Validity of Sismondi’s ideas for today’s economy

By Umberto Mazzei

Pisa, Dec. 2015

Sismondi’s analysis on the contradictions, dysfunctions, and evil social and economic consequences of the unbridled capitalism, based on the ideas of David Ricardo and his disciples is still valid. Two centuries of experience in economic policy have confirmed it. Sismondi’s critic commentaries were repeated later, in a passionate and radical manner, by Karl Marx and his followers. Sismondi’s thinking had a big influence on that school, even if there are basic divergences concerning the conclusions and above all, the recommendations.

The fact that Sismondi’s or Marx’s critic analysis is still valid is not due to either of them having a special foresight talent. It happens because the system we have today is the same – only enlarged and worsened – than the one shaped two hundred years ago. It still follows the ideas of Ricardo and the rest of the Anglo-Saxon School. Their version of the capitalist system has not evolved; the basic principles are the same, regardless of the social failures and recurrent devastating economic crisis. Those principles are still taught as established economic science in most Anglo-Saxon Universities and have influenced many others. It is now labeled as Neo-liberalism, after retouches by the Austrian school under Ludwig Von Mises and Friedrich Von Hayek and by the Chicago School of Economics under Milton Friedman

Wealth distribution among productive classes

Both Sismondi and Marx were very exceptical about the market proclaimed virtues to turn greed and self interest into an instrument for social and economic equity. Marx, always radical, did not even bother to elaborate on how to improve wealth distribution. He considered the capitalist production system as unredeemable and proposed to eliminate private property altogether. Wherever his proposal for public ownership of means of production was applied, it developed a curious economic tendency: accessible public services and scarcity of consumer goods. We could elaborate on that, but Marx or Marxism is not our subject today.

Untitled1In what concerns the validity of Sismondi’s ideas for the XXI Century, we will first approach the issue of wealth distribution, or more to the point, wealth concentration; which is already related to the title of his main economics work: New Principles of Political Economy or of Wealth in relation to the population.

Sismondi was the first philosopher to worry about wealth distribution among the population. He explains that Adam Smith -who he considers his teacher – was the first to demonstrate that work was the only source of value and that accumulated value constitutes wealth. But he explains that Smith didn’t approach the issue of how wealth was distributed among the population. Such an omission left an important void concerning the effects of the Industrial Revolution on the standard of living of the working population. That is his reason for the title of his main economics book. His purpose is to describe wealth distribution among the population that produces it, and to propose more equitable principles. What was then Sismondi’s lonely concern, is now, two centuries later, and a mayor subject of political debate.

In year 2014, according to research made by Oxfam and Credit Suisse and published by the French journal Le Monde, an 80 % of the world population has only 5,5 % of world wealth. It means that the other 20% of the population owns 94, 5 % of total world wealth. It seems a tendency that only gets worse.

Already in 2010, Tony Judt, in his last book Ill Fares the Land: A treatise on our present Discontents, which is a deep study in wealth distribution, stated that « in contrast to their parents and grandparents, children today in the UK as in the US have very little expectation of improving upon the condition into which they were born ». It reminds us of Sismondi’s description of the proletarian; that class of dispossessed people whose permanent role in ancient Rome was to furnish the arms necessary for production with their offspring: ad prolem generanda[1]. In fact, present inequality is against class mobility. The stratification of classes and wealth concentration are more marked in the US, which wants to be taken as the universal economic model. It is followed on wealth concentration by the Nederlands, Germany, France, Norway and Great Britain getting close. All of them members of NATO that request austerity to other NATO countries with better wealth distribution.

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A research in economic wealth distribution by Emanuel Saez and Gabriel Zucman, two specialists from the London School of Economics, published in Fortune on October 2014[2], found that there is no dispute that income inequality has been on the rise in the United States for the past four decadesIn America, the wealthiest 160,000 families own as much wealth as the poorest 145 million families, and that wealth is about 10 times as unequal as income. They argue that the drastic rise in wealth inequality has occurred for the same reasons as income inequality; namely, the trend of making taxes less progressive since the 1970s, and a changing job market that has forced many blue collar workers to compete with cheaper labour abroad. But wealth inequality is specifically affected by a lack of saving by the middle class.

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Today there is an increasing inequality with a much bigger dimension than in the XIX century. It grows due to three factors already denounced by Sismondi: a) tax inequality; b) foreign labor competition and c) lack of savings because overproduction causes overspending.

Always in Fortune, we find confirmation of great wealth inequality at the US in an article by Chris Matthews, were he states that wealth inequality is worse than you think… While inequality is a natural result of competitive, capitalist economies, there’s plenty of evidence that shows that extreme levels of inequality are bad for business.

Untitled4That was said by Sismondi two hundred years before; he insisted over and over that good salaries are necessary to mobilize and broaden the domestic market; basically what John Maynard Keynes repeated one hundred years latter. Very much what China is doing to increase its domestic market in order to achieve independent economic growth. That policy has taken 700 million Chinese out of poverty.

Sismondi also described how more wealth equality increases national consumer’s purchasing power, while increasing wealth inequality pushes towards export dependent economies, which is the main cause for imperialism.[3] But since world markets also have limits – he remarked- the universal competition, imposed by inequalities at home, causes displacement of workers abroad and grows into a world-wide trade conflict, which can degenerate into armed conflict. The proof that this kind of struggle still goes on are the debates that take place at the WTO in Geneva. All of them are related to opening of markets and erosion of policy space for national economic policies for autonomous development.

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Sismondi was the one that pushed aside Quesnay division of society into three classes and divided it into today’s perception of two classes in social and political dynamic: the working class and the capitalist class, which struggle to obtain a larger part in the benefits of production. It was Sismondi who discovered a surplus value [mieux value] from the workers input into production, which is appropriated by the capitalist class. Marx elaborated on that. Sismondi acutely comments that nations become richer when they increase their total revenue but not when a class usurps the revenue of another class.[4]

This observation can be perfectly well applied to modern and much advertised production criteria defined as Value Chains. This approach is intended for international production. Its value perception of the production process attributes to local inputs and local work, much less value and less retribution than the value attributed to Investment, Distribution and Intellectual Property factors.

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It is blatantly a case of a capitalist partner – in this case international corporations- usurping the revenue share the local partner in an international production. This concept tends also to lower the income of working classes in the developed world, since under this model they have to compete with the working classes of developing countries. As Sismondi repeated often Wealth is something good when it spreads its comfort over all classes; …But a State can be miserable even if a few individuals are accumulating colossal fortunes.[5]   Or when he said later A manufacturer that increases his revenue from what he trims from his workers salary does not add anything to the national revenue ; …The same income is well spender either by the rich or by the poor, but is not used in the same way. The first will substitute much more capital and create much less work than the second; it favours much less the people and consequently, aids much less in the increase of wealth reproduction.[6]

We have documented enough, for today, the modern economic importance of wealth and its relation to the population. It seems to be overlooked by the architects of political economy in Washington and Brussels, who lead the world economic system. But people in the streets of the US and Europe are beginning to be aware of it and also tired of it. They may be called Occupy Wall Street or Indignados or Front National or Syriza, but there is an evident popular reaction against wealth concentration, that will have political consequences. Their opposition may succeed, but their leaders should be reminded of Sismondi’s recommendation: Improved social order is in general advantageous for the poor as well as for the rich, and political economy teaches to keep that order by correcting it, not by overthrowing it[7].

World wealth distribution among nations

Besides domestic wealth concentration, there is also wealth concentration and unfairness at the international level. 15 nations have 75 % of the world’s wealth. It must be noted that all of those countries, with the exception of China , are   also much indebted, which hints that their wealth share comes from some sort of surplus value skimmed on resources from the remaining 182 countries that own only the 25% of the world wealth.

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It seems that there is a tendency for change in the world wealth distribution. China has now a 16 % share, while the US is reduced to a 13 %, but it must be remembered that the US has just 315 million (2014) inhabitants, while China has 1.357 (2013) millions, which gives the US an advantage in per capita wealth. But if we consider the external debt, the US has a per capita debt of US$ 58. 400 while China has only US$ 2.200.

Japan is third with a 9% of global wealth and a population of 127 millions, whose per capita debt is US$ 24.000. Germany, Italy, UK, France and Spain, have the biggest share from the EU economies and put together they amount to an 18% of global wealth; their added debts would be US$ 25,771 billions for a per capita debt media of US$ 80.500; but UK per capita debt is US$ 160,158. The weight of debt is oddly distributed. That there is a minority class that profits from debt is easily proven: the common citizen’s per capita debt is very often bigger than its net value.

The gigantic inequality in world wealth slows the world economy, because as Sismondi said, wealth concentration causes economic growth stagnation.[8]

We will abandon the wealth distribution theme and will comment on other pertinent modern issues, where Sismondi is still a guide. We will only mention some present concerns and quote pertinent parts from his Nouveaux Principes d’economie politique- his main economics book, even if there is a later one (1837) with the title of Études sur Economie Politique.

Nouveaux Principes d’Èconomie Politique

The First Book of Nouveau Principes is over the object of Political Economy and the origins of that science. In the first lines of the First Chapter Sismondi states that the science of government has, or should have, as its goal the well-being of men in society. It looks for the means to assure the highest possible well-being that is compatible with their nature; it tries at the same time to have the largest number possible of people as participants on such well-being[9]….In none of the political sciences this double goal should be forgotten by the legislator. We believe those principles to be still a valid guide for all governments, but unfortunately they are not always applied. The norm seems closer to the promotion of private special interests, at public expense.

We do not intend to cover here all of Sismondi principles applicable to present socio-economic problems, so we will limit ourselves to only some outstanding international modern issues.

Fair share of scientific and technological progress

Untitled8Now, as in Sismondi’s time, science and technology are changing the procedures of production in goods and services. It causes productivity increases. Now, as then, instead of being a blessing for all, it becomes cause of unemployment and displacement of people with hard won skills. Now as then, gains in productivity are not shared among workers and owners. There is unfairness in the distribution of the benefits. So the increase on productivity, instead of expanding markets by increasing purchasing power, becomes increased wealth concentration, which restrains markets.

Automatic procedures increase productivity and profits for invested capital, but make employment precarious and menaces workers with redundancy, so there is a tendency to accept even lower wages. This phenomenon exists since the Industrial Revolution, since Sismondi’s time. He observed it and said that improvements in science and technology were a progress for the whole of humanity and should be shared among those that participate in the production process. He proposes an obvious way to share the benefits of increased productivity either with increases in salary or increases in leisure time, with the same salary. What is wrong today is not the discoveries but the unfair sharing, the unfair partition of the benefits.[10] 

On Value-Added Tax or Tax on Consumption

Untitled14Consumption tax systems exist in more than 120 countries around the world, including every OECD nation, other than the United States. Rates range from 3 percent to 25 percent.  Value-Added Taxes (VAT) are charged on the majority of transactions at every level in the supply chain from production through the final sale of the product to the consumer. The levying of the tax is almost completely hidden to the final consumer. These taxes are not meant to be a cost to businesses and are generally recoverable by the producer and the distributor. Ultimately, it is the end consumer (mostly working people with salary) that bears the entire cost of the VAT. The International Monetary Fund, The World Bank group and other international financial institutions recommend the use of VAT or consumer taxes as a simpler way to increase fiscal income. It is also the official policy of the European Commission, which has set a minimum of 17%.

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Sismondi expands himself on this kind of tax which he, appropriately, calls tax on consumption. He begins by explaining how there are many activities that classify as consumption but are very difficult to tax, like those that are consumed at the source or those that are of domestic production. He objects the widespread use of consumption taxes, because we never know who will end up paying it….they get always heavier in relation to incomes as they descend the wealth scale through the different classes, until reaching the poorest one, that of the industrial workers. Their expense is composed almost always of products that are bought and introduced into the cities, and there is not any part of it that can escape the tax.

It is unfair and inhuman to propose to eliminate direct taxes and to collect all of the State income from taxes on consumption…In a certain sense it would be like going back to the feudal system, in which the rich didn’t pay any tax.

Taxes on consumption raise the price of everything. Those that live from their work, which are the most numerous class, would not have enough to live….Since total sales will diminish it will be necessary to rise the price of every merchandise, in particular the essential ones, because those that sell them impose their law on the buyers that can not do without them. The increase in food prices will put pressure again on salaries and profits…competition in foreign markets will become more difficult; growth will stop…Then he mentions Ricardo’s trickle-down economics which is still the official US economic policy and says: Lets avoid believing that by taxing primary need goods, in which the poor advance the payment, the rich will end up reimbursing them.[11]

 

On International free trade agreements

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The ancestor of bi-lateral or pluri-lateral trade agreements, presently called Free Trade Agreements or Partnership agreements, are the trade monopolies that were given to specific companies like the British East Indies Company. Today the purpose still is, regardless of the labels, to administer trade in a preferential and discriminatory manner. Sismondi already had a contrary opinion on that kind of trade. He stated that when it concerns commercial wealth in general, governments have only seen the traders; they believe that their interest is equal to that of the nation as a whole; it is always in agreement with their advice that they have adjusted their legislation. They have always tried to make them rich as soon as possible. …agreements can be obtained – sometimes as a favour from a foreign government, or because of fear or because of hope to reach an alliance – to give an advantage to traders of a particular nation over those of any other, …that is the goal of those trade agreements that, during half a century, have been an important matter of European policies.


An exception on the import tariffs that are paid by other nations …gives without doubt to the nation that obtains it, almost all the trade of the nation that grants it…When the trade agreement implies the concession of reciprocal exemptions, every country could find out that it acquired too expensively the monopoly given to its producers, in exchange of the monopoly given to foreigners against his own consumers…No trade agreement can ever satisfy the greed of traders that always want a monopoly.[12]

That timeless last remark by Sismondi, describes well the aspiration of those behind the push for trade negotiated agreements by governments. While describing the trade monopolies that the European powers imposed on their colonies, he has a very up-to-date valid proposition that implies already an idea similar to that of the European Common Market and which is contrary to the discriminative and exclusive trade enclosed in the Trans-Atlantic Trade and Investment Partnership – TTIP- proposals by the US to the EU.

He says : a free trade of the whole of Europe with all of it colonies would have been, without doubt, more advantageous for all of them, because it would have increased infinitely the market of the first and accelerated the development of the second.. It is something that the EU, as a whole, is somehow now attempting now with APC countries (former colonies).

The TPP and TTIP agreements affect not only trade issues, but also non-trade areas that will immensely impact the lives of citizens in all participating countries. It is the reason to have them negotiated in secret, but the details are well known to specialists because of other similar agreements like NAFTA, CAFTA et al. The recent uncovering of the TPP clauses by New Zealand confirmed that it has the same clauses. The Mexican and Canadian experience on NAFTA can be then helpful to forecast what the probable consequences are.

 

On export subsidies

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At WTO in Geneva, the theatre of multilateral trade negotiations, the Doha Round was accepted, only in order to eliminate price distorting subsidies on agricultural exports. Negotiations on all other aspects of trade are on stand-by because there has not been agreement on the elimination of agricultural exports subsidies, which are mainly from the US and to lesser degree from the EU.

The problem is not new. There have always been economies that are not based on their domestic market and whose growth depends on international trade, meaning, based on exports. It is a problem that already existed at the beginning of the XIX century and Sismondi analysis concerning export subsidies is as valid now as it was then. When all the other means for expanding foreign markets were found to be insufficient, some governments have gone to even pay their traders in order to allow them to sale at a better price; the more this sacrifice was odd and against the most simple calculations, the more it was attributed to a high policy. This subsidy is a reward that the state gives the manufacturer because of manufacturing and it replaces benefits : as a result it encourages the continuation of industries that produce no revenue; and when it is given to exports, the government is paying its traders at the expense of its citizens, so foreigners can buy at a better price. We suppose that this manoeuvre is frequently done in order to bankrupt foreign factories whose competition is feared. This sacrifice seems to be very much out of proportion with the proposed goal; the people that during ten years, would have paid to discourage its rival, runs the risk, if it is discontinued on the eleventh year, to find them ready to start again. This may be the reason by which the US and the EU find it so very difficult to scrap or at least reduce the subsidies to their agriculture and above all, to their agricultural exports. Without those subsidies, that lower international prices, some countries would stop importing and could start exporting again.

Continues Sismondi, Subsidies as a policy can only be justified when it is given to goods whose fabrication is considered necessary enough for the defence, or for feeding a nation, so its production must be assured at any price, like weapons, ship rigging equipment, medicines, food from the country or even those whose culture is still unknown. To accumulate wealth is not the main goal of a nation and it must be sacrificed to anything else that warrants the security and the health of a nation.[13] In this paragraph Sismondi inaugurates the principles for an autonomous defence industry as well as for food sovereignty. Those principles have been around since the Napoleonic Wars. Recent EU sanctions on Russia have put them at the forefront of present Russian and Chinese economic policy.

On overproduction and consumption

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Overproduction is Sismondi’s bête noir and is also very much a present concern.

David Ricardo and Jean Baptiste Say stated that production could be unlimited; that there were no limits to production; that every production creates its own market. That idea is still taught as basic truth in today economics courses. It is the basic theory of the so-called Supply Side Economics, which guides US economic policies since President Reagan

Sismondi strongly objected. He said that the abundance of capital pushed owners to concentrate investment for production in big factories. The industrial concentration created unemployment, which restricted the internal market and pushed production to be exported to other countries.[14] It resembles the Hecksher – Olin theorem on international trade patterns: countries export products according to their most abundant resource: be it capital intensive or labour intensive ones. But Sismondi points out that international markets are also limited and that those exports are often sold by dumping, which ruins local production. It is a frequent complains that is heard today at international trade forums, such as WTO or UNCTAD in Geneva…

Sismondi quotes Ricardo when he said that M. Say [Jean Baptiste Say] has proven, in the most satisfactory manner that there is not a capital, however big, that can not be employed in a country, because the demand of products is only limited by production[15].

Sismondi protests and contradicts them: Their mistake is that they see annual production as the same thing as income…. With such a principle it is impossible to understand the most demonstrated fact in the whole history of trade ; market saturation …it is impossible to explain how is it that capital profit and salaries go down at the same time that production increases.[16]   It is the same effect that is causing in the stock market the over-production of money.

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Some of today problems of over-production are linked to the Say and Ricardo’s mistakes. Marx agreed with Sismondi’s explanation of over-production as the cause of the periodical crisis of the capitalist system. So do also other critics of capitalism from the socialist camp, like Mikhail Bakunin, Rosa Luxembourg and nowadays by economists like Robert Brenner or J.A, Hobson. Both explain present recurrent economic crisis by overproduction, which causes as well as a wasteful tendency that goes against the idea of Sustainable Development.

