Mattick Jnr and inflation
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Re the review of Mattick Jnr’s ‘The Return of Inflation’ in the November SS, in the current issue of Brooklyn Rail he is interviewed about it by a sometimes incredulous interviewer (the German [?] group Friends of the Classless Society).
This bit is good:
“What is missing from the classical or neoclassical account of the economy is that it treats supply and demand as a relation between producers and consumers. The regulation of that relationship by the need of capitalists to achieve a certain level of profitability is ignored. But in fact the market is essentially regulated by the need of producers to make a level of profit large enough to accumulate, to continue expanding their businesses. What determines supply is the possibility of making a profit from the sale of goods of a particular type. What determines demand is, with respect to consumer goods, the level of the wage and the living standard that people are used to. For producers goods, it’s determined by what inputs are needed to make those goods which can be sold for profit. So demand ultimately depends on the ability of firms to make an adequate level of profit.”
As to his theory of why the price level
Has been rising non-stop since the war — due to monopolies competing with other capitalist firms for a share of profits by restricting output and rising prices — I am inclined to share the incredulity of the German group:“What you seem to be saying about price formation seems to me a very far-reaching claim. Market competition by cost-cutting and lowering prices is a core mechanism of capitalism and you’re saying that it’s not operating anymore. I have a problem with this thesis. (…)
You seem to be claiming that this mechanism of competition and cost-cutting and price formation is not valid anymore.
Aren’t you basically saying that firms can decide themselves what prices they want and then that’s how market prices are created? The way you claim that companies set prices, again, leaves me hesitant because I believe that they can’t just raise prices arbitrarily because they’re in a state of competition. Even if there’s an oligopolistic situation, that’s still a situation of competition and it still means that cost-cutting and lowering prices is a very good competitive strategy.”I am not sure either about his claim that capitalism has entered into an era of permanent stagflation that will eventually lead to its economic demise.
In fact I think Mattick has gone off the rails (or is it the rail !) on both these points.
I don’t really have anything all that intelligent to add. But I did translate an article a while back that theoretically refutes the idea of a “wage-price spiral.” (https://www.marxists.org/archive/kuruma/wages_inflation.htm)
Mattick sort of rejects the spiral, but then sort of doesn’t.I also thought his idea about raising prices was suspect. But the interviewer poses the question rather strangely at an earlier point in asking Mattick: “Doesn’t competition force companies to try to offer their products at a low price to maximize market share?” This might be a quibble but that way of phrasing things makes price seem a bit arbitrary (an idea that the interviewer criticizes later). I think the force of competition is what is behind the drive to raise productivity (which makes it possible to lower prices). A company could hardly lower prices very far unless there is some increase in labor productivity. Sometimes the term “competition” is thrown around without examning exactly what is spurred by it. Capitalist firms scramble to raise productivity because whoever manages to do it first can (for a while, at least) to sell its wares below the market price but still at or above the commodity’s indivdual value (thereby pocketing a “surplus profit”). That is also the basis for driving smaller competitors out of the market. Why raising prices (at least in a competitive market) could be a successful strategy is beyond me.
In any case, I think the biggest problem I had with interviewer and interviewee alike is a tendency to pose the question of prices as if it was some sort of conscious choice of business leaders rather than a reflection of the value of the commodities produced.
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