MONETARY DEVALUATION. — A true and harmless index of an evolution that would not in itself be harmful if it occurred uniformly across all classes and all lines of transformation (v. PRICE), it is, on the contrary, a cause of the most serious economic and social disorder when it actually occurs with absolutely unequal rhythm and measure in time, space, and the various economic activities. From the strictly monetary standpoint, it is the loss of the purchasing power of money, a constant phenomenon measured at approximately 2–3 percent per year, alternating with periods of rapid devaluation (economic crises, wars, misrule) and periods of relative stability.
From the standpoint most sensitive to the general consumer, it is identified with the continuous rise in prices. Individuals react to this by reducing consumption and charging more for their own services. But this is much easier for classes with variable incomes (producers, merchants, professionals) than for those with fixed incomes (workers, employees, pensioners), who can only with difficulty and slowness obtain adjustments to their monetary incomes in relation to the increased cost of living: hence the class struggle.
I. CAUSES AND REMEDIES
The causes of monetary devaluation are mainly: a) the interest rate on loans, particularly unproductive ones, when it exceeds a reasonable risk quota, and the accumulation of interest (v.); b) useless labor (bureaucracy, commercial intermediaries, unionism, politics, advertising, the press), or destructive labor (luxury industries that serve bureaucracy and war, wartime destruction, reduced or absent productivity due to social unrest). The annual rate of devaluation represents the social cost of the economic errors committed.The path to remedy is clear: a) reduce the interest rate on loans, either by increasing the abundance of capital through competition (v. SAVINGS) or by insuring capital itself against risks; b) reduce useless and harmful labor through a profound work of moralization and social education, an indispensable foundation both for the formation of savings in masses adequate to the need and for the spirit of enterprise that must put them to work, with the aim of guaranteeing everyone the right to work while at the same time providing a more rational and agile economic organization, especially of exchanges.
The phenomenon cannot be entirely eliminated, for neither can its fundamental causes be. But a slow, gradual, and uniform monetary devaluation, contained within a minimal measure that would not harm savings, would have a salutary effect. Indeed, a moderate and orderly rise in prices is an effective stimulus to activity and initiative, chastising the idleness of those content with the status quo and forcing everyone to increase and improve productivity and work performance.
MARIO BARONI