Differential Inflation

For a general discussion of topics relating broadly to power and political economy (e.g., capital-as-power, Marxism, neo-classical economics, institutionalism).

Moderator: sanha926

Differential Inflation

Postby Ikonoclast » Tue Jul 16, 2019 5:08 pm

After reading “Capital as Power” by Bichler and Nitzan, where they talk about differential accumulation, a key point about our economy appears to me to be the current regime of differential inflation. Clearly, differential inflation can enable differential accumulation. Economists often talk about economies as if one average inflation rate affects the entire economy. This does not seem to me to capture the situation at all. (Blair Fix mentions this issue in a post on this forum. The modern (neoliberal / monetarist) economy seems notable, to me, for its differential inflation rates and the staggered sequence of sectoral bubbles over time. (Tech bubble, property bubble etc.)

In terms of the differential inflation rates now embedded in the modern global economy we can note;

(1) Minimal to zero wage inflation (no wage rises).
(2) A long term high inflation period for real estate which (despite corrections) seems to have permanently implemented higher real estate prices relative to wages.
(3) General high asset inflation dependent on asset class but particularly notable for shares.
(4) Low inflation in basic goods and services (those purchased by wage earners and thus wage earners can continue to live day to day but must move to renting rather than purchasing a domicile).
(5) Higher inflation for luxury goods but the wealthy can afford this and still be better off (differentially wealthier) because of points 2 and 3 above. Differentially Inflated luxury goods and services prices also serve to exclude more and more of the hoi polloi, including the middle classes, which process is a very enjoyable addition to the privileges of exclusivity for the rich in a crowded world.

Along with this pattern, the price of money (interest rates) is high for the myriads of small loans (credit card debts, personal loans and mortgages) of the type that workers take but low for large loans. Corporations can get billion dollar loans for an effective 0% real interest rate after taking relatively low general (official and headline) inflation rates into account.

The cheapness of money for large loans (and bailouts via quantitative easing etc.) is somehow quarantined from the expensive nature of loans to workers. A great deal of money creation has occurred (fiat and credit money creation) but much of this money in effect is kept in different circuits (it seems to me) from the wages – basic consumer purchases circuit.

The logical end result of these processes will be the reduction of workers to a new modern form of debt peonage. Distinct from the precariat, who will have no wages at all, workers will earn modest wages which will be entirely spent weekly on basic consumption items, rents and hires. Workers eventually will own no property beyond personal effects (toothbrush, toiletries, clothes and some moveable furniture). They will rent accommodation, uber-style rides, computers, computer software and even their physical mobile phones (not just the plans).

The goal of late-stage, neoliberal capitalism is for the capitalists to own everything worth owning which can generate rentier income and have the working populace renting everything. This is the logical end-point of the neoliberal master plan: the scarcity of assets for the worker (and for the precariat of course). Can we even doubt the eventual full privatisation of water and in some cunning manner the (virtual) enclosure of the atmosphere, long term? The workers would pay private charges to breathe. After all, all the O2 would be re-generated by cropland and forest plants owned by private holders. “My plants make the O2 so you have to pay for it.” Where does the logic of enclosure ownership end? Is this a dystopian novelistic fantasy or the logical end-point of current capitalization and privatization trends?

Footnote: I was unable to access the CasP website for over a month. Being busy on other matters I did not follow it up. It now appears to be corrected anyway. Was it a regional problem? Were users from some regions of the world locked out? Just wondering.
Posts: 28
Joined: Sun Dec 15, 2013 4:47 pm

Re: Differential Inflation

Postby Jonathan Nitzan » Tue Jul 16, 2019 8:35 pm

For an early theoretical account of differential inflation, with Israel as an empirical case study, see:

Nitzan, Jonathan, and Shimshon Bichler. 2000. Inflation and Accumulation: The Case of Israel. Science & Society 64 (3): 274-309.

This model relates overall inflation and differential inflation on the one hand to differential earnings on the other.
Jonathan Nitzan
Posts: 80
Joined: Sat Dec 06, 2008 2:39 pm

Re: Differential Inflation

Postby Ikonoclast » Wed Jul 17, 2019 4:37 am

I hadn't seen that paper before. I still need to read it again carefully, when my mind is fresh.

Also, it's clear that "Capital as Power : A Study of Order and Creorder" addresses the issue in the Chapter on "Depth" under the heading "Accumulating through crisis", subheading "The stagflation norm".

"Unemployment and stagnating production, along with other forms of instability, conflict and force, constitute the necessary backdrop for differential accumulation through differential inflation." - on page 379.

I had some initial thought that differential inflation might not have been covered in the book (which I have read in full). I even thought I had check-searched the book pdf for the term and not found it. Memory error... search error... 65 year old brain!
Posts: 28
Joined: Sun Dec 15, 2013 4:47 pm

Re: Differential Inflation

Postby Jonathan Nitzan » Wed Jul 17, 2019 7:47 am

If you are interested in the subject, the idea of differential inflation and its centrality to differential accumulation was developed in my PhD dissertation. The vocabulary was a bit different since the thesis devised an alternative proxy for “inflation”, based on the dynamic interaction of business and industry:

Nitzan, Jonathan. 1992. Inflation as Restructuring. A Theoretical and Empirical Account of the U.S. Experience. Unpublished PhD Dissertation, Department of Economics, McGill University.

