More reasons capitalism is always doomed to fail
We’ve known for a long time that demand-pull inflation is occurs when demand for a service or product outstrips the supply. Companies will experience a buy out of their products or services and can react in 1 of 2 ways.
1. Do not raise prices and instead hire more workers to meet the demand.
2. Raise prices to slow down demand and increase profitability
In capitalism you can 99% of the time expect companies to follow number 2. The end goal of capitalism is profitability. When companies raise prices of goods due to high demand, what they are fundamentally doing is charging higher rates for something that did not, in reality, increase in value. They are still paying the same wages, the same production costs, but their profitability rises. Imagine if a local milk processing plant experienced a surge in demand. The production costs of of a gallon of milk are $1. Because they realize there is an opportunity to profit, they raise prices to $2. Inflation has occurred. Consumers have purchased the same good, of the same value, for a higher cost.
But the most fucked up part is that capitalism can never exist in a state free of inflation. Inflation is intrinsic in capitalism, because the entire point of profitability is extract more value for something than that something is worth. There is NEVER an equal exchange between consumer and producer. The $1 gallon of milk from the previous paragraph never actually cost $1 to make. It cost 75 cents, and there was always an element of profit, and therefore an element of inflation to every purchase that takes place in capitalism.