Robert Brenner says A main cause, though not the only cause, of the decline in the rate of profit has been a persistent tendency to overcapacity in global manufacturing industries.[17]It is worth reading it, because his present day descriptions are similar to those of Sismondi, only that Sismondi’s description is closer to the primary root.

J.A.Hobson explains something that Sismondi said two hundred years before. Hobson states that over-production and subsequent under-consumption spark a complex chain reaction of events that result in imperialism. He attributes the 1929 crisis and subsequent depression to an excess of industrial and farming investments, which were financed by banks and created a wide over-production. Unsold products brought bankruptcies and emptied deposit accounts, which dragged the banks along. Sismondi describes the process: We may have noticed that capitals can accumulate faster than the increase in the demand for their production, that in such a case the interest that they carry diminishes, and that way they push production further, at the same time that they push consumption down ; that every transformation of working capital into fixed capital implies a future production, without equivalent consumption; and that if society continues some time still in its prosperity race …there will be very soon, because of capital accumulation, a frightening lack of proportion between production and consumption. It seems that terrible scourges are necessary to carry human societies back to harmony, .It could be that there is a time in the progress of nations, where destruction of existing wealth is necessary for the creative activity to start again. It is quite and very much Joseph Schumpeter’s, Creative Destruction theory.[18]

On economic policy fairness

When Business Schools are confused in the public mind with academic centres for the study of economic policy, it is useful to remind society of Sismondi’s keen distinction: Political Economy is not a calculus science but a moral science.[19]

[1]    Les Romains appelèrent prolétaires ceux qui n’a-vaient point de propriété, comme si, plus que

tous les autres, ils étaient appelés à avoir des enfans : Ad prolem generandam.   Sismondi. Nouveaux Principes, Livre VII, Chap. II, pag. 264.

[2]          http://fortune.com/2014/10/31/inequality-wealth-income-us

[3]    L’ égalité des jouissances doit avoir pour résultat de donner toujours plus d’étendue au marché des producteurs ; leur inégalité, de le resserrer toujours davantage. …la concentration des fortunes entre un petit nombre de propriétaires, le marché intérieur se resserre toujours plus, et l’industrie est toujours réduite à chercher ses débouchés dans les marchés étrangers, Sismondi. Ibidem.Livre IV, Chap.IV, pags. 357 – 361

[4]    Les nations s’enrichissent quand elles augmentent leur revenu, mais non pas quand le revenu de l’une de leurs classes est usurpé par l’autre. Sismondi ibidem. Livre IV, Chap.V, Pag.378.

[5]    La richesse est un bien lorsqu’elle répand l’aisance dans toutes les classes ; …Mais un État peut être misérable encore que quelques individus y accumulent des fortunes colossales.

[6]    Le fabricant qui augmente son revenu de tout le salaire qu’il retranche à ses ouvriers, n’ajoute rien au revenu national….Le même revenu est bien employé par le riche et par le pauvre, mais il n’est pas employé de la même manière. Le premier remplace beaucoup plus de capital et beaucoup moins de travail que le second ; il favorise beaucoup moins la population, et sert par conséquent bien moins à la reproduction de la richesse.

[7]    L’ordre social perfectionné est en général avantageux au pauvre aussi bien qu’au riche, et l’économie politique enseigne à conserver cet ordre en le corrigeant, non pas à le renverser. Sismondi. Ibidem. Livre I, Chap. II

[8]    Aussi ce que nous avons vu au commencement de ce chapitre, que le marché intérieur ne pouvait s’étendre que par la prospérité nationale…. l’augmentation du débit universel ne peut résulter que de la prospérité universelle. Sismondi. Nouveaux Principes d’économie politique, Livre IV, Chap.IV. Page 362.

[9]    La science du gouvernement se propose ou doit se proposer pour but le bonheur des hommes réunis en société Elle cherche les moyens de leur assurer la plus haute félicité qui soit compatible avec leur nature ; elle cherche en même temps ceux de faire le plus grand nombre possible d’individus à cette félicité. Dans aucune des sciences politiques on ne doit perdre de vue ce double but des efforts du législateur Sismondi. Nouveaux Principes d’économie politique, Livre I, Chap.I.

[10]  Supposez tous les hommes partageant également entre eux le produit du travail auquel ils auront concouru, et toute découverte dans les arts sera alors, dans tous les cas possibles, un bienfait pour eux tous ; car, après chaque progrès de l’industrie, ils pourront toujours choisir, ou d’avoir avec moins de travail un plus long repos, ou d’avoir avec le même travail plus de jouissances. Aujourd’hui, ce n’est pas la découverte qui est le mal ; c’est le partage injuste que l’homme fait de ses fruits. Sismondi. Ibidem. Clarifications, Pages. 433 – 434.

[11]  C’est un grave inconvénient des impôts sur la consommation, qu’on ne sache jamais, en les établissant, par qui ils seront payés en dernier analyse. …que ses droits s’élèvent toujours plus dans leur proportion avec les revenus, à mesure qu’on descend vers les clases plus indigentes, et que la plus malheureuse de toutes, celle des ouvriers manufacturiers , dont la dépense se compose presque uniquement de denrées achetées et introduites dans les villes, n’y échappe pour aucune partie de son revenu.

C’est donc une proposition très-injuste et inhumaine que celle qu’on a souvent répétée, de supprimer toutes les impositions directes, et de lever la totalité des revenus de l’État par des impôts sur la consommation ; …à plusieurs égards ce serait rentrer dans l’ancien système féodal oû le noble ne payait rien ;…

D’autre part, lorsque les impôts sur la consommation ont élevé le prix de toutes choses, les hommes qui vivent de leur industrie, et qui forment une classe nombreuse parmi les consommateurs, ne trouvent plus dans l’industrie des ressources suffisantes pour vivre….Comme la vente totale diminue, il faut, pour qu’ils vivent, que chaque article leur rapporte davantage,…mais surtout celui des denrées de première nécessité, parce que leurs vendeurs font la loi aux acheteurs, qui ne peuvent s’en passer. Le renchérissement de ces denrées réagit de nouveau sur les salaires et les profits. … Gardons-nous de croire qu’en chargeant d’un impôt les objets de première nécessité, si les pauvres font l’avance, les riches finiront par le rembourser ! Sismondi. Ibidem , Livre VI, Cahp. VI

[12]  En général, les gouvernements, dans la richesse commerciale, n’ont vu que les marchands : ils ont cru l’intérêt de ceux-ci constamment conforme à celui de la nation ; et c’est presque toujours d’après leurs conseils qu’ils ont réglé leur législation. Ils ont cherché à les rendre riches le plus tôt possible ; …mais on pouvait quelquefois, par la faveur d’un gouvernement étranger, par la crainte, pas l’espérance d’une alliance, des avantages pour les commerçans d’une nation de préférence à toute autre,…C’est le but des traités de commerce qui, pendant un demi-siècle, ont été un objet important de la politique européenne. …Lorsque le traité de commerce portait une concession d’exemptions réciproques, chaque état aurait dû trouver qu’il achetait trop cher le monopole accordé à ses producteurs, par le monopole accordé aux étrangers contre ses consommateurs. …Aucun traité de commerce ne peut satisfaire pleinement l’avidité des marchands qui désirent un monopole. Nouveaux Principes d’Economie Politique. Livre IV, Chap. IX, pages 413, 414, 417, 418, 421.

[13]  Tous les autres expédiens pour étendre le marché des producteurs s’étant trouvés insuffisans, quelques gouvernemens sont allés jusqu’à payer leurs marchands pour les mettre en état de vendre meilleur marché ; plus ce sacrifice était étrange et contraire aux calculs plus simples, plus on l’a attribué à une haute politique. La prime est une récompense que l’état décerne au fabricant en raison de sa fabrication, et qui lui tient lieu de bénéfice : elle encourage par conséquent à suivre une industrie qui ne donne aucun revenu ; et lorsqu’elle est accordée sur l’exportation, le gouvernement paie ses marchands aux dépens de ses sujets, pour que les étrangers puissent acheter d’eux à meilleur marché. On a supposé que cette manouvre a été souvent suivie pour ruiner des établissements étrangers dont on redoutait la concurrence. Le sacrifice paraît bien disproportionné avec le but qu’on se serait proposé ; le peuple qui pendant dix ans, aurait payé une prime pour décourager ses rivaux, risquerait, s’il la discontinuait à la onzième année, de les trouver tout prêts à recommencer.

Une prime ne peut se justifier en politique, que lorsqu’elle est accordée sur la fabrication d’une marchandise que l’on juge assez nécessaire ou à la défense, ou à la subsistance d’un peuple pour vouloir s’en assurer à tout prix la production, comme des armes, des agrès de navire, des médicamens, des denrées propres au pays, quoique leur culture y soit encore inconnue. L’accumulation de la richesse n’est pas le but principal de l’existence d’une nation, et elle doit être sacrifiée à tout ce qui garantit sa sûreté ou sa santé.

[14]  L’effet de l’augmentation des capitaux est en général de concentrer les travaux dans de très-grandes manufactures….Ainsi donc, par la concentration des fortunes entre un petit nombre de propriétaires, le marché se resserre toujours plus, et l’industrie est toujours plus réduite à chercher ses débouchés dans les marchés étrangers, où de plus grandes révolutions la menacent. …une confiance générale de tous les producteurs, qu’ils vendraient aux étrangers, avait partout élevé la production au-dessus de la demande que l’offre d’un grand rabais que les producteurs d’un pays viennent faire aux consommateurs d’un autre, étant en même temps un arrêt de mort qu’ils lancent contre les producteurs de ce même pays….Ainsi,…que le marché intérieur ne pouvait s’étendre que par la prospérité nationale, et l’augmentation du revenu national …l’augmentation du débit universel ne peut résulter que de la prospérité universelle…. Le marché du fabricant peut donc s’étendre …par le progrès de la civilisation, de l’aisance, de la sûreté et du bonheur chez les nations barbares. Ibidem. Livre IV, Chap. IV pages 361, 362, 363

[15]  Sismondi quoting Ricardo : M. Say a prouvé, de la manière la plus satisfaisante, dit-il, qu’il n’y a point de capital, quelque considérable qu’il soit, qui ne puisse être employé dans un pays, parce que la demande des produits n’est bornée que par la production. Sismondi. Ibidem. Livre IV, Chap. IV, pag.366.

[16]  L’erreur dans laquelle ils sont tombés tient tout entière à ce faux principe, c’est qu’à leurs yeux la production annuelle est la même chose que le revenu. …..Avec ce principe, il devient absolument impossible de comprendre ou d’expliquer le fait le plus démontré dans l’histoire du commerce ; c’est l’engorgement des marchés. …il est impossible d’expliquer comment le profit des capitaux et le taux des salaires baissent souvent en même temps que la fabrication augmente. Sismondi, Ibidem, Livre IV, Chap. IV, pages 336, 367

[17]  Robert Brenner, Overproduction not Financial Collapse is the Heart of the Crisis: the US, East Asia, and the World. http://www.japanfocus.org/-Robert-Brenner/3043/article.html

[18]      Toutefois, on peut déjà avoir remarqué, que les capitaux peuvent s’accumuler plus rapidement que les demandes pour l’ouvrage qu’ils font produire n’augmentent; que dans ce cas l’intérêt qu’ils portent diminue, et qu’ainsi ils font produire plus , en même temps qu’ils font consommer moins; que chaque transformation de capital circulant en capital fixe entraîne la création d’une production future, sans consommation correspondante; et que, si la société continuait quelque temps dans son cours de prospérités, sans pouvoir s’étendre sur des régions nouvelles, et faire naître un nouveau peuple sur une nouvelle terre , il y aurait bientôt, en raison même de l’accumulation de ses capitaux , une disproportion effrayante entre ses productions et sa consommation. Il semble que de terribles fléaux sont chargés du soin de ramener à l’ordre les sociétés humaines, ….De même il y a peut-être telle époque dans le progrès des nations, où la destruction de la richesse existante est nécessaire pour que l’activité créatrice puisse recommencer à s’exercer.. Sismondi. Ibidem. Livre VI, Chap. VII, pages 248, 249.

[19]  Aussi, l’économie politique n’est-elle pas une science de calcul, mais une science morale. Sismondi. Ibidem. Livre III, Chap. XIII, page 313.

Money as a public good

By Umberto Mazzei

Geneva, 14.03.2016

 

It seems that today there is a policy to privatize money, for banks to create and own all the money. We are standing far away from Adam Smith, Ricardo and Sismondi when they stated that only work creates value and that money is only the mean to account it. They described capital as an amount of useful things produced by work and which can be traded. Since then, money was considered as just another good which is useful to express the capital value and facilitates trade.

 

The difference between money and capital, established two hundred years ago, is the basis of economic science and has not ceased to be true, what happens now is that capital and money are being confused with credit and debt. Sismondi already said that money is the wealth acquired through work, and it is part of the circulating capital. Because of a confusion of money with capital …it has been believed …that national capital can be increased with fictitious money.

 

Further confusion between debt and wealth, which is so common in today’s economy, originates- according to Sismondi – in the United States; since its first independent government; since the George Washington Administration, in which Alexander Hamilton was the first US Treasury Secretary. Sismondi says “how can debt be mistaken for wealth? It is impossible to be more completely deluded than Alexander Hamilton, 1st United States Secretary of the Treasury, a much appreciated man. In its report to the House he says: “There is a kind capital … in the US, which excludes any concerns about the lack of capital: it is our financed debt” and he devotes 20 pages to confuse active with passive A this commentary he added, in the next chapter, something that shows a consistent behaviour by banks in the United States: American banks  … incite speculative activities with easily obtained money.

 

Money as mean of payment

 

According to the three classics of modern economy, money facilitates trade, because it is a neutral standard that serves as a reference to what is always a subjective exchange of the products of labor. An exchange in which each actor perceives a greater value in what he receives than in what he delivers. To stabilize the value received and to constitute in itself an intrinsic guarantee, rare metals which can be refined to a homogeneous and divisible quality have been used from time immemorial.

 

Sismondi explains that « gold and silver were chosen because they are both divisible to infinity and susceptible of reconverting without loss; imperishable throughout time that they are conserved, which may be purified to a degree that makes themselves perfectly equal and in perfectly similar amounts ». It is likely, that they were also chosen because some magical association with the colour of the sun reflections and the pale glow of the moon, which are the first two most obvious sources of vital effects. The division of these metals into pieces of identical weight and quality is what we call currency or money. The scientific and technological progress in the wedging allowed taxing on them inscriptions that describe accurately their weight and quality. The guarantee of veracity was assumed since antiquity by governments, because of that they were necessarily attributed to the monopoly of wedging. Up to this point there is complete coincidence among the three famous classic economists and from there on begin their differences.

 

Smith does not want government intervention to go beyond guaranteeing the money value, the wedging. Ricardo doesn’t want it either and he even considers the paper notes issued by private banks as the perfect form of money: The currency is in its most perfect state when it consists only of paper, but a paper whose value is equal to that of the sum of gold that it says to represent. The use of paper instead of gold replaces a very expensive agent, for one that costs very little; which places the country, without there being any loss to individuals, in the condition of being able to exchange all the gold it used before for that purpose, against raw materials, utensils and livelihoods, whose use increases both wealth and the joys of the nation.

 

Sismondi mocks Ricardo and says that it reminds him of the English Admiral Anson who noticed   in his trip to China, that the fortifications made along the river of Canton, and intended to impose respect to that power, although they had very good appearance from far they were made with crushed paper and defended by cardboard cannons. The Chinese had reasoned more or less as M. Ricardo. The use of paper instead of copper, for the artillery, replaces a very expensive material by another that costs very little, which puts the country, without there being any loss to individuals in a condition to exchange all copper used before for their cannons against raw materials, utensils and livelihoods, which increases both the wealth and the enjoyments of the nation. This will be very good throughout the duration of the peace, but at the first war, it will known that the paper shields and the cardboard cannons are not as worthy as those of silver, copper and bronze.

 

The similarity that Sismondi finds between paper money Ricardo with the cardboard cannons that Admiral Anson saw in Canton, can also be found in the announcement that both, the Federal Reserve and the European Central Bank, are planning to withdraw from circulation the high denomination banknotes, those of US $ 100 and € 500 and € of 100, to force the circulation of money to be made through banks. This idea comes from neo-liberal economists like Larry Summers and others, like Kenneth Rogoff, who even wants only electronic money, so that only by spending it money can be removed from the banks. This would allows central banks to lower the interest rate to down to zero, which is actually negative rate, so banks can capitalize in their favour the  devaluation of money.

 

The pretext would be that high denomination bills facilitate the drug money laundering. Regardless of the fact that retail drug trade is actually done with low denomination bills, the result of removing high denomination bills would be to concentrate on banks all kinds of savings and to accentuate the tendency to make them the forced intermediaries for any transaction. There are already limitations on the amounts that can be withdrawn from peoples own deposits, which is of a doubtful legality, but that extra measure seeks to prevent any independence and privacy in personal spending. What will happen, in a world without physical money- as it is highly probable -, most banks go bankrupt? How will people buy or sell if their money and savings consist only on electronic impulses recorded in the banks virtual file accounts? When the financial crisis comes, the plastic payment cards that move electronic consumption will be as useful as cardboard cannons mentioned by Admiral Anson.

 

As for the pretext of combating money laundering by leaving the public with only small bills and by giving the banks the control on the flow of trade, nothing could be more false. There is one of the largest banks, the HSBC, valued at US $ 215 billion, which is linked to the drug trade from the start. It was created, in 1865, precisely to handle the money from the opium trade that the prudish Victorian England imposed by war to the China of cardboard cannons. Today, its frequent headlines on money laundering scandals and its 556 subsidiaries in tax havens show him as an institution true to its origin. Three years ago it was fined US $ 1, 9 billion for laundering drug money. Right now the US government is accusing it of laundering US $ 881 million from drug cartels in Mexico and Colombia. The backward thing is that, although criminal offences are by definition made only by natural persons, when bankers commit crimes in association with drug traffickers, the traffickers are sent to prison, but the bankers are not personally charged and it is the legal entity of the bank that is held accountable and punished with a fine; a fine which is always lower than the gains. It could be seen as if the government is only claiming his share.

 

According to the World Drug Report of the United Nations (2005) the profits of drug trafficking are an important part of the global financial system.  No wonder the same report notes that since the US occupation of Afghanistan, the country became the source of 87% of opium. The report also states that in year 2005 the illegal drug trade was worth US $ 177 billion. The latest UN figures (2013) put it at 320 billion per year. Alain Labrousse,at the Geopolitical Drug Dispatch, estimates that about 80% of the profits are laundered in rich countries banks Antonio Maria Costa, head of the Office of the United Nations crime and drugs, testified that it was only laundered drug money and corruption which prevented the collapse of the global economy during the crisis of 2007-08. It is not precisely the grandmother which treasures € 500 bills to give a present to the grandchildren on their birthdays the one who encourages money laundering.