For other early works on the subject, see:

Nitzan, Jonathan, and Shimshon Bichler. 2002. The Global Political Economy of Israel. London: Pluto Press.

Bichler, Shimshon, and Jonathan Nitzan. 2004. Dominant Capital and the New Wars. Journal of World-Systems Research 10 (2, August): 255-327.
Jonathan Nitzan
Posts: 80
Joined: Sat Dec 06, 2008 2:39 pm

Re: Differential Inflation

Postby blairfix » Wed Jul 17, 2019 3:13 pm

I too have problems reaching capitalaspower.com sometimes. It appears that the server will randomly block my IP address. Switching to another IP (vi a VPN) solves the problem. I have no idea why the server does this.
Posts: 104
Joined: Fri Dec 20, 2013 3:45 pm

Re: Differential Inflation

Postby Ikonoclast » Thu Jul 18, 2019 6:19 pm

1. The method of "Inflation as Restructuring"

I have read the introductory chapter to "Inflation as Restructuring - A Theoretical and Empirical Account of the U.S. Experience." What immediately impresses me is that it begins by questioning, and contrasting, two ontologies. What frustrates me about neoclassical economics is that it plunges in, in medias res, with an already assumed, complete and unquestioned ontology. If a person investigating something, anything, already has one settled ontology then any deductive conclusions from the premises are more or less inevitable conclusions. Any hypotheses devised for empirical testing and more particularly the methods devised for testing the hypotheses, from within a single assumed ontology, are likely to suffer from fallacies like circular reasoning and reification. (These two fallacies seem the mostly likely to me to arise, on my first intuitive assessment of such possibilities.) The posing of two possible ontologies (as in Inflation as Restructuring) sets up fertile ground for generating new hypotheses to contrast with the existing "received" ones and to help suggest new methods for empirical testing.

To me, it's an instructive example of doing "comparative ontology" studies. I hadn't thought of this approach before, at least not anything like in these very clear terms. These days, I always consider myself guided by the following dictum, most importantly as a link between philosophy and empirical science:

“The best that can be done is to supply a hypothesis, not devoid of all likelihood, in the general line of growth of scientific ideas, and capable of being verified or refuted by future observers.” – C. S. Peirce.

Philosophy I regard as an hypothesis generator (though speculative metaphysics can be entertaining in its on right). Comparative ontology now appears to me as perhaps the best method for hypothesis generation and the way to aid logical deductions, and intuitions for testing methods. This is after seeing Jonathan Nitzan's use of this method. People will have to excuse me for being so late to this insight. I assume it is standard in modern scholarship... outside dogmas like fundamental religions and neoclassical economics!

However, I will have to postpone reading "Inflation as Restructuring" for several months. My projects take me in another direction for the moment. I will be trying to rectify however the fact that I have read no Veblen and Mumford (in serious quantities).

2. A Corporate Pharmaceutical Case - Valeant.

The case of Valeant Pharmaceuticals is instructive (as well as disgraceful). It seemed to follow a combined breadth-depth strategy. If I have the order and categories correct it;

(1) Acquired new companies for new drugs to sell (breadth);
(2) Slashed R&D (depth);
(3) Used its new monopoly power on given drugs plus extortion on patients, as in pay the new drug price or die. (depth).

The Veblenian sabotage component is very clear. Society's total needful pharmaceutical R&D is reduced by this sabotage. Individual human health, poorer patient by poorer patient, is also sabotaged as drugs are priced out of individual patients' reach, sometimes on the order of $3,000 per annum to $300,000 per annum for life preserving drugs like Syprine to treat copper accumulation (a rare but fatal disease).

It seems a combined breadth-depth corporate strategy, logically executed in that order, and achieving some individual product monopolies, would always result in differential inflation for the product concerned and in differential hyper-inflation when the product is life-preserving, assuming perhaps a tiny sub-group of the super-wealthy who can pay the extortionate price without blinking as it were. Indeed, in this case "conspicuous consumption" turns into "conspicuous survival" a rare pleasure of the most exotic kind for the venal super-rich. Of course, there was overt social-political push-back eventually but while one person was jailed for extortionate pharmaceutical pricing, he was not from Valeant. Valeant's principals suffered few real consequences and certain drug prices continue extortionately high, so far as I know. All of this looks like clear confirmation of Jonathan Nitzan's general theory to me.

3. Further Reading?

All of the above makes me wonder (given my amateur philosophical leanings and methodological interests) whether I should start reading books like:

Comparative Metaphysics: Ontology After Anthropology (Reinventing Critical Theory) Reprint Edition
by Pierre Charbonnier (Editor), Gildas Salmon (Editor), Peter Skafish (Editor).

Any suggestions?
Posts: 28
Joined: Sun Dec 15, 2013 4:47 pm

Return to Political Economy

Who is online

Users browsing this forum: No registered users and 3 guests