[lbo-talk] inflation and Ernest Mandel

[Wojtek Sokolowski]

> Ernest Mandel says inflation occurs because workers are paid 
> to work in 
> the defense industry, but the goods are not used by consumers, so 
> inflation occurs in the chase for commodities.
> 
> From Ernest Mandel's "An Introduction to Marxist Economic Theory" -
> 
> "The fundamental cause of this permanent inflation is the 
> importance of the military sector, of the armament sector, in 
> the economy of most capitalist countries. The production of 
> armaments has this special
> characteristic: it creates purchasing power in exactly the 
> same way that production of consumer goods or production of 
> producer goods does wages are paid in plants making tanks or 
> rockets, just as they are paid in plants manufacturing 
> machines or textiles, and the capitalist owners of these 
> plants pocket a profit just like the capitalist owners of 
> steel mills or textile plants but in exchange for this 
> supplementary buying power, there is no corresponding 
> supplementary merchandise placed on the market."

How is the government purchase of a cruise missile different from a
government purchase of, say, a drug rehab program for the poor?  Both
are examples of collective goods purchased through a three-party
transaction in which the goods are paid for by taxes (because of their
collective nature) and are consumed by someone else than the payer.
What is more, none would be purchased (at least in the same quantity) in
the market - in both cases the government props up the non-existing
demand.  It stands to logic that if one 'Keyensian" prgram (propping up
demand through military purchases) causes inflation, then all of them
do,

Wojtek