I wrote: >>Nowadays [as opposed to under the gold standard], prices
may or may not rise with money wages, but capitalists have much more
control over prices than under the gold standard. Currently, it's
import and export competition (along with the dollar exchange rate)
which determines how much power the businesses have over prices. <<
Cristobal Senior de Ruiz writes:
It is not clear the part about "export-import competition" and its
connection with business power over prices. <
when raising prices, a company in the US has to worry about cheaper
products being imported. It also has to realize that other countries'
businesses are vying for the same world markets.
What it is clear is that the incorporation of China's labor force
into the global industrial economy has push down wage costs of
consumer as to have a significant impact in the domestic rates of
inflation of rich countries, especially the US. Furthermore , as
Marx's reserve army of labor goes global, just its presence is
sufficient to stymie wage pushes in rich economies , to foster a low
inflation climate and to increase capital's share of GDP.. Thus,
nowadays prices do fall with money wages courtesy of global labor
arbitrage.. <
yes, but do prices fall as much as money wages do? the idea that the
"mark-up" of prices over wages is rising fits with the general shift
in the income distribution away from labor and toward capital of late.
As for the comment on Friedman's "natural rate of unemployment" ,it
must be said that it was quickly replaced by that of the NAIRU or
non-accelerating inflation rate of unemployment of which both
Greenspan and Bernanke are enthusiastic supporters. <
in general, the difference between the "natural rate" and the NAIRU is
that the latter is a more scientific-sounding name for the former. The
big thing these days is that most serious macro economists admit that
the NAIRU cannot be estimated with sufficient accuracy to be used in
policy. Greenspan seemed to know this, since he relied on a "seat of
the pants" (subjective) method of policy-making, using a wide variety
of different kinds of data, not just the unemployment rate and the
estimated NAIRU.
Also, Friedman's dictum that inflation is always a monetary phenomenon, is pretty
discredited as well. For instance, in the last five years the rate of growth of
M3 has been around 55% while the CPI has grown just by 17%.. Very little actually
remains from Friedman's monetarist projects. <
You're absolutely right about the disconnect between the growth of M1
or M2 and standard measures of inflation. (BTW, they've stopped
reporting M3.) MF's idea that "inflation is always and everywhere a
monetary phenomenon" has its basis in tautology: without the use of
money, there could be no inflation.
Another version of the quantity theory might apply, by the way. The
growth of M1 and M2 might have helped to cause _asset price_ inflation
(which is missed in CPI inflation). That is, the growth of the money
supply might have helped to cause the stock market bubble of the 1990s
and the current housing market bubble. But I don't know the research
on this.
--
Jim Devine / "Economics is extremely useful as a form of employment
for economists." -- John Kenneth Galbraith.
