The Real Movement

I have been reading a paper, Marxist Political Economy in the Age of Inflation, by Marxist theorist, Vytautas Liutkus (VL). At least in part, the writer seems to offer an explanation for post-World War 2 inflation in the monetary system that is consistent with Marx’s labor theory of value. This is my fifth post on VL’s paper.

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Quick recap:

Previously, I argued that a theory of inflation that would be consistent with Marx’s labor theory of value is not as simple and straightforward as it seems. I suggested it would take a roadmap of sorts to get there. The reason for this is probably obvious: in Marx’s labor theory of value, unlike bourgeois economics, a description of the way the mode of production works begins with production, not exchange.

This fact hints that an explanation of inflation that would be consistent with labor theory likely should begin on the production side of the mode of production as well.

This where VL’s discussion of Paul Mattick’s ideas on inflation enter the picture. Mattick proposes that inflation is an expression of a crisis of profitability; part and parcel of an effort to raise the rate of profit. VL, while not disagreeing directly with Mattick on this point, points out that, first, such a strategy could only be possible once the gold standard was abolished. Second, VL points out that, even with the abolition of the gold standard, inflation would not alter the distribution of the social product between classes.

In the previous post, I offered a hypothesis to answer VL’s objection regarding the end of the gold standard that did not depend on state policy, but relied instead on Mattick’s idea that inflation has its roots in capitalist crisis, specifically in the Great Depression of the 1930s. Evidence shows that the owners of commodity money, including national governments, abruptly began to withdraw commodity from circulation beginning around the 1930s and hoarding it. This is a process that continued until 1971, when the last remaining currency tied to a commodity money, the dollar, was finally debased by the United States.

But this was only step one of our roadmap in answer to the objections raised by VL: accounting for the end of the age of commodity money. This accounting does not yet explain inflation, although it provides a necessary precondition for inflation. Still less does it explain how inflation might be used to alter the distribution of the social product between capital and labor to raise the rate of profit above zero — an argument made by Mattick in his essay.

The critical next step on our roadmap may be to discuss the implications of the withdrawal of commodity money from circulation for the mode of production because some of them may not be so obvious.

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I have been reading a paper, Marxist Political Economy in the Age of Inflation, by Marxist theorist, Vytautas Liutkus (VL). At least in part, the writer seems to offer an explanation for post-World War 2 inflation in the monetary system that is consistent with Marx’s labor theory of value. This is my fourth post on VL’s paper.

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As anyone reading this post likely knows, unlike bourgeois neoclassical economic theory, Marx’s labor theory of value begins with production not exchange, when describing the normal operation of the capitalist mode of production.

In bourgeois economics, newly produced commodities enter circulation without value. After this, the forces of supply and demand establish an equilibrium price for them at the time of sale. Ideally, this equilibrium price includes, among other things, the wages paid to the workers, the profit of the capitalist and the costs of necessary inputs.

In labor theory, the process is a bit more complicated.

The capitalist purchases the labor power of the worker and the necessary means of production. Under his direction, the two are combined in an act of production that creates a social product. A portion of this social product simply embodies the value (i.e., the socially necessary labor time) originally advanced by the capitalist for the labor power of the workers and the means of production. Another portion embodies an increment of surplus value (i.e., an increment of unpaid surplus labor time). This social product enters into circulation as commodities.  When it is sold, the surplus value produced in the act of creating commodities is realized in the exchange as profit.

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How does this difference play out in the bourgeois economic theory and labor theory notions of inflation?

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I have been reading a paper, Marxist Political Economy in the Age of Inflation, by Marxist theorist, Vytautas Liutkus (VL). At least in part, the writer seems to offer an explanation for post-World War 2 inflation in the monetary system that is consistent with Marx’s labor theory of value. This is my third post on VL’s paper.

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At the end of part two, we have come now to what looks like an apparent irreconcilable theoretical disagreement between VL and Mattick Sr. about post-war inflation, so let’s take a moment to sum up:

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