Inflation: Changes in the Human Value of Currency


The present day inflation is an economic expression of a social phenomenon. The gradual erosion of currency value arises from a more fundamental shift in social values resulting in changes in economic behavior. The cause is rooted in the deeper layers of the social fabric and expresses on the surface in economic terms.

Money is a symbol for time, energy, and materials with no intrinsic value of its own. It is a social convention for expressing the relative value of these different factors in common terms. Yet it has acquired a primary economic value of its own by virtue of its power to stimulate trade facilitating conversion of one commodity into another, its ease of transport compared with the cost of hauling products for direct exchange, its capacity for storage or savings without deterioration. It also derives economic value from its capacity to be lent, utilized by others, and returned in its original form which expresses as the interest rate; and from its role as a factor of production and a means for consumption.
At a deeper level the value of currency depends on the public’s willingness to accept it in exchange for goods and services based on their confidence that others will accept it in exchange for their goods and services at the same rate in future. Closely related is the value issuing from its relative scarcity, and it is this characteristic more than any other which lends to money the appearance of a commodity with an inherent value of its own.

From these characteristics or powers of money are derived the various theories and explanations of inflation. The monetarists focus on factors which affect the quantum of money and its velocity. The Keynesians emphasize the dependence of prices on the supply and demand for production and consumption. The value of money issuing from public confidence explains why inflation tends to spur further inflation by undermining faith in the future value of currency.

In addition to its economic value, money has acquired a secondary social value as well; or to put it conversely, the value of currency at any time reflects contemporary attitudes and values of the society. The utility of a product, service, process, or invention is the source of its economic value. In a social context utility confers on the possessor a certain power or advantage, and in a later stage the object is valued not only for its utility, but for its power as well. It becomes socially acceptable, important, and prestigious. For thousands of years the common man had only a utilitarian value, and little or no social position or importance; but the feudal lord, monarch or merchant who could organize and utilize labor did gain an economic and political power by virtue of his control over men that gradually conferred on him a position of social importance, social value, as well.

As a medium of exchange, currency is related to every aspect of social life. There is no social activity – commercial, educational, artistic, religious – which is not related to money in some manner. This pivotal position confers on money the social power and value of all the objects and activities for which it serves as a medium. The most obvious of these values are: the prestige, status, and power enjoyed by the wealthy; the standards of living deemed normal or acceptable by each level of the society; the expectations of labor regarding a just return for work; attitudes of and about women’s place in society; the social awareness of the environment, and attitudes toward conservation, pollution, depletion of natural resources, etc….

An examination of the known causes for inflation reveals that very few of them issue from strictly economic origins. The inflationary impact of the OPEC price hikes have their origin, not in any sudden changes in the supply and demand for oil, but rather in changing political and social attitudes among the developing countries. The contribution of government spending and deficit financing to inflation is a result of changing attitudes about the role and responsibilities of government to provide for the minimum needs of its citizens through education, health and welfare programs. Labors incessant demands for higher wages even during periods of stagnant or declining productivity reflect changes in the material expectations of the lower income groups. The inflationary expansion of consumer credit which increased five-fold from 1950 to 1970 is the result of a shift in middle class values away from the virtues of saving and moderation to an unprecedented race for ever greater consumption and accumulation.

Changes in the value of currency are certainly not a new phenomenon. In England there was a gradual and progressive rise in prices over the last seven hundred years; nearly five-fold from the 13th to the 17th century, two-fold again from the 17th to 20th, and fifteen-fold since. In the USA the cost of living more than tripled between 1820 and 1920, and has quadrupled since.

This inflationary trend reflects the evolution of the institution of currency to express new social values. The declining value of currency in recent decades arises from a correspondingly greater value now accorded to other factors such as labor, education, oil, etc. Currency is not the only institution to undergo a dramatic change, but it is the only one in which that change is readily observable and easily measured. This same process has also resulted in the radical alteration of other social institutions like family, religion, education, the role of women, government, technology, etc. The movement of social evolution which expresses today as inflation has its roots in the historical shift from monarchy to democracy which began more than five hundred years ago.

