Martin says,
“If the low inflation of World War Two owed something to tight government controls over high finance, then maybe this low inflation, paradoxically, owed something to the increased autonomy and power of high finance, which absorbed revenues which would otherwise have augmented inflation.”
But, it was not revenues that were the basis of inflation, and nor could it be unless you accept the orthodox, bourgeois view of inflation as arising from an imbalance of aggregate demand and supply. In the 1980's, increased rates of profit, and increased masses of profit, relative to the demand for money-capital certainly were the basis of falling rates of interest. Falling rates of interest, are certainly, also, the basis of rising asset prices, via the process of capitalisation. But, that is not inflation. Falling rates of interest should lead to increased capital accumulation, and so economic activity, leading to increased employment, and, thereby, rising wages. But, rising wages do not cause inflation, they cause falling profits, as Marx describes in Value, Price and Profit, arguing against Weston.
In fact, the falling rates of interest in the 1980's and 90's, did not lead to increased capital accumulation, as Marx would have expected, as set out in Capital III, Chapter 23, because of the role of the ruling class as now owners of fictitious, rather than real capital, and their focus on obtaining capital gains on that fictitious capital. Where Marx's expectation was met, in that regard, was in the huge rise in the size of the petty-bourgeoisie, at that time, as unemployed workers became self-employed, and as small employers could utilise cheap unemployed labour, in increasingly precarious manners. That did contradict Marx's longer-term perspective of the historic decline of that petty-bourgeoisie, a trend that has affected political developments over the last 30 years, as with the rise of petty-bourgeois nationalism, Brexit and so on.
This illustrates not only the parasitic nature, of the global ruling class of owners of fictitious-capital, but the extent to which they have become a fetter on the further development of capital itself. What actually created the asset price inflation of the 1990's and after, was not revenues, but the actions of central banks in creating excess liquidity, directed specifically into those asset markets, just as the creation of excess liquidity, directed into households, as income replacement payments, and now feeding into the real economy, is the cause of current commodity price inflation.
The following statements are correct.
“The capacity of governments to counteract by increasing taxes and cuts in public spending is reduced by several factors, including the fact that cuts already made in public spending to try to recoup from the emergency measures of 2008-9 have damaged public infrastructure to a degree where even by capitalist calculations it needs restoration. Even a capitalist government with no concern but to make its territory attractive to footloose global capital wants to offer that global capital efficient public services, a "reserve army of labour" kept in work-ready condition, etc.”
As I stated earlier, austerity had already run its course. If anything, states need to increase spending on infrastructure, as well as on education and training, the latter being useless without workers themselves being kept in good health.
“And class struggle probably plays a role, as in the 1970s. It would be easier for governments to quell inflation if workers passively "soaked up" the price rises by way of accepting lower living standards. But history gives no grounds for confidence in bourgeois governments to tame embedded inflation in any short time scale and without great social cost, whatever concessions workers make.”
Its not class struggle, but only distributional struggle, but, the point is that there is no reason why workers would, currently, simply soak up falls in real wages. As with austerity, they have already done that for 12 years after 2010. But, unlike the 1970's and after, rather than being at the start of a new Innovation Cycle, in which technology begins to undermine the position of labour, we are at a point, like the early 1960's, in which still high rates of profit give no great incentive for capital to engage in such a new period of development, and so where capital accumulation takes the form of extensive accumulation, productivity growth slows, and employment expands at a relatively faster pace, as witnessed by global labour shortages, higher Quit Rates, high levels of job vacancies, and so competition between capitals for labour, pushing wages higher – and, as I have set out elsewhere, by more than the headline figures of hourly wages indicate.
As with the 1960's, that means that workers should not, and will not, rely on governments taming inflation, but will take matters into their own hands collectively via strikes, and individually by simply moving to better paying jobs. Neither the Brexitories of Sunak, nor those of Starmer have a solution, and both seek to have workers soak it up. They will not, bringing workers into conflict with both of these reactionary petty-bourgeois parties, and requiring them to also rebuild their own political alternatives. As workers take matters into their own hands, and raise wages, the state will try to protect capital by increasing liquidity once more to enable firms to raise prices to cover rising costs, ensuring that inflation will continue. Already, the speculators are looking to central banks relaxing monetary policy once more, in the hope of inflating asset prices. As in the 1960's, liquidity will increase, but not by enough to protect profit share, and in inflation adjusted terms, asset prices will falls, as they did then.
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