 

The paper money fraud

 

For Sismondi Money is wealth acquired by labor, like all other values, and so, like them, it is a part of the capital circulation therefore it is a public good of great importance because it guarantees the value of all other goods and services. He says money is the road for trade; so for that reason governments should intervene to prevent fluctuations in their value and should monitor its use. That is the reason for the existence of central banks. Then he adds based on his experience of the abuses by banks that Smith never knew and became today quite visible: the principle that the law should not regulate private banks is totally false. These banks borrow national money, which is a public property, one that is and must always be under the supervision of the sovereign authority

 

Sismondi says that Ricardo’s proposal to replace the circulation of intrinsic value coins with a paper circulation is due to confusion between cash and equity. Ricardo’s ideas shaped the US economy since its independence and paper money circulated there since the very beginning. In England paper money was used for the first time during the British banks crisis of 1826, when all the metallic money was collected. Since then the Anglo-Saxon countries tend to sustain a circulation of paper money, which after the First World War they promote for the rest of the world.

 

Sismondi principles which require the State to be the guarantor of the value of money earned with work, have become quite uncomfortable for present practices and are being deliberately ignored. It is not the last reason for the study of his teaching to be abandoned and for him to be ignored. Today citizens receive in return for their work and their savings, papers with a monetary denomination whose value in real terms, in terms of their purchasing power, fluctuates always downward. The role of central banks as guarantors of the value of money is something that seems completely forgotten. So much that devaluation or subsidies are used to promote exports, which according to Sismondi is to pay its own merchants in order to enable them to sell cheaper, but at the expense of all the other subjects. All along his works Sismondi opposes manipulation of currency value and prices in order to favour a minor sector of the national economy at the expense of all others, as is since then the case for exporters and as now when everything is sacrificed before finances sector.  

 

A recent example was given by the European Central Bank -BCE – Chaired by Mr. Mario Draghi, a former Goldman Sachs high executive officer, who is taking over from the Federal Reserve the emission of  Quantitative Easing (creating money without funds), when it began to affect the value of the US $. To the ECB it seemed appropriate to issue one trillion and six hundred billion Euro in a stagnant European economy. Mr. Draghi, answering criticism over the issuance of such an enormous quantity of money which sabotaged the value of the Euro, replied that his intention is to bring down the euro until parity with the US dollar. A statement obviously made to precipitate a flight from the Euro to the US Dollar. The latest feat of Mr. Draghi is to take over from the Federal Reserve in charging zero interest for loans from the European Central Bank, which is actually a negative interest rate: it is to pay for lending. The measure, announced on March 10, 2016, under the pretext of promoting investment and employment, will have the real effect of sustaining the fictitious values of the stock markets bubbles created by the speculation of the financial sector and to delay their explosion, so that bank executives continue to collect their millions in awards.

 

Central bankers should listen to Sismondi when he says that economic stagnation is not due to lack of money, but to the fact that the consumer money does not replace the capital fast enough. The whole Fifth Book of his New Principles of Political Economy is devoted  to money and has the title of its Chapter IV precisely states that interest is the product of capital and not of money. That statement deserves some thoughts by Mr Mario Draghi of the ECB and by Ms. Janet Yellen of the Federal Reserve, whose entities – which still are main pillars of the world economy – emit astronomical amounts of money without funds and in order to lend to the banks at zero interest rate. A worthy reflexion only in the event that they could want to improve the world economy and not the profits of the bankers.

 

A private and universal fiat currency

 

The principle that the State should regulate and monitor private banks and intervene in the management of money, because it is a public matter of the highest concern was never better justified. The outrages committed by banks have only increased since 1913. Then a group of private banks constituted the Federal Reserve in the United States and converted US money into private property by replacing the government – specifically the US Treasury – in issuing it. Since then the issue of US money is not the US Government concern but that of a consortium of private banks, which decides on monetary policy, issues the amount of money it deems appropriate and lends it, with interest, to the Federal Government. It can be feared that these functions are carried out in their banks exclusive benefit.

 

After the Second World War the US privatization of money started to expand to the rest of the world. At Bretton Woods the US guaranteed to comply with the Ricardian condition to keep a paper money whose value is equal to the sum of gold that it says to represent. In exchange of a formal pledge by the Federal Reserve to a gold standard of US$ for ounce of gold it’s US$ would be used as the international reference currency. That lasted for 25 years, the time that lasted the US advantage of being the only economy favoured by the damage caused by two world wars.

 

In 1973, when their trade balance was already in deficit, the United States reneged on its gold standard and since then the world trades and accumulate reserves in US $, issued by the Federal Reserve without any value guarantee. That same year the United States achieved from OPEC countries the engagement to sell oil only in US $. Since then the US$ is a universal fiat money which is issued as required by the banks who own the Federal Reserve. As Emmanuel Todd said in Apres l’EmpireAmerica is no longer essential to the world for its production but for its consumption … The United States created a Keynesian world, like that of the Egyptian pharaohs, in which America would now be our pyramid, maintained by the work of the whole planet. Their trade deficit keeps on because they pay their purchases in their currency, which has such a magical behaviour that some economists have deduced that the economic role of the United States is no longer, like other nations, to produce goods but money.

 

The universal bank fraud

Sismondi already said, when he spoke of the United States and England two centuries ago: Their bankers, because of their credit, seem to have endless capitals … That credit seems to have a creative power, and speculators … are given to illusions which are dangerous for them and for the states that believe in them … Every day a new speculator presents a gigantic project … if he manages to drag the country’s richest capitalists, he can turn his speculation into a national business That kind of national business which today has attracted the richest capitalists – banks and great corporations – is speculation in the stock market. There, securities are traded which are only badly warranted credit. In general, those are but variations on the old trick known as Ponzi scheme, in which credits are sold whose profits are paid by issuing and placing more credit (debt). That is what stocks bubbles actually are. The mechanic procedure is to intensively buy some securities to inflate their value before selling them to investors, in whose hands they explode.

 

This is an old fraud described already by Sismondi, as Professor Fabrizio Bientinesi, from the University of Pisa, says in an important article entitled Sismondi and the dangers of the financial system . In that article Bientinesi points out that after the Napoleonic wars, auto financing, which was  previously the norm for businesses and which contributed to regulate investment according to demand, was supplanted by the use of credit and credit as such, has virtually no limit. Hence the final passage to international finances as a system that guarantees its own existence at the expense of the rest of the economy.

 

Bientinesi quotes Sismondi, in his Etudes sur les Sciences Sociales and his phrases are very pertinent today, because nothing has changed. Sismondi says: “Bankers that negotiate loans for Greece, for the new states of America, for Spain or Portugal, in the absence of a guaranteed income provided by the interests, imagined the another one; to keep in their hands from the very funds that they advance to the governments, a portion of capital that was enough to pay the interest on the first two years. Thus they imply that after the crisis that is to be overcome, the state will find new resources; but they are rather counting on the regularity of those first payments to illusionate the mass of the capitalists, so they come forward to buy all the coupons they have upon themselves, when they sell them.

 

These frauds were repeated a hundred years later speculating with debts from economies affected by the First World War and the reparations required by the Treaty of Versailles. Those speculations contributed greatly to the 1929 crisis and following recession. As a result of that crisis, during the Franklyn D. Roosevelt Administration, the United States approved rules protecting depositors from such fraud, including the separation between savings banks and investment banks. That and the War economy that continued during the Cold War gave the West international financial stability until the time when Ronald Reagan in the US and Margaret Thatcher in UK began to deregulate banking activities. However, the emotion of regulation that still protected the savings depositors from speculation and fraud took place in the US under the William Clinton Administration.

 

Since then the banking activity, with the natural support of the consortium which is the Federal Reserve, unleashed a speculation of every type of paper that led to the financial crisis that exploded in 2008. A crisis in which in order to avoid the bankruptcy of the speculators, the Federal Reserve and other central banks used public money, issued money without funds and borrowed money from the banks to give money to the very same bank…and save them from bankruptcy. Between 2008 and 2014 the Federal Reserve issued 3 trillions of US $ – i.e. public debt – with no other object but to save the banks from their sorry speculations. In 2015 the European Central Bank took over issuing € 1.6 trillion so the carnival on the stock markets could keep on.

 

Graph 1. Federal Reserve emission of “Quantitative Easing» 2008- 2014

Captura de pantalla 2016-07-18 a las 14.24.49

 

A carnival where financial wizards pronounce technical sounding English spells to transfer the savings from the 99.5% of the population, to an already rich 0.5%. A misguiding jargon where Quantitative Easing means issuing money without funds or giving public money to the banks; Default Equity Swaps  is mutual guarantee on unredeemable debts; Sub-prime mortgages means mortgage without real collateral. These and other euphemisms for the word fraud are sheltered under the larger term Derivatives, which are bets that crisscross on the stock market. According to the Bank for International Settlements in Basel, the Derivatives rather than decrease after the crisis caused by them have doubled. By 2015 they reached a figure close to US $ 800 trillions, with a daily trading of around 25 trillions. To give an idea of their excess over real economics, we remind our readers that the annual US GDP is US $ 18 trillions.

 

It is impossible to pay the amount of debts owed by the banks, but the Fed and the ECB seek to delay the collapse by squeezing the 99.5% of the population, until the of banks directors keep on  making money on their speculative bets. Meanwhile, bankers commit other clearly criminal offences. Because of the dimensions of their crimes we believe that many among that 0.5% favoured by central banks should be in jail. In one scandalous case it was found that the “traders” used pseudonyms such as The Cartel, The Mafia, and Bandit’s Club which show a clear knowledge of their activity. So far the only country that has put bankers in jail is Iceland, which also refused to pay their debts with public money.

 

It would be impossible and tedious to scroll through, in this limited space, the list of frauds committed by banks, so we will only mention a couple of important examples among many scandals that continue to make headlines, despite the unusual discretion shown by the press when it regards banks.

 

On August 20, 2014, we read that the Bank of America, the second largest on Wall Street, was fined 17 billion because of fraud. That fine was the largest that any bank had paid until that date. A year later, on August 14, 2015, the press announced that nine of the largest banks in the world – some of them are part of the Federal Reserve – were accused of manipulating exchange rates at the expense of their clients. The offence was settled with a fine of US $ 2 billion and payment of US $ 2 billion to the investors. The guilty banks were Goldman Sachs, Bank of America, Citi, Barclays, BNP Paribas, HSBC, JPMorgan, RBS and UBS. There are other foreign banks accused of complicity, these are Standard Chartered Plc, Societe Generale SA, Bank of Tokyo-Mitsubishi UFJ Ltd., RBC Capital Markets, Deutsche Bank AG, Credit Suisse Group AG and Morgan Stanley. The interbank change rates movement is of around US $ 5.3 trillion daily. It can be seen that stealing is still good banking business; even when you are caught and fined. No one was arrested.

 

Conclusions

Sismondi was right when he considered money a public good, which must be legislated and monitored by the State. The independence of central banks is false myth that shelters bands that manage national finances for the benefit of international private interests.

 

The present financial system is a parasite of the world economy, which robs the public from the earnings of their work in the real economy, the economy which produces goods and useful services. Credit recklessness and fraudulent indebtedness of private bankers have led in Europe to the liquidation of public assets and social security systems to pay for private debt. It is curious that the affected countries are the same that, two centuries ago, were mentioned by Sismondi as victims of the same financial speculations. As in Greece, where along with its museums the millenary cultural testimony of our civilization was privatized.

 

Banks dominate governments and that makes impossible a political solution before the final financial explosion. Then there will be three remedies, which are not mutually exclusive:

 

  1. a) Recover the control of central banks and of money printing, impose a standard to avoid the erosion of the money value, which serves debtors and exporters but damages all workers salaries and savings
  2. b) Nationalize all bailed out banks and manage them under strict collegial supervision to promote national economic and social development.
  3. c) Apply anti-monopoly laws to banks and divide them as communitarian banks, under operative separation rules, such as those that existed before Bill Clinton and the posterior take-overs.

 

These basic ideas are inspired in Sismondi’s political economy which was thought long ago, but which was never more valuable than ever. The increasing wealth concentration and financial fraud problems that we face today, derivate from the biased abstractions that Sismondi denounced in Ricardian economics, the one that still guides the economic policies of the Anglo-Saxon world. They are the work of that invisible hand that, unless we firmly control it, will keep moving stealthily to steal everything from us.  

 

The reflection of Sismondi on Marx

By Umberto Mazzei

Geneve, January 2016

 

The physical well-being of man, so far as it can be produced by governments is the object of Political Economy

Sismondi

 

Marx, in his most well-known book, Capital, mentions almost all of the economists that existed since Classic Antiquity up to the last quarter of the XIX century. Adam Smith, David Ricardo and Jean Charles Sismondi are the most quoted. Marx sees Smith and Ricardo in a simple manner: as antagonists. With Sismondi the relation is a somewhat more complex one. Sismondi was the first to denounce the evils of the capitalist system that emerged from the French Revolution and the Industrial Revolution. Sismondi was the first to contradict Smith up to a certain extent and very much Ricardo’s economic theory. Marx sees him as a rival. A rival whose basic principle is that a more equality oriented wealth distribution, enforced by governments, can be the engine for a stable general economic growth. For Marx it was an undesirable proposition, because he believed capitalism as unredeemable and doomed to destruction. That could explain Marx’ ambivalence towards Sismondi, who he sometimes praises, sometimes omits to quote and even distorts or disqualifies. 

 

For this first research on the influence of Sismondi in Marx, the source for Sismondi’s economic ideas are his Nouveaux Principes d’Économie Politique in the 1827 edition and his Études sur l’ Économie Politique of 1837. The sources for Karl Marx’ ideas are the Communist Party Manifesto and the First English edition of Capital, because it was authorized by Marx himself who also wrote an author’s preface for it, while the editor’s preface was written by Frederich Engels. 

 

Sismondi’s social approach

 

We will approach the rapport between Sismondi and Marx from the perspective of Sismondi, because he lived, studied, thought, wrote and published extensively before Marx even existed and while there are many of Sismondi’s ideas in Marx, obviously there is no influence of Marx on Sismondi. During the whole of the XIX century all critics of the capitalist industrial revolution referred to Sismondi; his thinking and discoveries have gone well beyond this time.  It is well worth exploring and studying him now, when facts once again confirm his forecasts and the economic distortions and social damage that he criticized then have now been repeated, on a much larger scale, because the economic system remains the same, unchanged and even worsened.

 

Sismondi was a concerned and cosmopolitan philosopher who moved with great ease between the intellectual world of Switzerland, France, Italy and England, during the time of the Napoleonic Wars and their long sequels. He was a prolific writer on literature, history and economics and his work shows an innovative analysis technique, an acute realistic judgement, a social perspective, and a universalistic dimension.

 

His friend and compatriot, Mme. de Staël, described him in Corinne as a man of “deep wisdom” who spoke with “authority”. Stendhal, the great writer from Grenoble, carried with him the works of Sismondi wherever he went, and in his Lucien Leuwen he included Sismondi among the three favourite writers of the novel’s main character, together with Goethe and Walter Scott. The famous historian Charles Augustin Sainte-Beuve, member of the French Academy, devoted much space to Sismondi in his memoirs Nouveaux Lundis. The most illustrious British magazines published Sismondi’s works. Sismondi was also well known in Spanish America, and he makes accurate and interesting commentaries on the role and purposes of British finance on its separation wars from Spain. Domingo Sarmiento puts him as a political philosophy reference in his Facundo (1845). But the reference to Sismondi that is best known today came from the then unknown Karl Marx, in 1847, in his Communist Party Manifesto. Marx was obviously impressed by Sismondi and believed him worthy, because he was the only economist mentioned there, even if afterwards he disqualifies the quality of his social sense.

 

Indeed, Sismondi, quite before Marx, was the first to dissect and analyse the origins, consequences and contradictions of the capitalist production system. He wants to reform the system; he wants to make a more equitable distribution of wealth, to improve job stability and to balance production for a general well-being, to limit the power of the unbridled bankers and industrialists, through the intervention of the State. He wants to reform the system immediately and demonstrates clearly and specifically that a more equitable distribution of wealth is beneficial to economic stability and growth. Something akin to the principles that guided Bismarck in Prussia and Germany since the 1860s, but far from the radical messianic proposal of the theoretic anti-capitalistic system that Marx developed later.

 

Sismondi sees work as the only genuine source of value, abundance and wealth. He is the first to analyse the structural causes of the poverty and misery imposed worldwide on workers by the industrial revolution. He is the first to talk of class struggle and the exploitation of the proletariat, while looking for a practical, fair and immediate solution. In his opinion the workers’ misery has four major causes. a) the appropriation of the surplus value of labor by capital; b) the precariousness of employment, exacerbated by the automation of the production process; c) an excess of capital that fuels an overproduction that saturates markets, bankrupts industries and causes unemployment; d) the loss of a social structure that allowed the worker to balance his offspring with his livelihood. Sismondi believes his contribution to the science of political economy is to fill a gap left by Adam Smith, concerning wealth distribution. That is the reason, for his main economic work to be titled New Principles of Political Economy or about Wealth in its relation to population.  

 

His proposals to improve wealth distribution would be, especially for today’s global crisis, feasible innovations, but that would be inconvenient for entrenched privilege. Proposals like: a) to give workers a share in the profits and eventually a stake in ownership of the companies where they work; b) to absorb the increase in productivity resulting from the automation and technological improvements with decreased working hours without reducing wages; c) to improve education, to induce an awareness of reproductive responsibilities; and d) to control the freedom of banks on emitting money, credit and debt.

 

Sismondi thinks that the State should be the guarantor of a harmonious relationship between labour and capital, for mutual benefit, because good salaries expand and invigorate the market, while expanding property among workers makes a more just, happier and stable society.

 

An interesting detail of Sismondi is that even then, almost two hundred years ago, he criticizes four features in the capitalist system whose monstrous development threatens the entire world economy today. The first is the idea that governments should abstain from interfering in financial affairs and that central banks should be free to carry an autonomous policy. Sismondi says money and its facsimiles are public goods and therefore the State should be vigilant and keep control over its issuance and circulation. The second one is his criticism of the United States which he describes as an economy  based on debt, structurally bound to funding speculation and seeking maximum and fast profit as the only measure of success. The third is the deliberate use of loans that will be defaulted, loans for political subjugation of insolvent countries and it is there when he describes the case of England in Spanish America. The fourth is the damage and misery caused by subsidized exports from industrialized countries on developing countries’ economies and sees export dependent economies as victims of an excess of capital that makes them intrinsically unstable.

