As I wrote a while ago, this is also the basis of Keynesian theories of cost-push inflation, such as that, also, put forward by Michael Roberts. In fact, as I have also described, Roberts goes a step further, explaining recent inflation in terms of high profits, rather than Weston's “high wages”, even though, in the same breath, Roberts also spoke of “low profits” consistent with his one-trick pony theory of crisis, based on a misrepresentation of The Law of the Tendency for the Rate of Profit to Fall.
True, Roberts speaks of monopoly profits, but, as Marx sets out in Capital III, monopoly profits and reasons for compensating only result in a disproportionate amount of surplus value going to these specific capitals. In doing so, it reduces the surplus value shared by other capitals, as average profit, and so reduces their prices of production. Roberts' argument, like that of Weston, would require that all firms be able to simply raise prices, so as to raise those profits. In fact, firms do raise prices, but not those prices being described by Marx.
The prices described by Marx, are values expressed in money, and assuming a constant value of money/standard of prices. Firms do raise prices to compensate profits for rising wages, but these are nominal prices. In other words, they are a reflection of a fall in the value of the currency/standard of prices. In periods where workers are able to raise not only nominal and real wages, but also relative wages, the impact on profit share is cushioned by the role of the central bank in devaluing the currency, so that firms can raise nominal prices. It cannot change the underlying relation of the demand for and supply of labour-power that enables the rise in relative wages, and so leads to a price-wage spiral.
Marx sets out why profits cannot be produced or maintained simply by raising prices, above these values.
“What a man would constantly win as a seller he would constantly lose as a purchaser. It would not do to say that there are men who are buyers without being sellers, or consumers without being producers. What these people pay to the producers, they must first get from them for nothing. If a man first takes your money and afterwards returns that money in buying your commodities, you will never enrich yourselves by selling your commodities too dear to that same man. This sort of transaction might diminish a loss, but would never help in realizing a profit.” (p 53)
This was also Marx's response to the solution to crises put forward by Malthus. Malthus was a paid apologist of the landed aristocracy. His explanation of crises was plagiarised from Sismondi, who argued against Mill's Law of Markets, known, today, as Say's Law. It argued that supply creates its own demand, and so there could be no generalised overproduction of commodities. In Theories of Surplus Value, Marx also shows that Say's Law is wrong, whilst also setting out the deficiency in Sismondi's argument.
Plagiarising Sismondi's work, Malthus came up with an under-consumptionist theory of crisis. His solution was to argue that the landed aristocracy, and the state and clergy should take more in rents, taxes and tithes. That would leave less profit for capitalists to accumulate as capital, thereby, reducing future supply, so reducing the potential for overproduction, whilst creating an additional demand for unproductive consumption. A century later, Keynes basically proposed this same theory of under-consumption, and the same solution of unproductive consumption, by the state, as described in the idea of having it pay workers to dig holes, and then paying other workers to fill them in again.
“To explain, therefore, the general nature of profits, you must start from the theorem that, on an average, commodities are sold at their real values, and that profits are derived from selling them at their values, that is, in proportion to the quantity of labour realized in them. If you cannot explain profit upon this supposition, you cannot explain it at all. This seems paradox and contrary to every-day observation. It is also paradox that the earth moves round the sun, and that water consists of two highly inflammable gases. Scientific truth is always paradox, if judged by every-day experience, which catches only the delusive appearance of things.” (p 53-4)
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