When Roberts comes to argue against the Keynesian cost-push theory of inflation, he basically refutes many of the lines of argument he has just previously used against the Monetarist theory. He defines the Keynesian cost-push theory as essentially a theory of wage push inflation.
“The usual Keynesian way to estimate likely changes in inflation is to use the so-called Phillips curve: the curve of the statistical relation between unemployment rate and the price inflation rate. Again, however, this theory has proven to be false. The ‘curve’ does not hold or is so ‘flat’ as to provide no guide to inflation. Indeed, since the great recession of 2008-09, unemployment rates in the major economies have dropped to near all-time lows - and yet wage rises have been relatively moderate and inflation rates have slowed. This is the mirror image of the 1970s, when unemployment rates rose to highs, but so did inflation, and we had what was called ‘stagflation’. Both examples show that the Keynesian cost-push theory is false.”
This assumes that high levels of employment do not mask high levels of underemployment, which the low levels of productivity indicate exists. It also assumes that measures of unemployment are accurate, when, in fact, in the 1980's as unemployment soared, governments modified these measurements to minimise it. Thatcher's government introduced more than 20 modifications to the calculation to reduce the headline numbers. Moreover, in the 1960's, as wages began to rise on this basis, the UK unemployment rate was between 1-2%, even on today's heavily modified measurement, it has not fallen below 4%, the level it was at in the 1970's, when the economy first began to suffer the kinds of levels of unemployment not seen since before WWII.
In Theories of Surplus Value, Marx describes two causes of rising wages. The first, is essentially that identified by Ricardo, in which rising costs of wage goods, primarily of agricultural products due to diminishing returns, causes the value of labour-power to rise, leading to rising wages. Ricardo saw this as a secular trend, resulting from the continued growth of capital, placing demands upon agriculture that it could only meet by drawing into cultivation less fertile soils, leading to diminishing returns. It is his explanation of the tendency for the rate of profit to fall. Marx demonstrates that although this definitely occurs in the short-run, it does not establish the secular trend that Ricardo assumed, because, it provokes a response from capital to raise productivity in agriculture/primary production, as well as the opening up of new lands. Marx describes the latter process in Theories of Surplus Value, Chapter 9, and it is a fundamental component of explaining the periodicity of the long wave cycle, and, thereby, of the cycles of prosperity, boom, crisis, and stagnation.
The second cause of rising wages, described by Marx, is that identified by Smith, which is the fact of labour shortages causing wages to rise, as capital bids up the price of labour. Again, for Smith, this is a secular trend. He argues that the reason that the price of labour is lower than its value – which he equates to the value created by labour (which he recognises resolves into necessary labour and surplus labour) – and that the price of capital is greater than its value, is that capital is scarce, whilst labour is plentiful, and so the effects of demand and supply enables capital to obtain a higher price, and labour has to accept a lower price. Profit is obtained because capital, thereby appropriates the surplus value created by labour. He thinks that capital will accumulate faster than the supply of labour, and so this initial condition will slowly reverse with the price of labour rising, and so squeezing profits. It is his explanation of the tendency for the rate of profit to fall.
Again, Marx shows that this happens in the short-run, and is indeed the cause of crises of overproduction of capital, but, here, he agrees with Ricardo, in demonstrating that Smith's belief in the idea that capital would accumulate faster than the labour supply, in the long-term, was wrong. Capital responds to these crises of overproduction, again, by engaging in technological developments that replace labour with capital, and so create a relative surplus population. But, the important points in both these cases, is not that, they break down in the longer-term, as a result of technological development by capital, being induced by crises, but that they are real phenomenon in the short-term, that, indeed does cause capital to be induced to seek resolution of them.
No comments:
Post a Comment