 

Another particular merit of Sismondi is that he is the first to place economic growth in a sociological frame and to look at the progress of the wellbeing mass in a global scale

 

Marx’s social perception

 

Karl Marx sees misery and deprivation as redemptive forces. His theory assumes solidarity among oppressed workers, which would overcome the call of selfishness and individual urgency. It will feed itself for action from their common rage and will be consciously channelled towards worldwide liberation from the oppression of the ruling classes. Marx sees the working class miseries as the element whose increase and accumulation will reach an unbearable level for the majority of the poor and cause a violent and uncontrollable social explosion. It is bound to happen because of a dialectic process where the theme is only economic, materialistic, and whose mechanics make a revolution against bourgeois capitalism, a historically unavoidable event.

 

He names his forecasted explosion, the Proletarian Revolution, which will nullify the private property system which for thousands of years has oppressed the working class under the proprietary classes. An oppression that has become worse since the French and Industrial revolutions which brought about bourgeois capitalism.

 

Marx proposes a ten-point program, first outlined in the Manifesto of the Communist Party and then developed in his book Capital. This programme shows very clearly the intellectual antecedents of his theory, which are also confirmed by the bibliography listed in Capital. His theory combines many ideas and observations of those authors, while commenting on a wide range of human activity from antiquity up to his contemporary society. Marx developed a huge, keen, detailed and erudite description of ancestral class conflict, which he brilliantly combined with acute economic dissections of the capitalist production process, underlining its unfairness and exploitative character. He believes Bourgeois Capitalism is the last manifestation of working class exploitation that through a dialectic process has reached its historic end, culminating in a final struggle. The poorest among the poor, the proletarians, would prevail and seize power to rule through a Proletarian Dictatorship imposed on the owners’ class.

 

Under that government, the system of private property would be cancelled, by gradually subtracting capital from the bourgeoisie and centralizing all means of production by State ownership. In the end private property will be abolished and there will be no more classes or distinctions and all means of production will be publicly owned. Unexpectedly, Marx considers including women among them. 

 

The reasoning process that Marx follows to reach his conclusions and make his forecasts are obviously speculative and not always consistent, but they are very convincing, because people like to believe in what they would like to happen, particularly when they are desperate, full of anguish and hate. The list of the many authors that Marx quotes expands from Moses, Homer, Aristotle, Plato, Xenophon and Antipharos, all the way past the luminaries of the Mercantilist, Physiocrat and the Liberal economic schools up to social philosophers like Hegel, Carlyle, Darwin and Engels. Among the economists, as we already said, Adam Smith, David Ricardo and Jean Charles Sismondi are the most quoted.

 

Marx is not known for being benevolent with those authors that lent him ideas and that he frequently omits and forgets to quote. It is strange that there is no mention of François Grachus Babeuf in Capital, even if he was the first to speak of communism as a modern political proposal, during the French Revolution. It is not for lack of documentation, for Babeuf was a journalist that left a long trail of documents and who forged a consistent and popular doctrine: babouvism, which cost him his life. He is mentioned in the Communist Party Manifesto, but only once. It seems a feature of Marx’s character, because in his time, Marx was often criticized for appropriating other people’s ideas, for changing the meaning of conventional economic terms, for copying without quoting and for distorting quotations. Hints of such behaviour can be found in the preface by Friedrich Engels, to the fourth German edition which can be seen in the first English edition of Capital, when he contradicts those accusations.

 

Another curious tendency of Marx is to criticize and dismiss authors that gave him inspiration and over whose ideas he has very obviously built his own theories. Such is the case with Georg Wilhelm Hegel. Marx takes Hegel’s dialectical interaction method of interpreting history based on cultural conflicts and makes it his own by reducing it to conflicts of an exclusively economic class, which he calls dialectical materialism. Then he claims that “my dialectic method is not only different from the Hegelian one, but it is its direct opposite.

 

Another similar case is that of Sismondi, from whom he copies the method of economic analysis, including his definitions and some of his examples, his perception of class struggle and his concerns over wealth concentration and the proletarization of the working class. Then he labels him petty bourgeois socialist.

 

He also dismisses Proudhon, and when he explains why, the reason for that socialist rivalry appears more explicit. These socialistic bourgeois want all the advantages of modern social conditions without the struggles and dangers necessarily resulting therefore… They would like a bourgeoisie without the proletariat..this socialism sought to depreciate every revolutionary movement in the eyes of the working class, showing that a political reform is not enough, because only a change in the material conditions of existence and economic relations can be advantageous for themBy changing the material conditions of existence, this form of Socialism, however, by no means understands the abolition of bourgeois relations of production – an abolition that can only be effected by a revolution – but only administrative reforms. It is clear here that it is not the immediate welfare of the working classes which Marx pursues, but the realization of a dream, a dream of a violent revolution to end the present bourgeois conditions of production, but with only a foggy and not very defined plan as a substitute for it, because the Dictatorship of the Proletariat, without institutional developments that define its political organs and a profile of its proposed method of production, as Marx says over  Proudhon socialism, it becomes a mere figure of speech.

 

This gratuitous disregard reaches other worthy and very well known previous socialist figures like Saint Simon, Fourier and Owen, who are bound together in the Communist Manifesto under the category of utopian socialists.

 

Claude Henry de Saint Simon (1760 – 1827) coined the term industrialization and founded the “organismic positivist” school, whose theory of organic evolution served Marx well for much of his doctrine of social evolution.

 

Charles Fourier (1772 – 1837), coined the term feminism and defended gender equality. His first book was The social destiny of man. Fourier proposed a social reconstruction based on experimental community associations that he called phalanges, where the social product would be distributed according to social needs, and allocation of responsibilities was done according to the intellectual faculties and individual inclinations, in order to make work a pleasure. There was also a decent minimum salary for those who could not work. His influence on Marx’s vision of a classless society, with equal conditions of education and income, is evident.

 

Robert Owen (1771 -1858) was an industrialist, who wrote A new vision of society, from which came the socio – political school that first carried the name Socialist. Owen thought that the loss of a sense of community was the main problem of the industrial revolution in England. Over this concept he developed the idea of building a model city for workers in his textile factory of New Lanark. There, working hours were shorter, wages were high and children had free education… Afterwards, because of the success of that first experiment, he built another workers city in Harmony, Indiana, United States. The basic objective of Owenite socialism was a rational human happiness, an idea shared by Bentham, but of which there is no trace in Marx. There is instead another Owenite idea that Marx elaborated on: the importance given to breeding environment in the future behaviour of the individual. Ironically enough, the Owenites regarded Marx as a simple closet theorist

 

Marx labelled them together as utopians, although technically their only feature in common is their desire to improve society and to have served him as a source of ideas. The reason for that is explained by Marx himself, who accuses them collectively of wanting to improve the condition of every member of society, even that of the most favoured… Hence they reject all political and, especially, all revolutionary action: they wish to attain their ends by peaceful means. Those words hint there is some venom in his wish for revolution at any cost. He then admits: they are full of the most valuable material for the enlightenment of the working class. The practical measures proposed by them – such as the abolition of the distinction between town and country; abolition of the family, of private gain and of the wage system; the proclamation of social harmony; the conversion of the functions of the State into a mere superintendence of production. All these proposals point solely to the disappearance of class antagonisms which were at that time just cropping up… Then he groundlessly concludes: These proposals, therefore, are of a purely utopian characterr.

 

It is likely that his hostile disdain for well known authors that shared a concern for improving the condition of workers and requested a more equal wealth distribution, is due more to his tumultuous character and disorderly and aggressive temperament than to personal meanness.

 

In the specific case of Sismondi, he is somehow presumed by Marx to be part of a ruined aristocracy or of a new class of petty bourgeois and summarily appoints Sismondi as the group’s head economist. In the Communist Party Manifesto, Chapter III, on Socialist and Communist Literature; in group b) petty bourgeois socialism, Marx  explains that “In countries such as France where the peasants constitute more than half of the population it was natural that writers who sided with the proletariat against the bourgeoisie should use in their criticism of the bourgeois regime, the standard of the peasant and petty bourgeois and from the standpoint of these intermediate classes fly the cudgels for the working class. Thus arose petty-bourgeois socialism. Sismondi was the head of the school not only in France but in England.

 

Then he adds something that explains why he may want to dismiss Sismondi: This school dissected with great acuteness the contradictions of modern production. It laid bare the hypocritical apologies of economists. It proved, incontrovertibly, the disastrous effects of machinery and division of labor, the concentration of capital and land in a few hands, overproduction and crises; It pointed out the inevitable ruin of the petty bourgeois and the peasant, the misery of the proletariat, the anarchy in production, the evident inequalities in the distribution of wealth, the industrial war of extermination between nations, the dissolution of old moral bonds, of the old family relations, of the old nationalities.

 

In its positive aims, however, this form of socialism aspires either to restore the old means of production and of exchange within the framework of the old property relations, and the old society, or to cramping the modern means of production and of exchange within the framework of the old property relations that have been, and were bound to be, exploded by those means. In either case it is both utopian and reactionary.

 

Nowhere, either in the Manifesto of the Communist Party or in Capital has Marx – who otherwise likes to get involved in minutia and detail – explained the reasons why he says such things. It seems misplaced to qualify Sismondi as a reactionary to Marx’s revolutionary proposals, because Sismondi published his New Principles of Political Economy, in 1919 and 1827, and his Studies on Political Economy in 1836, well before Marx called for a Proletarian Revolution. His labelling of Sismondi as a utopian is so unjustified that today we can believe, looking back, that his proposals would have saved much suffering to the working class by a fairer distribution of wealth, which still is a very modern concern. Marx has some responsibility in the delay for two hundred years of those still and increasingly urgent reforms.

 

Marx finally concludes saying about Sismondi: “His last words are: corporate guilds for manufacture; patriarchal relations in agriculture”. It is a completely fabricated and unjustified statement. Sismondi clearly says in his New Principles of Political Economy and in his Studies on Political Economy that he does not want the return of the old corporations and criticizes their tendency toward monopolistic behaviour. What he actually said is that we must find ways to give again the stability to employment and production that the old corporations gave, despite their flaws. He then made new proposals that are still valid to this day, such as employee participation in the benefits of production and a minimum wage. As for agriculture, Sismondi explicitly rejects patriarchy as a form of production. What he actually counselled was agricultural production by widespread small properties that are known to provide greater food security and more stable employment to farmers, while stimulating better quality, a wider range of production and a more equitable wealth distribution, something well proven to this day with modern cooperatives. As he said himself: No, I don’t want a return to the past, but I want something better than what we have today ….It is not against the machines, it is not against the discoveries, it is not against civilization that I bring my objections, it is against the modern organisation of society…. Today it is not the discoveries that are wrong; it is the unfair partition that men do with its fruits

 

The Sismondi in Marx

 

To study the influence of Sismondi’s ideas in Marx, the obvious first step is to look at how many times Marx quotes Sismondi in the first volume of Capital – it is the volume where he quotes him the most, and it is the only one of the three volumes, which Marx edited personally. Our analysis technique will be to identify in Marx the quotations of Sismondi’s text, expose them, then examine the context in which Marx quotes them, quote his commentaries and provide ours.

 

Marx does not always belittle Sismondi and for good reason, because there is much of Sismondi in the best of Marx, as much at least as there is from Hegel. So says Maximilien Rubel in his Marx, critique du marxisme. Obliquely, it is also Marx who says that himself: Sismondi is as important as Ricardo; the history of modern political economy … is complete with Ricardo and Sismondi: two antipodes. He continues on the same subject: Ricardo’s analysis is often absurd. Sismondi, by contrast, shows not only the existence of these production limits but shows how capital itself creates them and is enclosed in its own contradictions. Later on, talking about Surplus-Value – a basic element in the production process discovered by Sismondi- Marx continues: For Sismondi crises are not accidents, as for Ricardo, but essential explosions. This praise adds to the praise already mentioned in the Manifesto of the Communist Party.

 

Sismondi’s influence on Marx’s work is large, undeniable and obvious. Sismondi is the one who replaced the three classes in the Tableau of Quesnay with only two classes, fighting each other: the owners of capital and the wage-workers. Sismondi is the one who discovered the economic scheme of a circular movement of national income where each effect becomes in turn a cause and every step is regulated by the one that precedes it and determines the one that follows it and the last returns to the first order. The national income should regulate domestic spending, and that should absorb …the whole production, which when it fully absorbs the output at the bottom of the circulation determines a reproduction equal or above it. It is Sismondi who first identified the abstract relations of production in the framework of the capitalist world, where income, profit, business profits and interest on capital are seen under their general form of capitalist rent; where consumption is divided into two: indispensable consumption to keep the workers alive and luxury consumption reserved for the capitalists. This scheme is entirely taken by Marx in his scheme of reproduction, but at the same time he criticizes Sismondi for the way he explains the transformation of income into capital.

 

The first volume of Capital has a structure which, while offering a different order, continuously exposes issues already addressed by Sismondi in his New Principles of Political Economy and paraphrases the essence of his arguments, but the conclusions are not always the same. The essential difference between Sismondi and Marx is the way they approach private property. Sismondi believes that private ownership is a source of wealth that should be distributed in a more equitable way to everyone, through a reform of the capitalist system because violent solutions are cruel and ephemeral. Marx believes that private ownership is a form of violence which from time immemorial is imposed by a minority upon a majority; therefore it should be abolished and that – he says – can only be genuinely done with a violent revolution.

 

But there is agreement in many issues. In his preface to the second English edition of Capital, Marx says that Ricardo takes class conflict in England as a social law of nature and admits that “already in Ricardo’s life, he found opposition and criticism in the person of Sismondi. In Capital, Volume I, Chapter I – The goods, when Marx speaks of the difference between use value and exchange value, there are phrases with identical content as those of Sismondi, only more elaborate. Sismondi says that among the elements that compose the price of the producer labour is the most important; and up to a certain point, it regulates the others, because there is a necessary salary, under which even competition can not reduce workers for a long time. Marx says: The equality of all forms of human labor is expressed objectively by their products all being equally values; the measure of the expenditure of labour power must assume the form of the amount of value of the products of labour.

 

In Capital, Part II Transformation of money into capital, Marx makes Sismondi’s definition of capital his own and paraphrases it, but then he only quotes his shortest definition. Sismondi explains that the notion of capital arises from the existence of society because a man alone has no use for excess production. He shows that it is a production above the own need which allows to hire people in exchange of a surplus. He then describes  how it is the existence of a society, and the introduction of exchanges, what allows  to multiply almost infinitely these seed (wheat) this fruitful part of accumulated wealth, and it the one that we name capital, which is used to pay other people for help. This extra help further increases production and it forms a new capital. Before the producer consumed his own surplus as a rent, but once it was employed to feed productive workers; …against work…, it becomes a permanent value, which perishes no more; it was a capital. This value is separated from the merchandise that created it; it remains as a metaphysical and insubstantial quantity.

 

Marx said that, only when the money takes the form of a commodity, it becomes capital and is a wonderful means whereby out of money to make more money…. By its mere circulation goods have value and that is how the circulation of capital occurs suddenly as an independent substance, endowed with a motion of its own, passing through a life process of its own …Nay, more : instead of simply representing the relations of commodities , it enters now, so to say, into private relations with itself …It comes out of circulation, enters into it again, preserves and multiplies itself within its circuit, comes back out of it with expanded bulk, and begins the same round ever afresh.  

 

After this poetic description by Sismondi and the very similar and somewhat picturesque of Marx, both of them describe how commercial capital and industrial capital always operate buying at a lower price than the one they sell at. The first buys goods and the second buys inputs that are turned into goods. At this point, Sismondi already hints at Surplus – Value, which he will later on explicitly describe, when he says: the worker has labour as his only income …while his work becomes capital for his employer.  Sismondi then goes on to describe the division of labor and how it gave birth to the different classes and increased the submission of those that are born without other income than their ability to work. He explains then how the reduction of work to simple and repetitive operations increases the dependence on the employer and the brutalization of the person, another issue that will be dissected by Marx.

 

In Part II of Volume I of Capital, Chapter VI Buying and selling of labor power, there is again the obvious influence of Sismondi, which is indeed, quoted. Sismondi says: Regardless of the opposition we have established between the revenues that come from wealth and those who have only a potential to work, there is however, an essential relationship: they have the same origins, but from a different time. Among those who share the national income, there are some who buy every year a new right with a new work done, while others have acquired a permanent right by a previous  work … that makes every year’s work more productive.

 

As for the specific sale of labour power, Sismondi says and Marx partially quotes him: The poor, because their only income is their work, depend, before they spend it, on the upper classes. They need to do some work; they need to sell it before enjoying its fruits… The power to work gives an income only when it is used; capacity for labour is income only when it is employed; it is nothing unless it is sold

 

Concerning the same issue, Marx explains: When we speak of labour, or capacity for labour, we speak at the same of the labourer and his means of subsistence, of labourer and wages. When we speak of capacity for labour, we do not speak of labour, any more than when we speak of capacity for digestion we speak of digestion. This latter process takes more than a good stomach. When we speak of capacity for labour, we do not abstract from the necessary means of subsistence. On the contrary, their value is expressed in its value. If this capacity to work remains unsold the worker does not derive any benefit from it, and at this point he quotes in a note that last phrase of Sismondi.

 

Surplus Value

 

In New Principles of Political Economy, book II, Chapter V, Sismondi describes Surplus Value and identifies it with the name mieux-value. He will also refer to it in detail in a later work, Études sur l’Économie Politique (1837). Marx quotes him when he explains the concept of surplus value and describes it, but then elaborates over and goes to explain his notion of a relative surplus value. Very much like what he did with Hegel’s dialectic method of analysis.

 

When Sismondi explains the distribution of the national income between the various classes of citizens, he says that there are three permanent sources of wealth: the first is land, which has a spontaneous force that man can direct; the second is the capital used to pay for labour; the third is life, which gives the power to work. All three, he says, have a direct relationship with work and without work, there is no wealth.

 

He then describes how that relationship works in agriculture and industry. Unlike agriculture, he says, the power of the factory to produce is entirely as a result of previous work by men, who designed and built it… Factories bring into play forces infinitely superior to those of man, the movement of the air, the water, the steam; and their output, at least wherever the land became property, is more profitable than that from agriculture …. Compared to land, industry needs only the other two sources of wealth: life that gives the power to work and a capital that pays for it. When these two powers meet, they have an expansive force and the work that the worker will do during the year, will always be worth more than the labour he did the previous year, which is the one that will maintain himself. It is because of that Surplus Value, which is much greater than that of the progress the arts or science in their applications to industry, that there is a constant increase in the production of wealth. This growth can either increase the income of the working class or be added to capital. But, in general, very little of the capital that pays salaries and makes it possible remains in the hands of those who work. It turns out that there is an unequal distribution between the capitalist and the worker, where the capitalist strives to leave workers only what is necessary to keep them alive and reserves for himself everything that the worker produced above the value of his life. Workers, meanwhile, struggle to keep as much as possible from the work he does.

