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Power, Profits and Inflation: A Study of Inflation and Influence in Pakistan

Author

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  • Syed Ozair Ali

    (State Bank of Pakistan)

Abstract
Our analysis seeks to look at inflation as a political economic phenomenon, based on a framework devised by Jonathan Nitzan and christened differential accumulation. The theory of differential accumulation rejects the conventional definitions of capital and draws upon Veblenian economics to integrate the definitions of power and capital by describing the ownership of capital as differential power claims over social processes. In order to maximize capital accumulation, businessmen allocate resources, in response to the socio-political environment, to beat a certain benchmark rate of return in their pursuit of maximizing capital accumulation. We find evidence for the existence of this phenomenon in Pakistan by assuming that a certain group of businessmen seeks to maximize power by maximizing relative profit, which in turn affects overall inflation. However, we have not established proof through a scientifically rigorous process due to incomplete datasets. We believe that these findings merit further investigation and propose that the maximization of relative profit as opposed to absolute profit, may, in fact, be a behavioral phenomenon. Such a finding will merely be the doppelganger of the maximization of relative utility, as opposed to absolute utility, in consumer decision-making models.

Suggested Citation

  • Syed Ozair Ali, 2011. "Power, Profits and Inflation: A Study of Inflation and Influence in Pakistan," SBP Working Paper Series 43, State Bank of Pakistan, Research Department.
    • Handle: RePEc:sbp:wpaper:43
    as

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    File URL: http://www.sbp.org.pk/repec/sbp/wpaper/wp43.pdf
    File Function: First version, 2011
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    References listed on IDEAS

    as
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    5. Nitzan, Jonathan, 2001. "Regimes of Differential Accumulation: Mergers, Stagflation and the Logic of Globalization," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 8(2), pages 226-274.
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    Cited by:

    1. Bichler, Shimshon & Nitzan, Jonathan, 2023. "Inflation as Redistribution. Creditors, Workers, Policymakers," Working Papers on Capital as Power 2023/01, Capital As Power - Toward a New Cosmology of Capitalism.
    2. Bichler, Shimshon & Nitzan, Jonathan, 2013. "Can Capitalists Afford Recovery? Economic Policy When Capital is Power," Working Papers on Capital as Power 2013/01, Capital As Power - Toward a New Cosmology of Capitalism.
    3. Nitzan, Jonathan & Bichler, Shimshon, 2014. "Can Capitalists Afford Recovery? Three Views on Economic Policy in Times of Crisis," Review of Capital as Power, Capital As Power - Toward a New Cosmology of Capitalism, vol. 1(1), pages 110-155.

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