mean consumers have more money which means they are willing to spend more

    • triangle [none/use name]
      ·
      3 years ago

      FWIW marx himself disputed that increasing wages leads to inflation in Value, Price and Profit. "A general rise in the rate of wages would result in a fall of the general rate of profit, but not affect the prices of commodities."

      They tell you it will, they have beautiful curves on graphs that say it will, but all increasing wages does is cut into the rate of profit.

      • sysgen [none/use name,they/them]
        ·
        3 years ago

        That's true, but the rate of profit was much higher in Marx's time for commodities. There is less to cut from nowadays.

        • invalidusernamelol [he/him]M
          ·
          3 years ago

          I don't know about that...

          You could maybe argue that they'd raise prices on some specialty consumer goods, but the only way they can raise prices on other things is through fraud.

          Definitely recommend reading that pamphlet, it's really short

          • sysgen [none/use name,they/them]
            ·
            3 years ago

            They don't really have any choice but to raise prices on commodities. The rate of profit is low enough that even a modest increase in wages will either lead to price increase or negative profit rates.

            But général increase in wages would be in the international economy, not in a national economy. In a national economy it is certainly possible that prices do not increase much.

            • invalidusernamelol [he/him]M
              ·
              3 years ago

              The values of necessaries, and consequently the value of labour, might remain the same, but a change might occur in their money prices, consequent upon a previous change in the value of money. By the discovery of more fertile mines and so forth, two ounces of gold might, for example, cost no more labour to produce than one ounce did before. The value of gold would then be depreciated by one half, or fifty per cent. As the values of all other commodities would then be expressed in twice their former money prices, so also the same with the value of labour. Twelve hours of labour, formerly expressed in six shillings, would now be expressed in twelve shillings. If the working man's wages should remain three shillings, instead of rising to six shillings, the money price of his labour would only be equal to half the value of his labour, and his standard of life would fearfully deteriorate. This would also happen in a greater or lesser degree if his wages should rise, but not proportionately to the fall in the value of gold. In such a case nothing would have been changed, either in the productive powers of labour, or in supply and demand, or in values.

              Nothing would have changed except the money names of those values. To say that in such a case the workman ought not to insist upon a proportionate rise of wages, is to say that he must be content to be paid with names, instead of with things. All past history proves that whenever such a depreciation of money occurs, the capitalists are on the alert to seize this opportunity for defrauding the workman. A very large school of political economists assert that, consequent upon the new discoveries of gold lands, the better working of silver mines, and the cheaper supply of quicksilver, the value of precious metals has again depreciated. This would explain the general and simultaneous attempts on the Continent at a rise of wages.

              Value, Price, and Profit

              The value of the commodity will not change with a change in wages. The price may increase or decrease due to externalities (in Marx's case the price of gold, in our case oil and debt). We're in a situation where defrauding is talking place. The minimum wage is artificially deflated and an increase to $15 or even $20 would not effect cost of goods as that's the true value of the old wages (adjusting for inflation).

              • sysgen [none/use name,they/them]
                ·
                3 years ago

                I think we agree here, then. Of course the labour value and use value doesn't change, only the price, hence inflation.

                • invalidusernamelol [he/him]M
                  ·
                  3 years ago

                  I think you should read the whole pamphlet. Price doesn't mean anything and fighting for higher wages when they've been supressed for so long is just fighting for the old value of your labor and not something that will cause a negative rate of profit.

                  • sysgen [none/use name,they/them]
                    ·
                    3 years ago

                    So there's the thing. In value terms, there is paid labour, there is surplus value, and there is land labour.

                    If you increase the value term of wages, you will decrease surplus value. That means that the profit rate will fall.

                    Labour previously did not buy any more commodities as it does now. On average they stayed the same for decades, that is, in the US.

                    What did become more expensive are things such as housing prices, education, healthcare, and public services decreased.

                    Because of this increasing wages at least in the US of everyone across the board will reduce the profit rate, if it doesn't then it will cause inflation, ie, not increase at all in value terms.

                    The value term of labour in the US in commodities didn't decrease, it just stopped increasing while rent seeking increased and consumed more of that outside of the relationships of production.