 

Marx develops this theme on the same conceptual basis, but takes it to a level of working hours. He assumes that the value of one half of the working day is enough for the subsistence of a worker and the other half day that the worker also works is appropriated by the capitalist. He assumes a 12 hour working day and divides the work into necessary labour and superfluous labour, then he makes an arithmetic demonstration with given values and elaborates on a difference between Surplus Value and a relative Surplus Values: The surplus value produced by prolongation of the working day I call absolute surplus value On the other hand , the surplus value arising from the curtailment of the necessary labour time and from the corresponding alteration in the respective lengths of the two on  the working day, I call relative surplus value.

 

This last definition which explains the title of Part IV Production of Relative Surplus Value should have preceded perhaps a previous long paragraph where Marx explains what he means by increase in the productivity of labour and where he also quotes Sismondi. By increasing the productiveness of labour we mean, generally, an alteration in the labour process of such a kind as to shorten the labour time socially necessary for the production of a commodity, and to endow a given quantity of labour with the power of producing a greater quantity of use-value.

 

At this point Marx quotes Ferdinando Galiani in Della Moneta and also quotes Sismondi, when he says Saving in the expense of production is necessarily saving in the quantity of work used for production. This quote of Sismondi is inaccurate, out of context and not in the work and page mentioned. It comes from a paragraph in the introduction of his Études when Sismondi explains how international competition is causing universal harm: If everyone works to increase his production, everyone works also to produce cheaper, and each of those actions is the necessary consequence, the complement of the other. If as we said, wealth is the fruit of labour; saving on the production expenses cannot be anything else than saving in the quantity of labour or saving on the retribution of labour. For Marx the hue in Sismondi’s real phrase runs counter his simplification.

 

Wages

 

Regarding wages, Sismondi also anticipates some of Marx ideas and Marx recognized it and quotes him in Part VI, Chapter XIX of Capital, where he pretends mistakenly that Sismondi had said, in one of his first works, De la richesse commercialeThere must be an agreement by which whenever there is an exchange between labour done for labour to be done, the capitalist must receive more value than the worker.

 

Again Marx distorts and quotes Sismondi out of context. That phrase or something that resembles it is found in the aforementioned book, in Chapter I – the Capitals, when Sismondi explains how, at the beginning of society, the exchange between work and salary started: Since every man is forced to consume before producing, the poor worker finds himself depending on the rich, and he cannot live or work if he does not get the food and goods already existent against those he promises to make with his work. That exchange cannot be gratuitous…It must be agreed that every time they exchange work done  against work to be done, the last one will have a value superior to the first, or in other terms, that the proprietary of the accumulated surplus will get a profit proportionate to his advances.     

 

But Sismondi in his later book, New Principles of Political Economy, Book IV, Chapter V-wages, that Marx obviously knew and quotes frequently, but avoids to mention when it concerns salaries, says much more than that, and we found obvious traces of his ideas in the way Marx approaches the issue.

 

Sismondi says that among the elements that are taken into account for fixing the producer price in the market, labour is the most important because it regulates all the others. Because there is a necessary salary….whilst the reduction in interest in the money or the capital gains, which are the other elements of price, seem to be able to go on forever; the low price of labour generally allows producers to establish their product at the best price… but the price of labour can be low, in reality or nominally, while the work is exchanged against an insufficient quantity or there is an overabundance of things necessary to live. Money isn’t the only sign of the exchange… he has not received it early enough so that it can be used to buy provisions that are needed. If these are at a low price and if his working day can be traded not only for what is strictly needed but for a quantity… (which gives him) the feeling of being at ease. We often consider low labour prices as national advantage without wanting to explore whether it is real or nominal. We have hired their patriotism, the manufacturers who refuse to increase the wages of their workers, and the governments who have seconded them by fixing the workers salary’s rate and forcing them to stay… it is not the profit of the manufacturer which holds the national interest. It’s the benefit that the manufacturer distributes to all the parties who have contributed… the nations strengthen when their revenue increases but not when the income of one class usurps the income of another… the salary is not just a recompense for work done calculated hourly after it has finished. It is the revenue of the poor. And as a consequence of this it must not only be enough to look after them during their working period but also in sickness, it must fulfil their childhood and their old age just as in the prime of their life. In sickness and in health

 

Marx treats wages in several very detailed chapters. In Chapter XIX he says that Classical political economy borrowed from every day life the category “price of labour” without further criticism, he then simply asked how this price is determined… As with other commodities, this value is determined by the cost of production.

 

In Chapter XX Time-wages, Marx analyses them and finds that wages can take many forms. First by working time for payment, where the distinction between the exchange value of labour power and the sum of the necessities of life into which this value is converted, now reappears the distinction between nominal and real wages The sum of money which the worker receives for his daily or weekly labor forms the amount of his nominal wages. But it is clear that according to the length of the working day … the same wage may represent very different labour prices … It follows therefore, that the daily and weekly wages may remain the same, although the price of labour falls constantly. If for example, the normal working day is 10 hours and the daily value of labour is 3 s., the price of the working time is 0.3s. It falls to 0.25s when working hours up to 12 hours… The same result is obtained if instead of the extensive amount of labour the amount of intensity is increased.

 

Then Marx, in Chapter XXI,  speaks of payment by piecework completed and looks into the international competitiveness of labour in his Chapter XXII where he says that the quality of labour is here controlled by the work itself, which must be of average perfection if the piece-price is to be paid in full,….Piece work has, therefore, a tendency while rising individual wages above the average , to lower this average itselfMarx. Ibid. Part VI, Chap. XXI, Pag. 272- 274….and then in a sharp analysis he concludes that even if frequently workers may earn more with this system, the price per hour and the lapses of unemployment frequently lower the total gain. 

 

On Chapter XXII- National differences on wages- Marx states quite appropriately that In the comparison of the wages in different nations, we must therefore, take into account all the factors that determine changes in the amount of the value of labour power; the price and the extent of the prime necessities of life…But the law of value in its international application is yet more modified by the fact that in the world market the more productive national labour reckons also as the more intense, provided that the most productive nation is not compelled by competition to lower the selling price of its commodities to the level of their value. Even if Marx analyses very acutely the whole wages issue and hints at an international perspective, it is noteworthy that Marx discusses nowhere the damage done by this international competition to foreign workers and to their labour stability, like Sismondi does over and over. Neither does Marx approach aspects of Social Security for unemployed, sick or old workers as Sismondi was the first to do, followed by some of Marx contemporaries, such as the detailed proposals by John Ruskin in his Unto This Last.

 

The reproduction of capital

 

The reproduction of capital is another issue addressed by Sismondi and then Marx, which quotes him. In his New Principles of Political Economy, Book II, Chapter IV – How capital income is born, Sismondi says that Trade, which is the generic name we give to the entirety of exchanges, complicates the relation that should exist between production and consumption but increases their importance … But since each one works for everyone , the production by all must be consumed by all, and each should have in view, when producing , the  final demand of society … that demand is imperfectly known, but is know to be limited.

 

Continues Sismondi: Society … to avoid ruining itself, can only consume its annual income, if it would diminish its capital, it would simultaneously destroy its means of reproduction and its future consumption. Everything it produces is destined for consumption and if the annual production, when brought to the market has no consumers, production will be suspended and the nation will be ruined in the midst of plenty. It is a situation that repeats itself in modern times.

 

Sismondi says that understanding the nature of what is capital and what is income is the most abstract and the most difficult question of political economy, the nature of capital and income are constantly confused… We see that what is revenue for one becomes capital for another, and the same object, in passing from hand to hand, receives different names. Meanwhile, its value, which is separated from the consumed object, seems  a metaphysical amount that some spend and others exchange, that perishes with the object itself for someone and is renewed for another and lasts as long as the duration of the circulation.

 

The workers exchange their labour for a salary which is his income and that labour becomes a capital for the capitalist owner, who exchanges it against another capital where each keeps his own under a different shape, until it reaches the final consumer who buys it with his income.

 

As only labour has the power to create wealth…. all capital must be used in creating work, because all wealth…. must be exchanged against a future wealth that labour should produce …. The benefit of an entrepreneur often is nothing other than a plundering of the workers he hires; he doesn’t make a gain because his company produces much more, but because he doesn’t pay all the cost. Sismondi distinguishes between fixed capital and working capital, and a third form which is the value on which the finished product exceeds the investments made: these value is what we call income from capital and is intended for consumption.

 

It is unexpected that, when Marx quotes Sismondi in this topic, he does not mention the Chapter and only refers to the Nouveaux Principes edition of 1819, which also is the one he mentions in Capital‘s bibliography. That text was revised in the 1827 edition, which Marx knew well because he quotes from it in Capital and in other works. The substantial part of that quotation from Sismondi says: Wealth, alike work and through work, produces an annual fruit, which can be destroyed every year without a rich man becoming poorer. This fruit is the income that arises from the capital.  This phrase is found in Nouveaux Principes, BookII, and Chap.III of the 1827 edition

 

Marx’s explanation continues and expands Sismondi’s arguments. In Capital, Part Seven- The accumulation of Capital Marx says: The conversion of a sum of money into means of production and labour power is the first step taken by the quantum of value that is going to function as capital. This conversion takes place in the market, within the sphere of circulation. The second step, the process of production is complete as soon as the means of production have been converted into commodities whose value exceeds that of its component parts and, therefore, contains the capital originally invested, plus a surplus value. These commodities must be then thrown into circulation. They must be sold, their value realized in money, this money converted afresh into capital and so on over and over again … The capitalist who produces surplus value –  who extracts unpaid labour directly from the labourers, and fixes it in commodities – is, indeed, the first appropriator, but by no means the ultimate owner of this surplus value. He has to share it with capitalists, the owner of the land, etc., who fulfil other functions in the complex of social production. Surplus value, therefore, splits up into various parts. Its fragments will fall into various categories of persons and assume various forms, independent of each other, such as profit, interest, merchant’s profit, rent, etc… As far as the process of accumulation takes place, the capitalist must have succeeded in selling his commodities and in reconverting the sale money into capital.

 

In Chapter XXIII, which follows the introduction that we quoted, Marx finds that Whatever the form of production in a society, it must be a continuous process….a society can no more cease to produce than it can cease to consume…and every social process of production is, at the same time, a process of reproduction … But the labourer is not paid until after he spends his labour power, and realized in commodities not only its value but its surplus value…But that process must have had a beginning of some sort … it seems likely that the capitalist, once upon a time, became possessed of money by some accumulation that took place independently of unpaid labour, and that this was , therefore, how he was enabled to frequent the market as a buyer of labour power

 

Later on, when Marx explains how capitalist production perpetuates the condition for exploiting the labourer, he quotes a phrase of Sismondi over the inferiority of worker’s bargaining condition, in a note:  A worker asks for subsistence in order to live, the boss asked for labour to make a profit

 

Later on, in Chapter XXIV Conversion of surplus value into capital, Marx says from a concrete point of view, accumulation resolves itself into the reproduction of capital on a progressively increasing scale. The circle in which the simple reproduction moves alters its form, and, to use Sismondi’s expression changes into a spiral. Marx complements this reference to Sismondi, with a note where he says that Sismondi’s analysis of accumulation suffers from the great defect that he  contents himself to too great an extent with the phrase “conversion of revenue into capital,” without fathoming the material conditions of the operation. An appreciation obviously unfounded because, as we saw synthetically, Sismondi devotes Chapter IV and Chapter V of the Second Book of his New Principles of Political Economy to study the transformation of revenue into capital, besides  returning on that subject in other chapters. It is true that Marx devotes much more space: all the Seventh Section and its seven chapters, but it is also true that all that space has many quotations recalling Sismondi.

 

Always talking on the conversion of surplus value into capital, Marx relieves another point of coincidence that he artificially presents as in controversy with Sismondi: it concerns the origin of the first seed capital that hired the first workers from which the first surplus value was extracted.

 

Marx assumes an original capital of £ 10.000, and then asks. How did the owner become in possession of it? “By his own labour and that of his forefathers” answer unanimously the spokesmen of political economy “and he goes to quote Sismondi in a note when Sismondi says “The original work to which capital owes its birth. Marx obviously wants to put Sismondi in the same bunch with the members the English liberal school, that seems to be his reason to omit that  Sismondi goes on to describe the ancestral origin when he says that The one that had provisions in reserve, offered to feed the one who’s granary was empty, on condition that this last one works for him. This nourishment given in exchange of labour was named salary.  Then, later on, he specifies that, once rent was used to feed productive workers; once it was exchanged against labour or against future products of labour … it became a permanent value, a multiplier one, that does not perish any more; it becomes a capital. That  specific remark is followed by a detailed description of how living in society brought exchanges of surpluses and then goes on to describe the difference between rent, capital and salary.

.

Marx recognizes afterwards that, indeed, Sismondi’s assumption seems to be the only consistent with the laws of commodity production. But even then, Marx insists: But it is quiet otherwise with regard to the additional capital of £ 2,000. How they originated we know perfectly well. There is not a single atom of its value that does not owe its existence to unpaid labor. There is not a shade of doubt that Sismondi would have also agreed that that £ 2,000 came from a surplus value of workers’ labour; because he had said exactly that 40 years earlier.

 

The Production Process

 

On the issue of surplus value Sismondi makes a reflection that explains the convenience for the capitalist to keep the poor apart from wealth and perhaps also the repugnance in Marx to the idea of turning workers into owners, into petty bourgeois, unfit to make a revolution. Sismondi says that: … thanks to the progress in the application of sciences to industrial production each worker can produce more and much more than his consumption needs. But while their labour produces wealth, if he were left to enjoy that wealth it would make him unsuitable for working.  That’s why wealth is almost never left in possession of the one who uses his arms to make a living Sismondi continuously reminds us that wealth always originates from work, but… although the worker in his daily labour has produced more than he spends in a day, it is rare that after sharing it with the landowner and the capitalist, he keeps much more than what is strictly neededSalary does not represent an absolute amount of work, but only a subsistence amount enough to keep alive workers from the previous year. The same amount of subsistence will move the following year, a quantity of labour more or less as big; and from the fluctuation in the ratio of these two values, results in the increase or reduction of the national wealth, the comfort or the misery of the productive class, the multiplication or destruction of the population.

 

The economic facts over commodity production and its important social and national prosperity implications, reported together by Sismondi, will be separated by Marx into several chosen statements when he speaks of relative surplus population. He will then run through Sismondi’s Book II, Chapter III – increased social needs of man, and limits production and Chapter IV – how rent is born from capital, ranging from page 79 to page 85, to build a somewhat incongruous speech, but that leaves the impression that Sismondi despises labour and approves the existence of a mass of workers available for exploitation. Marx attributes to Sismondi the finding that thanks to The indefinite multiplication of the productive powers of labour can then only have for result the increase of luxury and enjoyment of the idle rich. Sismondi – as we have seen- did indeed make a some how similar statement, but quite disapprovingly, while explaining the formation of wealth and its distribution among the different social classes

 

Explaining his laws of commodity production, Marx says:

 

Thus, the original transformation of money into capital proceeds in strict accordance with the laws of commodity production, as well as with the property rights which are derived from them.  Nevertheless, it has the following results:

1) The product belongs to the capitalist, not to the labourer.

2) The value of the product includes over and above the value of the advanced capital a surplus value, which has cost the labourer labour, while it has cost the capitalist nothing, and yet he is the rightful owner.

3) The labourer has reproduced his labour power, which can be sold again, if he finds a buyer.

 

After this statement, Marx adds: Simple reproduction is only the periodic repetition of this first operation. Every time it takes place money is transformed into capital. The general law is not violated; on the contrary, it finds the proper occasion to manifest itself continuously. At this point Marx quotes Sismondi, when he says:  “several successive exchanges have merely made of the last a representative of the first, This phrase was written by Sismondi in his Nouveau Principes, Vol. II, Formation and Progress of wealth, Chap.II Creation of wealth in society by exchanges, in the 1827 edition. That paragraph says that exchanges do not alter the nature of wealth, which remains always something created trough work… that it is the need of it which gives it value, even when another one replaces the producer at the moment of consumption… A man made it, a man saved it because a man need it and would consume it; it is of little importance if the man turns to be the same one, the intermediate exchanges make the last one the representative of the first.

 

Marx accepts and shares Sismondi’s elegant and streamlined description of the mecanics of exchanges, from production until consumption. What is however puzzling is that he doesn’t quote also the more elaborate description by Sismondi, that he also shares, of how merchandises become capital, which is what he is specifically talking about, and which Sismondi deals with in Chapter VIII How trade pushed production and replaced productive capital, in that same book II. It may be something attributable to the disorder with his papers for which Karl Marx was also notorious.

 

 

Then again Marx quotes Sismondi out of context when he comments on this previous quote of Sismondi. He says: Nevertheless, we have seen that the process of simple reproduction suffices to imbue this first operation – in so far as it was considered as an isolated transaction – with a totally different character. Here he introduces quotation marks and  paraphrases Sismondi “Among those who share in the national income, some” ( the labourers ) “ acquire every year a new title to it by new labour, while others” (the capitalists) “have previously acquired a permanent title to it by a primitive work”. Then he comments: The field of labour is evidently not the only one in which primogeniture works miracles. That sarcasm is misplaced if we consider what we already mentioned about Sismondi’s explanation of the production process and the origin of capital. Besides Marx here hints that Sismondi is a defender of primogeniture, while Sismondi, in many of his books, all over his New Principles, and specifically in its Third Book, over land wealth (sur la richesse territoriale), advocates the elimination of primogeniture.

 

As we already saw, the previous phrase quoted by Marx is to be found in Book Two, Chapter V Distribution of the national income between different classes of citizens. In it, Sismondi only describes the real world, which, indeed, is the pre-requisite of any science. There he analyses how the annual income of the capitalist production process in agriculture and manufacture is distributed. He points out that there is a class struggle in such distribution process whose results are important. That’s where that quote is located and is the proper context to interpret it. The specific paragraph also has a final phrase that Marx omits. It says:… a primitive work, which makes the annual work more advantageous. When Marx omits these last seven words, he eliminates the implicit reference to Fixed Capital and Circulating Capital and distorts the entire sense.  The complete paragraph from Sismondi says :  We have seen that regardless of the opposition between the income that comes from wealth and those that are only a work potential, there is an essential relation among them: their origin is the same, work, but in a different moment. Among those that share the national income, some acquire each year a new right by a new work, the others acquired a permanent right by a previous work, that makes annual work more advantageous.  