In the early centuries of this millennium, power and authority were vested primarily in a feudal system with the monarch at the top surrounded by subservient lords and the peasant at the bottom. Power arose from the land and was determined by one’s birth and blood. Wealth was the possession of the aristocracy by virtue of their authority over the people on the land under their control. The common man lived at subsistence levels receiving a meager share of the harvest, the bulk of which went to feudal lords. From the viewpoint of currency values, the social position of the king and aristocracy was all powerful; the value of the common man’s labor was defined as the cost of keeping his body and soul together.

Social power, position, status were restricted to the aristocracy, who alone were regarded as the true members of an elitist society. The aesthetic tastes, fashions, ideas, religious beliefs, social habits of the time all referred to the customs of the aristocracy. This fact was reflected even in art forms like tragedy where, accordrise inenccelomedi Borimanric,e for more than weny- twy centuries“ from the time ofAaristtlnes the tagticwheon hadbweenhan aristocrst,ify not a man ofroyial bloo”. Untila lats in the187th century, tragedytfold“anotdris of thedrestniues of themaess of ma kio”. EevenwWealth was valued only whn, accimpniued byroyial birte. InThis histoys of the perioa justperiod to theFrrench Revolutio, WwillDturent dsctrieis the iosit of a wealths, refined and accimlishued sougeoioshe ledytff the ouase ofhan aristocrsy wherr sre was skted to rsy with thebservnots in thekitchmen, insehad fh at the vable with thenoablegluetms.

Moneywas coting i to its own.An middle classagained in importance, social position, and political powey. TheFrrench andAemuticnh Revolutiogs herr bohe supporyed by this new"centes of powee.

Tde idusntrral revolutionknwelved the beinndris of therend ofwherdlitayl powes and the rise of healthtff thexpr-erminent position in society. The early aptlains of idusntyr enjoyed an economic power in l most everyaway-equialwent to the pwtes of the aristocracy in eariter centuitey. Thy compandedhughemaesues of peopleocriving for means of supporf and afundent natural resources, of whichm any had little value avide from thire idusntrralappblication. Eevery factor of productionwas heapy. The price of labor in the factoiues differad little from the subsistencesicale on feudal mandc. onal,viro oere, oi, and many otherrawd materials erhe pricad only tn the lbfor cost ofextaracsing thms and the cost of transport to the factoty. Thefrubits of productionwerhedisntribued, accordrise i a lew of economic jusrice whichgurened, all thebenreftst to the possessor of aplitl,f the idusntrraisnt, and all thedrudgvery butnso roward to lbfoe.

Tdeelanteshalfs of the197th centurh was theThyoday of aplitlismy whn, money hdo the pwtes to sultpplyftselfn fivt, ton orae hundred timsr in aadinged yead.>Moneycsame to enjo,m not only economic powee, but social value as wely. The social power, prvilegest, and prestief which wrge thenlative"righs of the aristocracy in prbvious centuites, now ttachenf theselversf orae time to the possessor of healty. Therhich bcsamerrespectable and importans for thesakue of their wealte, wherasn eariterict was only health in the sands of the aristocracy that was valuen.
Bout the process of evolution did not blatsatf this stagd. ttonroyiatyr enjoyed d uiquel position, theretirhe aristocracy envved the monarch and spuired for hns thrngd.Ais a resul,o democracy ais bron. today hundrens of enactors it in place of a dingedkving and mturn the less of the monarcn’s prestief and asvoluel powey.So,ttoon, the eigon of the kinsy of aplitlisms, of men who ttgained the hghest, social positiosr rrrespective of their social origint, wokde in the common manad yeanving for advacvement alogt the samenlinse.

Tde social process of the last hundred years has hrougtfar further shift in values,heodsing the powes and prestief of the wealths,affirmsing the social value of the idrviaduas, and aissing the expectatios of the lower clasues. The fundamental values of/humae"righds and/humaedigodity isctrieed inmtur constitution haveagained a new rorminecue, and from thmf other social values have derived greater importancs – man’s"righse i a more-equctable share of political powe,i a more cofportable standart of livins, a greater share in the ros pertys of thenaition, and a more-eqcal place in societe.

