Martin is also wrong, when he says,
“Marx was not much concerned with inflation. He knew, of course, about the rapid price rises in Britain during the Napoleonic Wars, when the guarantee of conversion of Bank of England notes into gold was paused between 1797 and 1821. In his day prices might jump up and down from one year to the next, but there was no embedded regime of inflation.”
In Theories of Surplus Value, Chapter 9, Marx, as part of his analysis of the long wave (though he doesn't call it that), looked at price movements over different fifty year periods. He placed great store in the work of Thomas Tooke on the movement of prices. Some of that movement, as analysed in Theories of Surplus Value, Chapter 9, is a result of, long wave processes, by which whole new areas of land are opened up for agriculture and primary production of minerals and so on, as well as the periodic, technological revolutions that capital brings about, to create a relative surplus population, and reduce wages. But, others are caused by new discoveries of gold and silver, and others by the systematic devaluation of the standard of prices, as Marx sets out in A Contribution To The Critique of Political Economy.
Marx notes, that it was such a devaluation of the currency, and subsequent inflation of commodity prices that provided one source of primary capital accumulation. Landlords leased land to tenants on long-term leases at given money rents. But, when inflation leads to commodity prices rising, particularly the prices of industrial commodities produced in the towns, the real value of those money rents fell. It meant a transfer of wealth and power to the urban bourgeoisie, away from the old landed aristocracy. But, Marx also notes that the inflation of prices in the 19th century was also a basis for rising demands from workers across Europe for higher wages.
Its true that the value of the money-commodity, say gold, is determined by the labour-time required for its production, and so this determines the relation of the money commodity to the value of all other commodities. But, as Marx points out in A Contribution To The Critique of Political Economy, prices are measured in terms of a given quantity of this money commodity, and this quantity is the basis of the standard of prices. The value of the standard of prices, and so its relation to the value of commodities, as expressed in their prices, is not only governed by the value of the money commodity, but also by the quantity of it contained in that standard. If the standard of prices changes from being ¼ ounce of gold to being ⅛ ounce of gold, this will have the same effect as if the value of gold itself was halved. Such changes in the standard of prices is the basis of inflation, and Marx talks about that at length, in A Contribution To The Critique of Political Economy.
“As a result of an historical process, which, as we shall explain later, was determined by the nature of metallic currency, the names of particular weights were retained for constantly changing and diminishing weights of precious metals functioning as the standard of price. Thus the English pound sterling denotes less than one-third of its original weight, the pound Scots before the Union only 1/36, the French livre 1/74, the Spanish maravedi less than 1/1,000 and the Portuguese rei an even smaller proportion. Historical development thus led to a separation of the money names of certain weights of metals from the common names of these weights.”
And, Marx outlines that this debasement is most certainly the basis of a systematic inflation.
This was the basis of the dispute between Lowndes and Locke, and as Marx sets out, also the same dispute between Attwood and Peel. For metallic currency, it comes down to the value of the metal, and the amount of it contained in the standard of price, but for paper currency, which has no value of its own, and is not redeemable in gold, it comes down solely to the quantity of notes thrown into circulation, as Marx set out in the quote previously given, in Part 6.
Trotsky was also well aware of this relation, and attacked the Stalinists for creating inflation by an excessive printing of money tokens. Section 2 of Chapter 4 of The Revolution Betrayed, is entitled “Socialist Inflation”.
“During the first period of the five-year plan, on the contrary, all the sluices of inflation were opened. From 0.7 billion roubles at the beginning of 1925, the total issue of currency had arisen by the beginning of 1928 to the comparatively modest sum of 1.7 billions, which is approximately comparable to the paper money circulation of tzarist Russia on the eve of the war – but this, of course, without its former metallic basis. The subsequent curve of inflation from year to year is depicted in the following feverish series: 2.0 – 2.8 – 4.3 – 5.5 – 8.4! The final figure 8.4 billion rubles was reached at the beginning of 1933. After that came the years of reconsideration and retreat: 6.9 – 7.7 – 7.9 billion (1935). The rouble of 1924, equal in the official exchange to 13 francs, had been reduced in November 1935 to 3 francs – that is, to less than a fourth of its value, or almost as much as the French franc was reduced as a result of the war. Both parties, the old and the new, are very conditional in character; the purchasing power of the rouble in world prices now hardly equal 1.5 francs. Nevertheless the scale of devaluation shows with what dizzy speed the Soviet valuta was sliding downhill until 1934.”
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