Monetarist myths about wages | Pasqualina Curcio

The legal minimum wage in Venezuela covers 0,65% of what the worker basically needs to produce and maintain his workforce. Taking into account the recent increase of Bs 7.000.000, it is equivalent to 0,045 petros. The food basket totals 3,5 petros, while the basic one already goes for 7 petros.

The deterioration of the real wage is due to the criminal attack on the bolivar by imperialism who, with war objectives, has induced the depreciation of our currency by 3,1 trillion percent since 2013, resulting in a price variation of 63 billion percent from the same year. Each time the exchange rate increases on the dolartoday portal, the prices of all goods vary in real time. That is public and notorious. But this is not the only cause of the deterioration in purchasing power, it is also influenced by the lag in the nominal wage that, shielded in monetarist dogmas, has not increased in the same proportion and speed as the rest of the prices.

This month is propitious for workers to continue dismantling the myths behind which monetarists hide to justify not increasing wages.

Myth 1: wage increases cause inflation. At first, they claimed that wage increases were the cause of inflation. It is already obvious that it is false, in fact, prices in Venezuela have not stopped increasing even in periods in which there has been no salary adjustment. For example, between May and December 2020, wages were frozen, while prices rose 673%. The problem is not only that the monetarist claim is false, but it hides the fact that an increase in prices given fixed wages implies a greater profit for the capitalist. Let's see an example: suppose that the initial price is 100 of which 50 go to the worker and 50 to the bourgeois; Suppose now that the price (consequence of an attack on the currency becomes 200) if the salary remains the same, 50 will be distributed to the worker and 150 to the capitalist, that is, the profit increased.

Wage increases do not affect prices (in fact, they had already risen and it is precisely for this reason that workers demand the wage adjustment) but rather the bourgeois's profit decreases, this is where the main wage-capital contradiction lies and that is why monetarists do not want to tell the story as it is. If the price increases from 100 to 200 but the salary is adjusted in the same proportion, that is to say 100%, the worker would obtain 100 and the bourgeois 100, the latter would no longer have a profit of 150 but of 100.

Of everything that occurred in 2014 in Venezuela, workers accounted for 36% while capitalists accounted for 31%. In 2017, as a result of inflation due to the attack on the bolivar and the lag in nominal wages, the worker only accounted for 18% of everything produced while the bourgeois took 50% (BCV).

If prices increase after the salary increase, it is not attributed to this, but to a new attack on the bolivar.

Myth 2: the cause of inflation is "inorganic" money. When it was already obvious that it was not the increase in wages that was causing inflation, they began to repeat the monetarist dogma that reads: "prices increase every time they turn on the little machine to print" inorganic "money, all that money reaches the pockets of Venezuelans who increase the demand for goods that, given a fixed supply, pushes all the prices of the economy up ”. Speech that has been denied by the facts and the numbers of the BCV itself.

It is the case that in Venezuela aggregate demand has not increased, on the contrary, from 2013 to 2017 (latest available figure) it decreased 62%, household consumption fell 50%, government spending (contrary to what they say monetarists who spend more than they have and incur a fiscal deficit) decreased 30%. Not enough with these facts it turns out that, incidentally, the amount of money that circulates in the economy did not increase, but decreased. In 2014, for every 100 bolivars that were produced, 80 bolivars were circulating, in 2020 for every 100 bolivars produced, there were 20. The number of bolivars decreased 74% (BCV).

Myth 3: the cause of inflation is the "inorganic" money that affects the depreciation of the bolivar. When monetarists were exposed by their theoretical contradictions regarding the dogma that "inorganic" money was the cause of inflation, they had no choice but to migrate to the myth that says "well, it's true, inorganic money does not cause inflation. inflation because in Venezuela demand did not even increase, on the contrary it decreased, but it does influence the exchange rate, and it is the cause of the bolivar depreciating every day, which is what, in turn, causes inflation " .

Again the numbers and the facts belie that speech. First of all, we already mentioned that it is not true that the amount of money increased. Second, if we used all the bolivars that circulate in the economy to buy all the available currencies, the exchange rate would not exceed 180.000 Bs / US $, which is far from the 2.800.000 that the web portals mark. Third, and the spokesmen of imperialism, specifically Senator Richard Black, confessed that they have been the ones who have induced the depreciation of the bolivar.

Unlike monetarists who only repeat their dogmas, we have shown econometrically through the Granger causality test that, in Venezuela, the exchange rate varies first, then the prices of goods, and finally the quantity of money varies.

Myth 4: "in order to increase wages, you first have to produce." Since the myth of money has not been credible, they recently migrated to the discourse that says “you cannot distribute what does not exist and to increase wages you must first produce, and as we are blocked by imperialism we need to attract foreign capital, that requires meanwhile, make them fall in love with the workers who wait ”. This speech, although it is an excellent excuse to give concessions to foreign private capital, is not the condition to increase wages, much less the solution to restore the quality of life of workers.

The recovery of purchasing power is the only guarantee of increased production and not the other way around. Those who have capital will not invest them in Venezuela if they know that no one will demand their merchandise due to the deteriorating purchasing power, unless, what they want is to produce under special conditions, with high levels of exploitation taking advantage of low wages, and then export independently that what is produced cannot be consumed by the Venezuelan people.

Everything here exposed to dismantle the monetarist myths we have demonstrated theoretically and empirically. Those who tirelessly repeat these dogmas have not produced a single number to support their arguments. We are still waiting for your calculations.

 

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