Michael Roberts, in an article in WW, says COVID has blown a hole in mainstream economic theories of inflation, he's right, but his argument, and alternative, is also wrong. His main object is to counter the Monetarist theory, but, although he also seeks to oppose the Keynesian theory, he actually ends up with a version of Keynesian cost-push inflation. He objects to the Monetarist definition of inflation as a monetary phenomena, but that is also what Marx says in his analysis of inflation.
In A Contribution To The Critique of Political Economy, Marx discusses the role of money as unit of account, and as currency. Its necessary to examine this, as Marx does, on the basis of the development of money as a money commodity, and, then, its further development, in the form of money tokens, such as coins, or paper notes. Marx discusses the development of a money commodity in Chapter 1, and he discusses it again, in Capital I, Chapter 3, where he sets out the value form analysis. Under systems of barter, commodities are exchanged one for another, and the rate at which they exchange is determined by the value of each commodity. Initially, value takes the form, as it does with products, rather than commodities, of individual value, but trade means that commodities of the same kind, produced by a number of communities, all have different individual values, dependent upon the specific advantages or disadvantages that these different communities have in their production. When it comes to trade, exchange of these commodities for other commodities, competition means that all of these different individual values are subsumed into an average, or market value for each commodity. In each case, value is measured directly in labour-time, and the basis of exchange for commodity A with commodity B, is that they both represent an equal amount of value, i.e. an equal amount of average social labour-time.
As each commodity is traded for another, this comparison of values, in each case, means that, in place of a measurement of value directly, in terms of labour-time, this appears as a measurement of value indirectly as the quantity of each other commodity that can be obtained in exchange for it. The value of commodity A, is measured as the quantity of B,C,D,E etc. that can be obtained for it. This is what Marx calls the relative form of value. But, over time, a number of regularly traded commodities start to be identified, whose values are well known, and these can now act as an indirect measure of value of all other commodities. This is what Marx calls the equivalent form of value. Eventually, just one commodity is separated out to act as this equivalent form of value, by which the value of all other commodities is measured. It becomes the universal equivalent form of value, or money commodity. Its first function, is to act as this equivalent form, and thereby, to act as unit of account, measuring the value of commodities to be exchanged, and, thereby equating them. It fulfils this function, even if it does not enter the process of exchange directly itself. It functions to determine prices ideally, whether they are exchanged or not.
For example, suppose that gold is this money commodity. In order to fulfil this function, gold must be a commodity, and must have value, i.e. it represents a given amount of social-labour-time, equal to that required for its own reproduction. Let us say that 1 ounce of gold represents 10 hours of social labour-time. Now, a litre of wine also equals 10 hours of social labour-time, as does 1 metre of linen. The values of wine and linen can then both be expressed as a money price of 1 ounce of gold. We might give this 1 ounce of gold the name £1, in which case the price of a litre of wine, and of 1 metre of linen is £1. If the seller of wine comes to trade with the seller of linen, they can both exchange on this basis, therefore. Actual gold, as currency, does not have to be present for this exchange to take place. First of all there is an ideal conversion of each commodity into money. In other words, the seller of wine and the buyer of wine convert, in their heads, the value of the litre of wine into money. This is C-M. Ideally, therefore, the wine has now become £1. Similarly, the seller of linen, and buyer of linen do the same thing, and ideally, 1 metre of linen has become £1. So, the seller of wine can now offer to exchange to the seller of linen 1 litre of wine, for 1 metre of linen, and vice versa. The sellers of wine and linen, in the market, put price labels on their commodities of £1, and competition between all sellers of these commodities, forces them to do so. No actual money need take part in the physical exchange of these commodities, which occurs essentially still within the confines of barter.
The same applies where they exchange on the basis of credit, or trust, which is the original meaning of credit. The seller of linen, might give the seller of wine some token promising to pay, the 1 metre of linen to them at some later date, the token, being a symbol representing £1, as the equivalent of the linen to be supplied.
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