The Price Is Not Right

what is inflation really about?

Robust wage growth can be good news for workers, but it also increases the risk of sustained high inflation: Companies may raise prices to try to cover rising labor costs.

Jeanna Smialek and Ben Casselman, “Inflation Continued to Run Hot and Consumer Spending Fell in December,” New York Times, 28 January 2022

What are prices really about in a capitalist economy? Is not every conversation about inflation not merely about rising prices for all, but also about who gets what within the production of wealth? Much as the careful dissociation of economic from social policy in American life tries to mask the fact, inflation is always deeply political. Prices, most would typically say, are only about the free market, with governmental monetary policy trying to keep it all in balance; yet what if prices are not only about buyers and sellers but more specifically capital and labor?

When Jeanna Smialek and Ben Casselman write in the New York Times that “companies may raise prices to try to cover rising labor costs” in response to rising wages, left unsaid is that companies might alternatively do other things, such as cover rising labor costs by making less profit. They could accumulate less capital.

Of course, no capitalist company would ever want to do that, which is why inflation in relation to wages cannot be contained within the existing workings of capitalism but almost immediately raise the specter of the limits of the existing system. Any time workers get their acts together and start to demand a fairer share of the economic pie, the result is inflationary pressure, which is to say an implicit question of who gets what from the price of goods.

So inflation in relation to higher wages is not merely a quest for justice within the existing political economy and culture; it is almost instantly also a call to change the system. Inflation always threatens to blow things up. It is the bulging bump of a fist pushing up against the membrane of accepted economic assumptions, demanding not just the redistribution of wealth, but maybe even the abandonment of the capitalist logic of limitless accumulation in its entirety. Rising prices detach goods from their grounding in productive processes. They signal crises of many sorts, including that the ideological bubble of contemporary capitalist thought might burst.

Inflation can deflate the spirit, but it also pumps up a kind of trial balloon that floats another way of potentially coexisting. Prices denote far more than what things cost today. They also tell us something about what the costs of keeping things the way they are might be for tomorrow. Speculation, so economists tell us, causes monetary inflation; so it might be too that inflation is a telltale sign of intense intellectual and political speculation.

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