 

In his New Principles, Book II, Chapter VIII – How trade supports production y replaces productive capital. Sismondi makes some basic and elementary statements: There were never exchanges without benefit to both sides … one gets from the money he gets a better benefit than from his goods and the other gets more profit from the goods than from his money. Everyone wins and consequently the nation is winning twice. Similarly, when an owner puts a worker to work , he gives him in exchange wages corresponding to his livelihood, both sides have gained: the labourer  because he was advanced the fruit of his labour before his labour was performed; the master because the labour of the labourer is worth more than his wages, and the nation wins with both: because national wealth should be created, in a last analysis, with pleasure, everything that is more comfortable and increases individual enjoyment is a gain for all.

 

Again, this paragraph from Sismondi only describes reality in operation, but Marx, quotes him and makes a satire: “Both sides win: the labourer because he was anticipated the fruits of his labour” (read, the unpaid labor of other workers) “before this labour was performed” (read, before his own had borne fruit); “The master because the labour of the labourer was worth more than his wages”  (read lease, produces more value than that of his wages). Marx omits that last sentence which refers to a national and individual benefit.  Such vitriol is inadequate, because Marx knows very well that it was Sismondi who first discovered the appropriation by the capitalist of work’s surplus value and the first one to criticize it as unfair.

 

The concept of Proletarian

 

It was Sismondi who recovered from ancient Rome the word proletarian, which with synthetic capacity found in Latin, describes at the same time the tragedy, the social and economic role and the world vision of the impoverished working class that emerged from the industrial revolution. In his New Principles and in many of his multiple works, he elaborates on that theme. Sismondi presents it as mainly an English phenomenon and repeatedly explained that the allocation of land that took place in France during the French Revolution created a society where a better wealth and property distribution have created a more humane social ambience and wider political participation.

 

Sismondi describes the origin of the word and the meaning with a dramatic stroke: Therefore the more the poor are deprived of any property the more danger there is of misinterpreting their income and helping to increase a population which does not match the demand for labour so the subsistence level is not found. This observation is ancient enough to have passed in language, to have been passed from Latin through to modern languages. The Romans called those without property ‘proletarians’, as if, more than the others, their role was to have children: Ad prolem generandam.

 

In his foreword to the second edition of his Nouveaux Principes, Sismondi draws an anguished  picture of the effects of the unequal distribution of wealth in the British economy, nourished on David Ricardo’s liberal principles: Seven years have elapsed and facts have fought victoriously  for  me. They have proved, better than I could have ever done, that the wise men from which I separated myself were pursuing a false prosperity; that their theories, whenever they were applied, could increase material wealth, but…tend to make the rich richer and also the poor poorer…England has given birth to the most famous economists. Their science is applied today with renewed fervour. The English nation found it cheaper to give up the crops that require more manpower and they fired half of the farmers who lived off their fields; It found it cheaper to replace its workforce with steam engines. It laid off, hired and fired again its city workers; the knitters who lost their place to power looms (steam-powered looms) succumb to hunger today; it found it cheaper to reduce all workers to the lowest wage that workers can live on, who being proletarians did not fear plunging into even deeper misery, by always having larger families; it found it cheaper to feed the Irish only potatoes and to dress them in rags, it is why each packet-boat brings legions of Irish who work for less than the English, displacing them in all trades.

 

Sismondi mentions again the role of the  proletarians  in Nouveaux Principes, Sixth book, on Taxes, Chapter VI tax on consumption. He comments first on the unfairness for the poor of indirect taxes or consumption taxes, which is a very much a relevant topic today, so we will first quote his opinion on that subject in his most synthetic paragraph: There is a very unfair and inhumane proposal, which is much talked about, which is to eliminate all direct taxes and collect all the income necessary for the State with taxes on consumption. It is almost the equivalent of waiving all taxes on the rich, and to request them only of the poor. In many ways, it would be like going back to the feudal system in which the noble paid nothing; but this innovation brings a refinement on the aristocracy, because it would be enough to become rich to be exempt of paying.

 

Always on the subject of taxes, he again mentions the proletariat and its probable extension, when commenting about a French project to impose a tax on bread. He considers it to be unfair and also irrelevant. He remarks that those few pennies are important for the poor while they mean nothing to the rich, but both eat about the same quantity of bread. Besides, it is not even applicable, He says: Have we calculated that the five-sixths of the inhabitants of France do not buy their bread, but eat their own harvest or from their masters harvest?… There would be left only the people from some big cities and the most miserable among the proletarians, totalling maybe five million people who every day buy their bread from the bakery.

 

Sismondi addresses the proletarian issue in depth in his Studies on Political Economy. First he tells how the cities bourgeoisie and the cities guilds committed excesses of exclusion in their handling of the economic matters, they wanted justice, freedom, equality for themselves; but did not look at the rest of the nation …. They closed as much as they could access to their society, rejected the rural people who wanted to become citizens, they increased the restrictions for apprenticeship and made it difficult to become a Master … and that way they managed to disadvantage the city industries in terms of with respect to the numbers employed, but with greater superiority with regard to the rewards given. The bourgeois were involved in many monopolies in all trades and gained  from their fellow citizens the benefits of these monopolies. That is to say that they kept their market imperfectly provided, they sold things at high price with little consideration for the quality of their goods, because of the security of always being able to sale.

 

His description of corporations in that ancient period reminds us of the effects of not so ancient monopolistic policies of cartels in some developed and developing countries. He tells us about the disadvantages of that system but adds a question regarding social protection: Such a system, compared  to goods, compared to the creation of wealth, and according to chrematistic principles , was, without doubt, bad; it  put obstacles in the way of creating wealth, improvements and good prices, but concerning the people, have we calculated all the effects of destroying it? 

 

These excesses of corporate power led to their abolition, which in turn led to over production which created the proletariat. Sismondi explains then that: The abolition of corporations and all their privileges created the first proletarians, the day worker in the cities: anyone could enter any craft …without apprenticeship, without workshop, without a shop, to work with somebody else’s capital, in someone else’s factory, before having accumulated anything, and they believed they had gained in freedom while losing security. At the beginning, the proletarians, were a small number, the exception…but soon they multiplied for reasons we will show, while all the old masters, colleagues and apprentices disappeared almost completely, and today the proletarians alone carry out the majority of the work in the cities.  

 

Sismondi then explains that, this fundamental and revolutionary change, was aggravated and imposed on society by the universal struggle created by market competition; that the immediate effect of such struggle was the introduction of the proletarian among the human conditions.

 

He remarks that this revolution was not as sharp in the countryside and farmers improved their life by abolishing feudal rights. Only the farmers in those countries with extensive crops, found that it suited them better to supervise labour rather than to do it themselves … … and to have them done by the agricultural proletarians, which they hired or dismissed according to their needs. The economic revolution that replaced the old peasants with the proletarians only happened in England, but it is beginning to start everywhere. …Their number increases and the number of peasants decreases. He makes a reflection that concerns the cultural influence of agriculture for the national identity and spirit, that is close to the modern concept of the multifunctionality behind the Common Agricultural Policy of the European Union. The peasant is a man that cultivates his land and who cares about his country, who inherits and is entitled to a part of the country; the wage labourer is only concerned with his wages.

 

The effects of the accumulation of large amounts of capital in the creation of a proletarian class are described quite accurately by Sismondi and its similarity with present day wealth concentration problems is amazing.  We will cite some highlights. The capitalists are on the lookout to find ways to concentrate under the same system each and every industry, to suppress all independent trades and to install factories, to recreate the work of every locksmith, carpenter, furniture manufacturer in a factory… the chrematistic school looks on in admiration at how companies  manufacturing steam boats, stagecoaches , buses, railways, with the help of huge capital replace all the small industries of independent boatmen, coachmen, carters; each who had his own small capital and was his own master; all the work for big business is now done by salaried people, by  proletarians. The same admiration explodes when wealthy merchants opened vast stores in the big cities and offered, thanks to newly invented mass transportation, to supply all consumers at home … They are well on track to remove all gross merchants, all retail merchants, and all provincial small shopkeepers and to replace those independent men by employees, by salaried men, by proletarians. Big international corporations, Internet and e-commerce comes to mind.

 

Their success was announced as a prodigious industrial conquest and its promotors, as well as the heads of the chrematistic school, congratulated themselves on the rapid growth of public wealth. But a frightening reality has come to upset the spirits, to destroy all those principles that were announced so dogmatically: the emergence of pauperism, its rapid and menacing growth, and the recognition by oracles of the science who felt powerless to find a solution.

 

Marx has some of his most amusing and caustic pages when he describes this same process, while   quoting again a wide range of authors, like Luther, Goethe, Aikin, Smith, Say, Malthus, Senior, Scrope, Molinari, Ricardo, Stuart Mill Benjamin Thomson, Parry and obviously, Sismondi. The phrase he quotes from Sismondi belongs to a particular and amusing sort of a dialogue concerning a description of the economic development of Manchester.

 

Marx starts by a reminiscence of the conflict of Goethe’s Faust between the penchant for accumulation and the penchant for enjoyment, and then goes on to gloss Dr. Aikin’s history of Manchester which the  author divided  into four periods.

 

“.The first one was when manufacturers had to work hard to survive”, says Aikin.

When they enriched themselves by robbing parents whose children were taken as apprentices; parents paid a high price and apprentices were starving. As the average profit was low, in order to accumulate extreme stinginess was necessary… comments a caustic Marx. 

 

The second period, when they began to have small fortunes, but kept working as hard as before”, says Aikin.

Because the direct exploitation of labor implies work, as any slave driver well knows, says Marx.

 

The third one, when luxury started and trade was pushed by sending salesmen at each corner of the kingdom… It is probable that there were few or no capitals of £ 2000 to £ 3000 before 1690, however, by that time traders began to build modern brick houses” , says Aikin.

 “Even in the early seventeenth century, a Manchester industrialist who dared to put a pint of wine before his guests was exposed to criticism and accusations of his neighbours“, remarks Marx, who then goes on to give an interesting  description of usual tavern expenses at that time.

 

The fourth period, the last thirty years of the eighteenth century, is when the expense and luxury have made great progress, supported by expanded trade with vendors in every corner of Europe”, concludes Aikin.

What would the good Dr. Aikin say, if I he could leave his grave and see the Manchester today? Exclaims  Marx.

.

Accumulate, accumulate! That is Moses and the prophets! “Industry furnishes the material which savings accumulates” says Marx, quoting Adam Smith. Therefore, save, i.e. Reconvert the greatest possible portion of surplus value, or surplus product, into capital! Accumulation for accumulation’s sake, production for production’s sake, by this formula classical economy expressed the historical mission of the bourgeoisie and not for a single instant deceived itself over the birth-throes of wealth. This phrases are among the most lively in Marx’s stile, but there is the ambiguous footnote number 3, that says: Even J. B. Say says “The savings of the rich are made at the expense of the poor”… and then adds “The Roman proletarian lived almost entirely at the expense of society ….It can almost be said that modern society lives at the expense of the proletarian, on what it keeps out of the remuneration of labour ( Sismondi. Études, Vol. I, page 24. )”

 

Certainly putting together in the same footnote Say and Sismondi, after somehow attributing those exhortations to the English classical liberal economy looks very much as a manufactured effort to include Sismondi among them. A quite out of place assumption, because the profound discrepancies between Ricardo, Say and Sismondi were well known to any well informed economist and Marx was certainly one of them. Those discrepancies are specially sharp in what concerns over-production, a policy which Sismondi considers the cause of the periodic crises of the capitalist system. Besides, having Say state that the rich are made at the expense of the poor, is at least unexpected, and then there is no even mention of the source. Sismondi’s quote, although plausible, could not be verified in his Études at the page mentioned in the footnote or at any page related to the subject of proletarians.

 

Wealth and population

 

Sismondi is always interested on the equitable distribution of wealth among the population, as well as on the harmonious growth of the economic means available, in order to prevent the kind of imbalances between income and population that can cause suffering and misery. That led some to deem him a follower of Malthus, a mistake that is found even among scholars of economic thought. That confusion was denied by Sismondi himself in some articles after the publication of his Nouveaux Principes and with ample reason. The text of the first edition of Nouveaux Principes (1819) already contradicts Malthus and the text of the second edition (1827) widens his polite disagreement with him.

 

Sismondi says: Mr. Malthus, has established the principle that in every country the population was limited to the amount of food that the country could provide. This proposition could only be true if applied to the entire globe, or to a country without the possibility of importing from others any part  of its livelihood; in all other cases it is modified by foreign trade. But also, and this is most important, that proposition is true only in the abstract and does not apply to political economy. The population never reached the possible limits of subsistence and probably never will.

 

Not all those who want food always have the means or the right to take it from the land; On the contrary, those for whom the law grants the monopoly on the land, have no interest in asking it all the food that it can produce…. Long before the population growth stops because the country can produce no more food, it stops because it is not possible to buy it or there is a lack of willingness to produce it.

 

The human population, says Mr. Malthus, can double every twenty-five years, and follows a geometric progression; but work to improve land that is already cultivated, can add more products only in limited amounts … This reasoning …we find completely deceptive… Speaking in abstract, the multiplication of plants follows a geometric progression infinitely faster than that of animals, and this one is infinitely faster than that of men. A grain of wheat produces another twenty in its first year, which can produce four hundred the second, eight thousand the third and four hundred and sixty thousand, the fourth. But for the multiplication to proceed like that, resources, that means land, must be available for the wheat; just like with men.

 

It has often been seen miserable wage workers who do not find work, or not finding enough; they have been seen consumed by want bread and perishing; but it has never been seen in any country, the human species subjected to small portions as in a besieged city …. It has never been seen that food production stagnates because inability to have the land produce new fruits in proportion to the needs.

 

Sismondi ends his argument stating that there are other factors different from the lack of food, that limit population growth. He then points out that The nobility everywhere has had sufficient means so it should have multiplied itself until its descendants were reduced to the poverty. But it is the opposite that really happens: in every country in earth we see ancient noble families become extinct after a certain number of generations, and the body of nobility constantly recruited by ennobled ones. This argument closes with an amusing application of Malthus formula to the old noble and rich family of Montmorency, whose wealth goes back to around the year 1000 and who have never lacked food… and then today the universe would have only the Montmorencys, because their number in 1880 would be 2,147,475,648. But it is not so, because the main obstacle to unchallenged reproduction is man’s will, which always opposes this multiplication: an obstacle completely independent of the quantity of food.

 

One reason for the confusion about Sismondi as a follower of Malthus may come from the quote of Malthus by Marx, expanded by Engels in Capital, Part 7, Chapter XXV – The general law of capitalist accumulation. Marx says: Even Malthus recognizes overpopulation as a necessity of modern industry, though, after his narrow way (Marx always so polite), he explains it by the absolute over-growth  of the labouring population, not by becoming relatively supernumerary. Then he quotes Malthus who did actually say:  Prudential habits about marriage, if carried to a considerable extent among the working class of a country that depends on manufacturing and trade, may injure it. After which he explains that the amount of funds to keep work going grows faster than the population..

 

The Malthus quotation is attributed in a footnote to his Principles of Political Economy, but then in that same footnote there is a remark by Engels, where he adds the following ambiguous comment: In this work, Malthus finally discovers, with the help of Sismondi, the beautiful Trinity of capitalistic production: over-production, over-population, over-consumption. Three very delicate monsters.

 

A quite unjustified and out of place commentary, because Sismondi is very well known for his fight against over-production, which he sees as the main cause of the cyclical crises of capitalism, because it causes overconsumption, indebtedness and under-consumption, as well as profligate waste because it distances useful value from exchange value. As for over-population, Sismondi over and over recommended that population should be balanced with the possibility of employment, to avoid exploitation and recommended higher wages to increase workers share of consumption. Sismondi clearly says: Equality of benefits will always result in an increase in market size for producers, while inequality will reduce it. …Concentration of wealth among a small number of owners causes the internal market to shrink even further, and industry is forced to find its new markets overseas. Sismondi, all over his works considers that this Ricardian economic model, which becomes depends on exports, is the basic cause of imperialism.

 

On applied scientific progress

 

Sismondi was also accused of being against technological progress, to oppose the use of machines and industrial scientific applications. It is a baseless accusation that Sismondi himself proved wrong in several articles, that were included at the end of the second edition of his New Principles of Political Economy, in 1827.

 

He says: I have been presented in political economy as an enemy of the progress of society, and in favour of barbaric and oppressive institutions. No, I do not at all want what it was, but I want something better than what we have. I cannot judge what we have now but can compare it to the past, but I am far from wanting to restore ancient ruins, when I only use them to show the eternal needs of society.

 

I pray that attention is made; It is not at all against the machines, it is not against the discoveries, it is not against civilization, that I address my objections; it is against the modern organization of society, an organization that, by depriving the working man of any other property than his arms, does not leave any protection against competition, against a crazy auction directed against him, and of which he will become the victim.

 

Suppose that all men share equally among themselves the product of the labour in which they have all participated, and then all the industrial discoveries will be, in every possible case, a benefit for all; because, with every advance of industry, they can always choose to have less work and more rest, or longer joys with the same job. Today it is not discoveries that are bad; it is the unfair distribution that man makes of them.

 

We are, and it has not being said enough, in an entirely new condition of society, of which there is still no experience. We tend to completely remove all kind of property from every kind of work, to break any patronage between labourer and employer, to stop any sort of partnership from the first in the profits to the second.

 

This social organization is so new that it is barely established, and it exists only in the most industrial countries, the richest, the most advanced into a system that we are just establishing; a system where the work in agriculture, as well as the work in manufacturing, is made by workers who can be dismissed at the end of each week; It is that which we are heading toward; It is against this danger that I am warning and it is not against the discoveries of science

 

A few fragments of these clarifications are quoted by Marx in Chapter XXXII – historical tendency of capitalism to build accumulation. There is something somewhat disconcerting, because those clarifications were printed at the end of the second volume of the second edition of Nouveaux Principes, printed in 1827, which, as we said before, Marx does not mention in his bibliography. In the footnote Marx attributes the source to a Volume III that never existed.

 

The context of what Marx describes when he quotes Sismondi this last time, in the first volume of Capital, is touching: The expropriation of the immediate producers was made with a merciless vandalism, and under the stimulus of the passions the most infamous, the most sordid, the pettiest, the most meanly odious. Self-earned private property, that is based, so to speak, on the fusing together of isolated, independent labouring individual, with the conditions of his labour, is supplanted by capitalistic private property which rests on exploitation of the nominally free labour of others, i.e. on wage labour. To quote Sismondi in this case was indeed appropriate, because that description is precisely what Sismondi wrote at the end of his introduction to his Études sur l’Economie Politique, where he reached the conclusion that The crematistic school – meaning Ricardo’s kind of liberalism– supported with its arguments the power of money with the seduction of low prices.  

 

Conclusion

 

Sismondi was the first to develop an economic analysis over the causes for the misery and inequality brought by the economic and social theories that accompanied the Industrial Revolution. He believed in improving people’s conditions by making the large majority of the population owners of private property. Such a policy would mean a lot of work to overcome extructural resistance, but it is a plausible solution for stable growth.

