Monetary Devaluation

MONETARY DEVALUATION. — A truthful and innocuous index of an evolution that would not in itself be harmful if it occurred uniformly across all classes and along all lines of transformation (v. PREZZO), it is instead the cause of extremely serious economic and social disorder, since in reality it takes place at a rhythm and magnitude that are entirely unequal over time, across space, and in the various economic activities. From the strictly monetary standpoint, it is the loss of the purchasing power of money, a phenomenon constantly established at approximately 2–3 percent per year, with periods of rapid devaluation (economic crises, wars, misgovernment) alternating with periods of relative stability.

From the standpoint more keenly felt by the ordinary consumer, it is identified with the continual rise in prices. The individual reacts to this by restricting consumption and charging more for his own services. But this is much easier for classes with variable incomes (producers, merchants, professional people) than for classes with fixed incomes (workers, employees, pensioners), which manage to secure an adjustment of their monetary incomes in relation to the increased cost of living only with difficulty and delay: hence the class struggle.

I. CAUSES AND REMEDIES

The causes of monetary depreciation are mainly: a) the interest rate on loans, particularly on unproductive ones, when it exceeds the reasonable risk premium, interest (v.); b) useless work (bureaucracy, commercial intermediaries, trade unionism, politics, advertising, the press), or destructive work (luxury industries, which serve bureaucracy and war; wartime destruction; reduced or absent productivity due to social unrest). The annual rate of depreciation represents the social cost of the economic errors that are committed.

The remedy is clear: a) reduce the interest rate on loans, both through competition among capital made abundant (v. RISPARMIO) and by insuring the capital itself against risks; b) reduce useless and harmful work through a profound effort of moral reform and social education, the indispensable foundation both for the accumulation of savings in amounts adequate to need and for the spirit of enterprise that must put them to work in order to guarantee everyone the right to work, while at the same time providing for a more rational and agile economic organization, especially of exchanges.

The phenomenon cannot be eliminated entirely, because its fundamental causes cannot be eliminated: but slow, gradual, and uniform monetary depreciation, kept within a minimum measure that would not harm saving, would have a salutary effect. A moderate and orderly rise in prices is, in fact, an effective stimulus to activities and initiatives; it chastises the indolence of the beati possidentes, compelling everyone to increase and improve productivity and the efficiency of labor.