Hi, hello. Sorry that my usual output has waned in the past six weeks or so. We live in interesting, strange times, and my writing has moved around a lot between several topics and genres.
I have however, come upon something that I've seen discussed on the internet, a subject that confounds nearly everyone who talks about it – despite being very intuitive at first glance.
I'm going to avoid discussing exactly what 'money' is and what function it serves in a capitalist economy. I'm not an economist or a teacher, and the topic is very dense and meandering; if you're so inclined, I'll always endorse David Harvey's readings of Capital. For the purposes of this article, all that's important is that we agree that money is a thing that is exhcanged for other goods and services, and that money represents something.
From this starting point, we can start to discuss inflation. Inflation is pretty simple to grasp, so we'll start there: Inflation is a decrease in the purchasing power of some arbitrary amount of currency. Make it $100, $500, $1, doesn't matter. The point is that the same amount of money buys less over time.
This definition gives us a couple of important insights
1. Inflation is a change. This means you need a previous value to compare to. You cannot measure inflation or deflation (negative inflation) at any one isolated point.
2. Inflation is a decrease in purchasing power. This means we can reimagine it as an increase in prices.
The second is kind of backwards to how Liberals see the world, but we're going to continue forwards talking purely about purchasing power or, in Marxist analysis, exchange value. If you read Capital, you might get confused in Chapter 3 when Marx starts talking about how linen is gold and all sorts of other weird stuff. The point he's making is that exchange value is universal: every commodity has an exchange value, including money, which is just another commodity.
we can represent this relationship as a simple ratio: x/y, where x represents an arbitrary part and y represents the whole. Moving forward, I'm going to set x = 1 for simplicity, so we're talking about a single dollar. Defining y might seem like a big task, but if we stick to qualitative definitions instead of quantitative it's not so bad.
Because the value of a money commodity only depends on exchange values, we can define y = the sum total of exchange values in our economy. This is where a secondary liberal definition of inflation comes in: an increase in the monetary supply (the Y) of an economy. This is also an incorrect definition, but I'll leave that for another post sometime.
So, where does exchange value come from? If you're a Marxist, you already know the answer: Socially necessary labor-time. That is, the more people working in an economy, or the more hours people are working, the larger the Y.
There's a second component of the 'Y', the means of production. We can hold this constant though: a change in the means of production represents a huge change in the Y value of any economy. They're more epochal shifts, like the invention of the steam engine, the internet, etc. Anyway, because the X in our relationship is arbitrary, as Y grows your marginal value of any amount of currency shrinks: inflation.
Where this all comes into play now is that we've had a massive collapse in our labor market. Our 'Y' has necessarily shrunk: even though the amount of dollars in our economy hasn't changed, the dollars themselves are only stand-ins for socially productive labor time. This is why the primary fear of this crisis is negative inflation, or deflation. Unemployment and inflation share a negative correlation.
It's unlikely this description is something you've read or heard before. And it's even more unlikely that you agree with all of it. The reason I've put this down is not to be correct or accurately: I don't want to perfectly describe the world. What's important, I think, is sometimes stepping back and taking a new view on a particular problem or system. If our conventional analysis is incapable of fully describing the world we live in, then we need to seek out a different analytical framework.