 

Marx made a brilliant amalgam of the ideas of the XIX century, with Sismondi’s as the technical thread for socio- economics, to reach the conclusion that those miseries would unavoidably bring a violent revolution and that a history of economic injustice would resolve itself in a Proletarian Dictatorship. He thought that abolishing private property was the way to increase the wellbeing of the majority of people, which has a rather quimeric sound. Herding people’s pain and frustration towards  metaphysic and implausible solutions is a historically well proven way of maintaining the social Status Quo. David Ricardo would have smiled.

 

We can not know precisely what Sismondi would have thought of Marx theories, but we can imagine it by what Sismondi wrote arguing against David Ricardo’s brand of liberalism and of abstract theories in general: One should generally beware in political economy of absolute statements as well as of abstractions … and every abstraction is always a deception. Those lines can be equally applied to Marx’s communist theory. Sismondi concludes the argument against abstractions with a deep meaningful phrase that encapsulates his whole economic philosophy: Besides, political economy is not a mathematical science, but a moral science.    

 

Geneva, August, 2015

 

(Version updated: 12/01/2016)

 

BIBLIOGRAPHY

 

John Harrison, Robert Owen and the Owenites in Britain and America, The Quest for the New                           Moral World, Routledge Revivals, 2009.

Karl Marx.: Capital, Encyclopedia Britannica, inc. Chicago. 1991.

Karl Marx & Frederich Engels. Manifesto of the Communist Party, Encyclopedia Britannica, inc.                       Chicago. 1991.

Maximilien Rubel. Marx critique du marxisme, Payot, Paris 2000

Jean Charles Sismondi. Nouveaux Principes de Économie Politique, Vols I-II, Delunay, Paris, 1827

Jean Charles Sismondi. Études sur l’ Économie Politique , Treuttel &Würtz, Paris, 1837.

John Ruskin. Unto this last. Penguin Books, Penguin Classics, 1985.     

 

Notes

 

Truths and Lies over Syria

 

By Umberto Mazzei

Geneva, 29/01/2014

Thomas Lawrence (Lawrence of Arabia) on Arabs, in 1916: If properly handled they will remain in the sate of political mosaic, a tissue of small jealous principalities incapable of cohesion.1

Background

For centuries the Arabs lived in peace under the Ottoman Empire without religious conflicts in semi-autonomous communities called Vilayets. That peace guaranteed transport between the Mediterranean and India, so Great Britain then supported Ottoman integrity against Russian attempts to erode the Northern part of the vast Empire. In 1869, the new Suez Canal, changed the strategic interest, which moved South, to Egypt specifically.

The Khedive of Egypt, Ismail Pasha, bankrupted Egypt with projects funded by British bankers, and in 1875 sold his controlling shares on the Suez Canal Company to Britain, with the Rothschild Bank acting as intermediary, during the government of Benjamin Disraeli (1874 -1880). Shortly afterwards, the British intervened Egyptian rents and Egypt became a British vassal state.

In 1916, during World War I, Britain and France negotiated the Sykes -Picot Agreement, to distribute between them the Arabs of the Ottoman Empire. The agreement was like other Franco- British agreements in Africa, which divided peoples with artificial lines, while putting together others who had little in common. The drafter of the final borders was Sir Mark Sykes, without Georges Picot, because only British troops occupied the region.

After the war, France received her Syrian part, but amputated from Mosul , Jordan, Njed and Palestine, because the British invented three kingdoms for their Arab allies against the Turks. The Kingdoms of Jordan, of Iraq, with the vilayets of Basra (Shiite), Baghdad (Sunni) and Mosul (Kurdish), and of Arabia. Jordan went to Sharif Hussein, Iraq to Hussein’s son Faisal and Arabia to Ibn Saud. It is remarkable that when it was proposed to give Iraq to Ibn Saud, Winston Churchill , Secretary for the Colonies, objected: ” Ibn Saud would plunge the entire region into a religious pandemonium”. He said so because Ibn Saud came from Nejd, where Mohamad ibn al Wahhab, in the eighteenth century, founded a primitive intolerant sect, Wahabbism, whose members are called Salafis. It is now the official religion in Saudi Arabia, Qatar and Bahrain.

Palestine remained as a British Mandate, in order to fulfil the promises made by Britain in the Balfour Declaration (1917), which is a letter from Foreign Secretary Lord Arthur Balfour, to Lord Lionel Rothschild, President of the British Zionist Federation.

In the 60’s the Wahabbite Arab absolute monarchies regarded in dread, as kings imposed by the British lost their thrones: Farouk in Egypt, Idris in Libya, Faisal II in Iraq. In their place there were secular republics, which gave a very bad example by distributing their income. All that caused by a Pan- Arab Ba’ath (Renaissance) Party, with nationalistic and socialist ideas.

Beginning the XXI century, Arab countries were divided into secular republics, theocratic monarchies and pro-American/British/Israeli dictatorships. Laic and modern Arab countries were an ideological threat, which led the West to promote riots and pretexts to destroy them.

Peace Conference on Syria – Geneva II

After all the lies to justify NATO’s attacks on Iraq and Lybia, now the same partners are looking for a pretext to attack Syria. It is well-known that NATO countries, Israel and Gulf monarchies are supporting the groups that try to overthrow through military means and terrorist attacks the Syrian Government; the legitimate government recognised by international organisations. It is quite a clear intervention in the internal affairs of a sovereign nation, prohibited by the UN Charter and by modern International Law. It is a proxy aggression with foreign mercenaries, paid and armed by Saudi Arabia, Qatar, United States, Great Britain and France, helped to penetrate Syrian borders by Turkey and Jordan.

The US Government said that if the Syrian Army used chemical weapons to fight them it would cross the “Red Line” for a US – led direct military intervention. Washington has a long history of false flag operations to justify its wars before its credulous citizens – so we knew that gas attacks against civilians would be fabricated and attributed to the Syrian Government. We also knew that the case would be brought before the UN Security Council requesting authorization to attack mentioning nonexistent “strong evidence”. Only that this time, the majority of the Security Council, including veto-wielding permanent members Russia and China, were against the attack. Then, the British Parliament prohibited any action against Syria by the British Government and it seemed that the US Congress would deny its permission for an attack, that this time had benn previously requested. There where also eleven Russian and two Chinese warships guarding the Syrian coast against an attack in violation of the Security Council decision and the UN Charter.

That is the context in which Washington relinquished war on exchange for Syria surrendering its chemical weapons, which in any case were intended only as a deterrent against Israeli atomic weapons. That is how the US accepted to bring all sides to a peace conference instead. The usual Anglo-Saxon strategy for international conferences is to invite many vassal states – Mexico but not Iran- to have a majority of voices on their side while the press spreads lies to convince the general public. The idea is to intimidate and obtain concessions. It will be applied to Syria, even if the Syrian Government is consolidated its hold with recent military and diplomatic victories. The Syrian know it well, as is obvious in the speech by their Foreign Minister, Walid al- Moellem.

The Truth seen fom the Syrian side

I will quote parts of the Minister speech in Montreux, on January 22, asking to stop support to foreign terrorism that destroys his people and his country. “It is regrettable, Ladies and Gentlemen, that seated amongst us today in this room, are representatives of countries that have the blood of Syrians on their hands,…Countries that gave themselves the authority to grant and deny legitimacy to others as they saw fit, never looking at their own archaic glasshouses… Countries that shamelessly lecture us on democracy, on development and on progress, whilst drowning in their own ignorance and medieval norms. Countries that have become used to being entirely owned by kings and princes who have the sole right to distribute their national wealth granting their associates whilst denying those who fall out of favour.

They used their petrodollars to buy weapons, recruit mercenaries and saturate airtime covering up their mindless brutality with lies under the guise of the so-called Syrian revolution that will fulfill the aspirations of the Syrian people.… Ladies and Gentlemen, How can a Chechen, Afghani, Saudi, Turkish or even French and English terrorists deliver on the aspirations of the Syrian people, and with what? An Islamic state that knows nothing of Islam except perverse Wahhabism? Who declared anyway that the Syrian people aspire to live thousands of years in the past?

In the name of the revolution, children are killed in their schools and students in their universities, women are extorted in the name of jihad al-nikah and other forms, mosques are shelled whilst worshipers kneel at prayer, heads are severed and hung in the streets, people are burned alive in a true holocaust … This is what their masters ordered them to do, these countries that spearheaded the war against Syria, trying to increase their influence in the region with bribes and money, exporting human monsters fully soaked in abhorrent Wahabi ideology, all at the expense of Syrian blood. From this stage, loud and clear, you know as well as I do that they will not stop in Syria, even if some sitting in this room refuse to acknowledge or consider themselves immune.

Some neighbours started fires within Syria whilst others recruited terrorists from around the globe – and here we are confronted with shockingly farcical double standards: 83 nationalities are fighting in Syria – nobody denounces this, nobody condemns it, nobody reconsiders their position – and they impertinently continue to call it a glorious SYRIAN Revolution! While when a few scores of young resistant fighters supported the Syrian Army in a few places, all hell broke loose and it suddenly became foreign intervention!

Here I affirm, Syria – the sovereign and independent state, will continue to do whatever it takes to defend herself with whatever means it deems necessary, without paying the least bit of attention to any uproar, denunciations, statements or positions expressed by others. These have been and always will be Syria’s sovereign decisions… They imposed sanctions on our food, our bread and our children’s milk. When all of this failed, America threatened to strike Syria, fabricating with her allies, Western and Arab, the story about the use of chemical weapons, which failed to convince even their own public, let alone ours. Countries that celebrate democracy, freedom and human rights regrettably only choose to speak the language of blood, war, colonialism and hegemony. Democracy is imposed with fire, freedom with warplanes and human rights by human killing.

We are here as representatives of the Syrian people and the state; but let it be clear to all, – and experience is the best proof – that nobody has the authority to grant or withdraw legitimacy from a president, a government, a constitution, a law or anything else in Syria except Syrians themselves; this is their constitutional right and duty.”

The lies of the “Friends of Syria” and their press

Doubts begin with the report by an English law firm paid by Qatar, a country which sends money and weapons to the rebels in Syria. There are pictures of alleged victims of the Syrian government. The report comes to light just a day before the Geneva conference II on Syria. Sources are nebulous and it would be odd for a government to record torture, but Mr. Kerry is already horrified and the press lying when presenting the document as indisputable evidence.

Another lie concerns the resignation of President Assad as agreed before the talks. The Syrian government agreed to form a transition government to end the war and then call elections. The text says: “[a transition government] could include members of the present [Syrian] government and the opposition and other groups and shall be formed on the basis of mutual consent.” Nowhere does it say that Assad should leave power first, as the press is stating.

Another lie is that the United States supports only moderate militias. There is no such thing. The press narrative speaks of good press Rebels – Islamic Front – fighting with evil Al -Qaeda and Syrian Army. Words from the head of the Arahr the Sham, the strongest Front group, we know that their goal is to impose Sharia Law, enclose women in their homes, slaughter heretics and expel Christians. Ahrar al Sham claims to be the authentic representative of Al- Qaeda in Syria. None of that is reported by North American or European press.

Conclusion: It is impossible for Western governments to ignore the truth. They know the experience in Libya. It is likely that the objective is to destroy strong Arab countries to surround Israel with a “tissue of small jealous principalities incapable of cohesion.”

1 Kingmakers, the invention of the modern Middle East, Karl Meyer & Shareen Blair Brisac, W.W. Norton Company. Inc., New York London, pag. 202

Notes for a different economic and social system

By Umberto Mazzei

The world is undergoing a period of great change. The World War II victors polarized the world between a Marxist-Leninist recipe and a Ricardian liberal recipe. Such dualism is still presented as if there are no other options, a kind of global bipartisanship. Both systems failed. It’s time to look at other schools of economic thought and policy, to set a new course.

The Soviet Union socialist version began to go wrong when Leonid Brezhnev’s government (1968-1982) increased the budget of the military industries at the expense of the rest of the economy and of social welfare. His government also got involved in an Afghan war that could not be won. The adversary was equipped, trained and financed by the United States, which was out of reach, unless incurring in a global atomic war. After Brezhev, came Mihail Gorbachev, a dreamer, to say the least, who gave away his allies without warranties, adopted neo-liberalism and sold Russian state assets at degraded prices to Wall Street’s straw men.

In England and America, politics are ruled by financial interests since the eighteenth century and Central Bank functions have been assumed by consortiums of private banks. In Britain, the Bank of England assumed them since 1844 (Bank Charter Act). In Washington, a group of big private banks became the Federal Reserve and usurped those functions from the Treasury, in 1913. In both countries economic policies are dictated by “Lobbies”; among them excels the arms industry, which guides defence policy toward ever-increasing military spending. Both sectors – finance and weapons – loot resources from the economy to maintain two fantasy worlds: one of fabulous virtual fortunes and one of imaginary threats.

During both post-wars, the presence of Marxism-Leninism as a ruling ideology helped to raise wages and institutionalize social protection of workers, mainly in Europe, where the Soviet Union was close and had powerful communist parties. The potential threat promoted a policy towards a reconciliation of worker’s rights with business interests. The disappearance of the Soviet bloc unleashed greedy hallucinations that led to a socio economic cliff. The tale that total freedom for personal greed leads to collective prosperity proved false.

The real economy eroded and is now on life support, since 2008. It is a schizophrenic case: the people (99%) in the real goods and services economy lives a recession, but the owners of the finance and arms industries receive juicy bonuses and dividends. It happens that public debt was created to give money to the banks (“quantitative easing”) to re-inflate stock markets and the payment was charged to taxpayers. It might have been a new beginning if the practices and policies had changed, but they keep unchanged and lead inexorably to a terminal crisis.

There is not yet public awareness that there is a massive failure of the political and economic system imposed by Wall Street and the City in London, since their victory in 1945. Symptoms of collapse are clear and the gravest one concerns labor, because wages maintain consumption levels. In the U.S., official unemployment is 8%, but their statistics hide much data(1) and unemployment stands around 18%, and growing. In Britain the official figure is 8.4%, but excludes 3 million underemployed, with a few hours a week and 4 million of the so called “precariat”, people in casual self-employment, which rather means self-unemployed(2).

Since 2008, the bank ransom cost more than $19 trillion – more by one third of the US GDP – which was invested in new gambles of the financial sector and not in mobilizing the economy. Households lost $ 1.1 trillion in value, plus billions lost in investments and pension funds. Now, families that were middle class take soup kitchen’s charity. Those innocent pay for the absurd risks incurred by greedy bankers and for the follies of the military-industrial complex.

Socio-economic Ethics

The social responsibility of the economy is an ethical issue that separated Adam Smith and David Ricardo. Smith speaks of “excessive profit” as contrary to the general well being and a parasite; Ricardo sees it as an economic goal and that is also the approach of current neo-liberalism, it is what is now taught in business schools as economics. The anthropologist Gregory Bateson (Mind and Nature) said that “the ethics of optima and the ethics of maxima are totally different ethical systems”. Ethics of optima emphasizes quality and looks for satisfaction. The ethics of maxima are addictive and have only one rule: more is better.

Excesses are always toxic and it is what killed the U.S. economy and the present economic system. “Maximization of a single variable – Bateson tells us – typically ends in pathology.” A healthy economy keeps a balance in the prosperity of the various sectors; where growth is favoured only for a few sectors, there is a parasitic situation. Such is the case of the financial sector and the arms industry, which on one side request socioeconomic austerity to keep the value of debt while on the other side engage in wasteful and totally unnecessary wars.

As it agonizes, the system dismantles the European welfare state. The bankers need more money for their gambles, so they impose their own people in government; jobs are eliminated, employment becomes precarious, public services are privatized. As Boaventura de Sousa says, in History of Austerity: “The goal is to return to class politics pure and hard, that is, to the nineteenth century,” to Ricardian liberalism, to the England described by Charles Dickens.

There are other doctrines

During the Nineteenth century, economics was conceived as a science whose primary goal was not the earnings of workers but those of the capital invested… and even then, only that of the few. But there were also those who had the worker’s interest at heart; their thoughts were applied later, although timidly, in Western Europe before the Soviet Union collapse. Most of them are now ignored and their works are hard to find in university libraries. Their goal was national prosperity, rather than individual or corporate gain; an objectionable criteria for companies that fund academic activity and whose economic vision focuses on quarterly earnings.

The first of them was from Geneva, Jean Charles de Sismondi, who published “New Principles of Political Economy” in 1818. He minted there the term proletariat – which later Marx used – to designate those whose role was to guarantee labour with their offspring. He criticized Ricardo and noted that profits at the expense of wages is foolish, because good salaries are necessary to maintain market consumption; he was also the first to demand government intervention to protect workers from capitalist abuse and also the first to talk about class struggle(3).

Sismondi predicted the crisis afflicting the United States and other countries today, due to complicit governments. He said that overproduction leads to imperialism and to squeezing consumers through debt on future wages. Now it is called “supply side economics” and should be called Debt Economy. Sismondi denounced overproduction also because it distances the utility value of products from their exchange value, promoting unnecessary consumption on credit and debt bondage. It has happened in England and the United States since the Nineteenth century. Then it was credit at the employer’s store, now it is credit cards. This distinctive feature is described in “The Iron Heel” (1906), by Jack London.

Since then, the tendency to excesses of capitalism and the role of government to correct them have inspired other proposals. They can be classified in two basic theses.

One group is constituted by Karl Marx and his followers, who believe capitalism to be irredeemable and immersed in a fatal dialectic process that leads to its own violent destruction, until its replacement by a society without private property.

I think that Marx and his followers are utopian when they base their violent thesis in proletarian solidarity. Solidarity is rather precarious among people struggling to survive and even more so when they are denied the security of having their own home. Class solidarity exists, but between the very rich. Nonetheless, Marxism is valid as a method of socioeconomic study and has basic inputs for a proposal to replace pure Ricardism or Neo-Liberalism.

The other group thinks that capitalism can be managed with control policies to the benefit of society. Besides Sismondi, we can include Friedrich List, Werner Sombart, Max Weber, Vilfredo Pareto, John Maynard Keynes and in a reverse way, Deng Xiaoping in China.

We believe this second group is more realistic and consistent with what is now a postulate of political science, as mentioned by Sismondi, Iturbide, Sarmiento and others: In State matters, jumps are ephemeral; progress is made by evolution, as in nature, and institutions that last evolve according to the circumstances, the culture and the ideas of their citizens.

The influence of the authors in this group is important: List promoted the industrialization of Germany, Keynes developed the economic importance of wages, Max Weber, Vilfredo Pareto are still orienting social economics. Sombart coined the term “capitalism” (Marx does not use it) and the concept of creative destruction, later used by Joseph Schumpeter. Sombart’s main work(4) is not available in English because Princeton University has an exclusive right and has not translated it.