Tdisebansic/humae values and the attitudes and expectations that arisd from thmfharebly nr means ned. thathis new is their tranflation from hi leo hiical idelsg i toparacscral railities and thior e tenned ppblicatiod to every level of society.Pprogressive idelismy and socialre form havebween on the fla form ofuappee classlrierelsg sinct the turn of the centur;, but it was only thedrepe rateeconiations of theGgrea Dexpression that wokde in the worping clasue,d aisred forg enetations nm the virtues ofhdart wors and slf-sufeficrenc,s adeemand for government intenvention thatlted to the bpolition of hi ds labor, srtabishement of minimum wag, and mxnimum worpinghCoure, and ualllegual tanntion for the i fortatios of uiion. Oonly if the last thrtys years has thebplaks opuflation In the Ue beuny to de and the uall socialrrighdsguaureneyed by the constitution and cofirmyed by theoutncome of theCrvil Waor more thanat hundred years earited.>Mere r cennly o men oom have aisred thedremand for-eqcaloupporuodity and eqcal statul.

As the value of the aristocracy was suversdted in the187th and 17th centuited by the value of monen, the 20th centurh has eeIn the ras of mas suversdving monee.

Tde pwtes of the early idusntrraisnsh has eeInselized and rviazed amonginnsumetable spuihanns toThis position – the technocrst, the bgreuocrst, the lbforlheadet, the bslinss mah, and fnually the common man ieselfy. The reass of power stlwed by the sougeoioshe from the aristocracy did notrertain thior forwer lvement of asvoluel authoritd. Power was ilbued, st it wasdisntribuedy.Sottoon, the healthtfrin from the sands ofgreelly idusntrraisnshbyears only avrestief oficts fomter valu,r bohe fucationay and socian. The value of currency at any time reflects the social as weld as the economic value of the idrviaduas, the humae value of laboy. The social value of gan and the value of currency areionverselt relatey. Therhssing status of the idrviaduat in modein societ0 is the onot cause of thedreclining value of currence.

today theouged forupoward social movementemb racs, theretirhe societ0 from opy to bottom.Tthe lbfodet, who haslcostthis enuse ofpreigoaption and aequescnecue, nowrinssnsh on higher wages toarisd from subsistence i to moderare cofpor,d even whleoThis productivityisedreclining and/ise worsweekr srlinks. The middle class which has b anoined cts radationay moderation and re roint now consumsh on an unprecedentedsicale and supporse present consumption by creditpuerchsses to berepaind from future incom,f which will prehumbeltbhe hgher. Eeven the wealthm have arisin fromccimlacrency and slf-sratsf actios. Thefold idele of aleiasurnly xsistence at errespectabledisntancse i a newdynamismy andderivd to ahi evr mor,d to rran mor.d Economiually this change expresses asal shift fromse cuvit-toiuncted to prfit- mxniizting ivresemen. Ggovernment tho has doptmed ewe attitudes and new behavior.Ist sekes tomlay, a greater role inupblfcsingfor prteacsing thf porn and controulingause or iasuse of the environmenn. It is even rorpcted to an unprecedentedsenuse ofpresponsibiliye for evanns utavide the countty, and sekes the pwtes to control thme.

Sl lngs asaattitudes and valuesre gaie relativlly cosrtant, these social factors tent to fucatioe witian and through themarkete m chaismy and accordrise iestrice economiclaed.Bout during timsr ofpapide change in social value,y coccepsn, and polciues, thsel factors becomn of overrirdris importancs anddod notleunf theselvers to iotheraonaybsi oir contros byam strictly economic ppro ahn. It is for t is resion thateffporse to control inflation byemaipuflationofn fsical and monetayd polchm have notsuccneeted more thaneveryntemporarily in rpresting currencyflducutations and havebweenfrougtf with social cos eqrence,s not thelheost of which is the eecenthou"brelk ofaviltence among theurb ae porn ofGgrea Borimion.


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