2022-06-16 07:57:20
https://www.hindustantimes.com/opinion/the-crucial-interlinking-of-class-conflict-and-inflation-101655330356109.html
There is one route of inflation, caused by class conflict, which is hardly ever discussed. The
root of this goes back to Karl Marx, but a modern version of it was developed by Michal Kalecki and Bob Rowthorn. Commodities can be divided broadly into two categories — agricultural and non-agricultural. For agricultural commodities, supply (in the absence of decent storage facilities) is fixed in the short- run, so excess demand (apart from costs) plays a crucial role in their inflation. On the other hand, the supply of manufactured goods and services can easily adjust to demand
The price of a manufactured commodity to a consumer (MRP or the maximum retail price) consists of cost of production, profit margin of the firm, and indirect taxes charged by the government. So, a rise in any (or all) will increase prices. This is where
class conflict enters the picture. Such a process of price formation is like a division of a pie among different claimants over a share in it. These claimants can be categorised broadly as workers, raw material producers, other input suppliers, rentiers, government and – the highest in the pecking order of fixing prices – capitalists.
Each of these claimants has a tool to bargain with in this
class conflict. It is wages for workers, terms of trade for raw material producers and other input suppliers, oil prices (after accounting for depreciation of the cur- rency) for oil barons from whom we buy crude, interest rates for rentiers, indirect taxes (Goods and Services Tax or GST, customs duty or VAT) for the government, and gross profit margin for the capitalists. If in the process of this bargain, the total claim is equal to the size of the pie, prices will remain stable. If, however, these claims are larger than what the pie can accommodate, it leads to a rise in prices and
sets a process of a price
spiral we know as inflation.
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