There are other important authors that we could study: Vasili Leontief, Nicolai Kondratieff, Joseph Schumpeter, Jon Elster, John Roemer and Carlota Perez, a Venezuelan whose book “Technological Revolutions and Financial Capital”(5) covers 250 years of history and points out that changes and technical revolutions have a remarkable regularity and force the redesign of social and political institutions. We are experiencing one of those moments.

Geneva, 01/23/2013

– Umberto Mazzei has a PhD in political science from the University of Florence. He has taught international economics at universities in Colombia, Venezuela and Guatemala. He is Director of the Institute of International Economic Relations in Geneva.
www.ventanaglobal.info

(1) Individuals collecting unemployment insurance are officially unemployed, but when after a few months support stops they drop out of unemployed statistics even though they are still out of work. There are also millions of Americans who are underemployed, with only a few hours per week, but are included among the employed.
(2) The Guardian, John Philipott: We need employment statistics that confront political spin. 16 January 2013.
(3) Nouveaux principes d’économie politique (1818).
(4) Der Moderne Kapitalismus, 1902; last version in 1937.
(5) Carlota Perez and Chris Freeman, “Technological Revolutions and Financial Capital: the Dynamics of Bubbles and Golden Ages”. Edward Elvin Publishing Limited, Glensanda House, Cheltenham, UK. 2002.

UNCTAD Raul Prebisch Lecture – Correa: Freedom without justice is akinto slavery

Summary by Umberto Mazzei

Geneva, October 24, 2014

Development is a political problem. It depends on who rules the society. Elites or majorities? Financial capital or human beings? The marketplace or society?.

It is a big mistake to decouple the economy from its original sense of political economy, making believe that economy is a technical issue. John Kenneth Galbraith once said that “an economist who overlooks power issues is completely useless” and Prebisch pointed out that “the accumulation and income distribution is the result of collisions of forces and relations of power”. Bastiat said, 200 years ago, “When plunder becomes a way of life for a group of men … they create … a legal system that authorizes it and a moral code that glorifies it”.

Latin America has been dominated by elites that excluded majorities from progress. Their poverty is the result of perverse power relations. The Citizens Revolution in Ecuador has reduced poverty by 8 Gini points and the average economic growth in seven years was 4.3%. During that time poverty declined from 37.6 to 25.6% and extreme poverty from 16.9 to 8.6%. In Latin America the best indicator of good economic policy is the reduction of poverty and of extreme poverty.

Instead of reducing wages, to supposedly create jobs, and increase the exploitation of workers with labor flexibility, Ecuador increased wages and closely surveilled employers conduct. It’s a delicate balance, because without employers there is no employment. The problem is handled with quite a novel approach: a dignified wage, one that allows a family to get out of poverty. The law requires utilities to be distributed only after paying a dignified wage to its last worker. The effects have been better than expected, because the minimum wage has parified with the dignified wage. It was a way to give primacy to human work over capital, unlike traditional socialism that proposed the abolition of private property.

Ecuador bought back much of its foreign debt in the secondary market and debt service was reduced to 5.3% of the state budget. Concerning oil policy the old concessions system was substituted by service contracts, which fix a fee per barrel and the rest goes to Ecuador. Tax revenues tripled to 20.8% of GDP, thanks to lower evasion and more efficient tax collection. That allowed to have the highest level of public investment in Latin America, with 15.7% of GDP in 2013, and also improved competitiveness by 15 notches in the ranking of the World Economic Forum, with a public debt of only 24% of GDP.

The use of social resources demonstrates the power relations within a society. Inequalities had created such instability in Ecuador that it had 7 presidents in 10 years, but today it is one of the most stable democracies. Before creditors, bankers and international bureaucracy were in command. A sign of change is that Ecuador is the world leader in employing people with disabilities. According to the Human Development Index of the UN, Ecuador rose from mid-range to high human development. It is the result of a social investment that grew from 4.8% of GDP in 2006 to 11.4% in 2013.

The global crisis happens because of the global power of the Empire of Capital, specially the financial one. In 2008 the lack of intervention, regulation and supervision of the international financial system, especially in the US, brought one of the worst crises in decades. That crisis reduced the value of the middle class assets but, after the crisis, the very rich and the banks were richer than ever. It is also at the root of the European crisis. The complicity of an alleged economic science and a international financial bureaucracy, masquerades ideology as science. Austerity recipes are repeated against humans and in favor of capital. These policies were already implemented by President Hoover in 1929 and showed that they are not the solution. Why repeat the mistakes? Because the problem is not technical but political. The problem is the power relationship. The solution is to restore citizen control over capital and of society over markets. The solution is only political.

Higher education, science, technology and innovation are key to development. Ecuador now spends 4.3 times more in education and 4.5 times more in health. The basis for democracy is a high quality public education, a massive one with free access. To reinforce this effort, Ecuador made an agreement with the International Baccalaureate Organization, a Swiss organization. There are already 220 schools undergoing the accreditation process. With the vast worldwide generation of knowledge, countries that do not generate knowledge will become increasingly ignorant in relative terms. In Ecuador the higher education budget reached 2% of GDP, more than double the average in Latin America (0.8%) and higher than the OECD average (1.7%). Today Ecuador has 71 universities and that way it has managed to achieve quality with equity. Improved education is part of an effort to improve the low productivity of our economy, but without falling into the trap of basing the organizing of society on technology needs. Einstein said, ”The day that technology overcomes human interaction, the world will have a generation of idiots”.

Culture provides informal institutions that tend to dominate formal ones. The cultural approach to explain development is analyzed since Max Weber (1905) and it’s a culture of innovation, responsibility and excellence what really stimulates development. The culture of Latin Americans enables them to withstand extreme conditions and we may speculate that if we put a US citizen and a Latin-American in the jungle for a year, the Latin-American has more chances for survival. But if you put 200 North- Americans and 200 Latin-Americans in the jungle, after a year the US citizens will likely have a school, planted crops and built a church … while the Latin -Americans will likely still be discussing who’s the boss. Organizing and planning of collective action, for whatever reason, has not developed much in Latin America.

There is so much talk of solidarity, that we even have a surplus, but we must learn to be efficient and on that issue Anglo Saxons are better. Their pragmatic sense of responsibility pushes them to analyze errors and make corrections. In Latin America errors are vented by throwing stones at the US Embassy , because errors are never our fault. It is the source of the Dependency Theory: if we are poor is because they are rich; defects are made virtues, as to say that being poorer is being more democratic.

This lack of self-criticism and of a willingness to change is more pronounced in the native population, who has been victim of historical injustices. But being a victim does not necessarily give moral high ground or makes people wiser, nor disclaims responsibility for the current situation. The ancestral rhetoric makes a virtue of immobility and makes misery a part of their culture. The challenge here is to change in order to overcome poverty, but without losing identity.

There are new unfair forms of international production division. Before it was an exchange of commodities against industrial value-added goods, now it is one of privatized knowledge against freely available environmental goods. In principle, knowledge is a public good, from which it should not be possible to exclude some or have a consumption rivalry. Patents, nonetheless, are institutional barriers that establish both things, even if social well-being would gain with greater access. A dramatic example of this forced exclusion is the very high cost of some medicines. The seemingly pragmatic principle of knowledge privatization is but the subjugation of human beings to capital.

There are more efficient ways to encourage the production of knowledge. One option would be greater participation of academia and the public sector. Another is that states compensate the creation of knowledge for profit, to make it a public good. The problem with this kind of options is that they are contrary to particular ideological criteria and to the power of capital.

Many developing countries produce public goods, but they are public environmental goods, such as all the clean air produced by the Amazon rainforest, for which the big global polluters do not give any compensation. It is said that environmental goods are free of charge, but environmental protection has a high opportunity cost. The international power relation, in this case, would be clearly understood if we imagine the inverse situation, if the big polluters were developing countries and the generators of public environmental goods were rich countries. They would surely be demanding a fair compensation.

The world order is not only unfair, it is immoral. Everything is geared to serve the interests of capital. Just by giving compensation for public environmental goods there would be a redistribution of income in the world. The big polluters do not sign the Kyoto Protocol, but punish with jail when patent royalties are not paid. Prison for royalties is like going back to jail for debt. In Ecuador, there is not anymore imprisonment for not paying royalties, but there an attempt to limit our sovereignty by requesting sanctions against us, at WTO, because of that. There is another action that tends to limit our sovereignty, it is carried – as García Linera says – by some NGOs, which are actually agents of foreign governments, encouraging a sort of colonial environmentalism, that delegates on indigenous peoples the role of Amazon forest keepers. That is like condemning them to misery.

The great opportunity to develop with sovereignty for Latin American countries is through the use of their natural resources. It will generate the resources to invest in human talent, science, technology, and innovation, in order to overcome the extractive economy.

Free trade seeks to impose open markets at any cost, claiming that it is beneficial for all. It is a fallacy closer to religion than to science, something that does not stand a theoretical, empirical or historical analysis. Developed countries did exactly the opposite of what they preach today. The protection of infant industries has been the key to development in most nations. The first to advocate it was Alexander Hamilton. Only when, after World War II, the US industrial supremacy became obvious, like England in the nineteenth century, they began to promote free trade. Developing countries should imitate what the rich countries did, not what they say now.

The existence of an international market operating in a vacuum of power and issuing the right prices is a fantasy. As Paul Krugman says, that theoretical model is not valid. The phenomenon of globalization seeks only global consumers, planetary markets. It is an opening, but only for goods and capital, particularly financial. The collective action that ended the inhuman excesses of the Industrial Revolution is not possible in globalization, which seeks to gain competitiveness by precarizing the labor factor. It makes impossible for developing countries to have stable growth and employment. The high mobility of capital causes a financial speculation that destroys national policies. For many years now, the need to put brakes and controls on the movement of capitals has been pointed out, as recommended by James Tobin – the Tobin Tax – whose product could finance development projects.

Treaties of Reciprocal Protection of Investments are another colonial tool that puts capital above human beings and can subject a sovereign country to external arbitration, ignoring national legal procedures. A report by the Transnational Institute (TNI) and Corporate Europe Observatory (CEO) is appropriately entitled “When Injustice is Business”. It describes how a small group of legal offices, arbiters and financial speculators, are enriched with arbitrations that cost citizens billions of dollars. We are organizing to fight against such exploitation and UNCTAD should intervene. Unasur is already creating an arbitration center for South America.

The world order is not only unfair but also immoral because it is dominated by capital and the interest of foreign powers, which are also dominated by capital. As long as it keeps on unchanged there will be restricted or fictitious democracy and lack of governance in the world. The challenge for humanity in the twenty-first century is to unchain the vast majorities from the control of the few, to achieve the supremacy of humans over capital and of society over the market.

For the Big Homeland, as we call Latin America, the road to that goal is through integration. Unasur means 500 million people in 17 million square kilometres. United it would be the fourth largest economy in the world, with 5.9% of the WDP, a third of the world’s fresh water, the first place in food production, and with oil reserves for a hundred years.

The new Regional Financial Architecture of Unasur is our option to solve the paradox that 760 billion of our US dollars are deposited in major financial centers and we continue to depend on foreign loans and foreign investment. Liquidity and wealth is transferred to the big financial centers rather than to use our savings for our region. In order to change such absurd situation we created the South Bank and South Fund. In addition, we must develop compensated trade to minimize the use of extra-regional currencies, which, like feudal coining rights, transfers wealth to the issuer of the currency, while on our way to a regional currency and regional minimum wages.

Ecuador will preside CELAC next year and its proposals will hinge on four main areas: planning for Integration; the New Regional Financial Architecture; regulation of transnational capital; and Human Rights guarantees.

I want to reiterate before parting, that I consider education a right, but also the best means to achieve a good life and to make such way of life sustainable. All attempts to synthesize in simplistic principles and laws – by the names of dialectical materialism or rational selfishness – such complex processes are doomed to failure as the advancement of human society is unstoppable.

I believe that science and technology can generate much more well-being and become stronger engines for social changes than any class struggle or pursuit of individual profit. Ecuador has decided to base its economy on the only inexhaustible source of wealth: human talent, knowledge and innovation, in order to achieve a sustainable and sovereign development.

Freedom without justice is similar to slavery. That justice will not come from the invisible hand of the market – as Joseph Stiglitz says, so invisible that no one has seen it. Justice will come from the visible hands of a society consciously taking its decisions through political processes. There are no optimal institutions, but we already know that too much collective action kills initiative and too much individualism kills society. Both are necessary for a Good Life.

Both extremes, the minimal state of classical liberalism and the statism of classical socialism, have failed. One of the great mistakes of the traditional left was to deny the markets. The markets are an economic reality. But one thing is to have a society with markets and another is to have market societies, where life, people and society itself are treated as goods. The market is a great servant but a very bad master. We did get rid of the obsequious technocrats of blind orthodoxy; now we dare to think, to create our academic agenda. Raúl Prebisch would be glad to know that we have, again, a Latin American school of thought.

Summary and translation from Spanish by Umberto Mazzei, from IREI Sismondi.

Napoleon and world sugar overproduction

By Umberto Mazzei

Geneva, 04/10/2014

This week there was the annual meeting of the Group of Coppet, under the theme “Getting out of the Empire” regarding the collapse of the Napoleon’s Empire, in 1814. This group is one of those were people meet to read each other their scholarly thoughts about dusty documents, related to old celebrities whose acts usually do not transcend up to us. Coppet is a place, near Geneva, in whose château, once owned by the banker Jacques Necker, gathered, among others, three persons of high relevance two centuries ago:

Madame de Staël, daughter of Genevan banker, Jacques Necker, who was married to Baron de Staël, Swedish Ambassador to Paris. She was an intelligent lady, wrote in an acute and elegant style, was emancipated, well educated and of liberal sentiments. During her life she had to deal with recovering two millions livres that her father, then Finance Minister of Louis XVI, had lent to the French Crown, just before the French Revolution.

Benjamin Constant de Rebecque, great polemist in politics and religion, born in Lausanne, but educated in Edinburgh, he admired the English model that emerged from the 1688 revolution and it’s economic model based on international trade. In politics he was critical of the French Revolution and the Empire and in religion was a Hugenot Calvinist. In literature he adquired a reputation with Adolphe, an autobiographical novel of psychological and social content.

Jean Charles Sismond de Sismondi, acute historian and economist of socio-political wisdom, who first explained the need for a more equitable distribution of wealth and also the benefits to production from inovations from science and technology. He criticized the ideas of David Ricardo in his New Principles of Political Economy, an economic analysis which Marx later used, even after calling him “Petit Bourgeois” Socialist. His ideas were seen as the explanation of the recurring crises of the capitalist system, by authors as diverse as Rosa Luxemburg, Mihail Bakunin or Joseph Schumpeter.

Trafalgar and sugar beet

Some erudite rapports read during the event made me think of a link between the Empire, Sismondi and the present Common Agricultural Policy of the European Union, although it was not mentioned at the meeting.

In 1805, the British, commanded by Admiral Nelson, destroyed the French-Spanish fleet off Cape Trafalgar. This had great historical significance, favourable to the British and then American imperialisms, but the immediate effect was to leave France and Spain without access to trade with their colonies. It also helped to start the Continental Blocade policy of 1806. Among the colonial goods that stopped reaching Europe was sugar, from sugarcane.

As sugar is an industrial input of the utmost importance, the Imperial Government promoted cultivation of beet, a low efficiency sugar alternative, which had been only a laboratory curiosity discovered since the sixteenth century. The process of industrial scale production began at Passy, close to Paris, through work directed by Benjamin Delessert, in January 1812. When Napoleon knew about it, he thought it so important that he went immediately to visit the factory, and with the very same Légion d’ Honneur medal he wore on his chest, he decorated Delessert.

A few days later, Napoleon ordered the planting of 100,000 hectares of beet and the founding of five schools to learn the new sugar making process. Since then, in Europe, sugar has been part of a war economy, even in peacetime. Some 200 years later, in 2012, in France, 4, 6 million tons were produced. Total production in Europe was 25 million tons, of which the EU produced 17 tons, at a cost to taxpayers close to € 900 million in subsidies, that go mainly to big processing and distribution groups.

In the 1012 – 2013 campaign, world production reached 176 million tons and consumption was 164 million tons. This shows an excess of production of 12 million MT, which will be added to a 257 million tons stocks. With a world average price of $ 430 in 2014, a subsidy of $ 47 per ton is implied. The distortion caused by subsidies and by European tariffs and other trade barriers became so great, that, until 2006, although its inefficient way to produce sugar at taxpayers expense, Europe was the world’s largest sugar exporter.

Source : Central America Business Intelligence [CABI].

Over-production in Sismondi’s polemic with Ricardo.

The criticisms and recommendations of Sismondi to the economic system of his time are still valid and still new, because the system has not changed and its defects have worsened. Just remember that the main subject of his New Principles of Political Economy is wealth distribution amongst the population. Two hundred years later there are now many protesting the concentration of wealth in 1% of the world population.

His criticism of the over-production that David Ricardo supported, applies to European sugar over-production. Ricardo said that “the demand for products is only limited by production.” Sismondi disagrees: “With such a principle it is absolutely impossible to explain the most historically proven trade fact; the saturation of markets “…” in rich nations production tends to be determined not by needs but by the abundance of capital, and then, when it soon exceeds consumption, there comes cruel misery.”

Sismondi adds: “Society should always wish that the work done conforms to demand, so that sales have universal nature, and that no producer suffers,” … “The government, far from pushing production without discernment, should moderate such blind zeal, which turns against their fellow citizens, or at least, against other men. In the first case, it is contrary to national policies; in the second, it is contrary to humanity.”

This seems to be an adequate description of the damage caused by global over-production of sugar. The inhabitants of tropical developing countries should expect to benefit from the advantage of growing sugarcane, which is more performing on producing sugar at a lower cost. Sugar is one of the few tropical agricultural export goods that is not perishable, allowing storage and stable supply to meet world demand. However, the United States and Europe manage their imports with a quota system and subsidise their inefficient production .

The United States produces corn sugar, which is also an inefficient source, but because of receiving $ 5,000 million in subsidies, there is an overproduction of corn and sugar that stimulates an internal over-consumption and pushes exports to countries within the US net of free trade agreements. Those exports damage Mexican and Central American rural economies and are a cause of migration.

The European Union was exporting about 6 million tons until 2006, when it amended its policy and imposed production quotas; it reduced EU exports to 1.6 million and increased its imports from the ACP countries (former colonies). Still, EU production remains close to the global surplus.

Perhaps, the despair that drives rural African migration to Europe could decrease if European sugar was produced in Africa, following a policy line pointed out by Sismondi in his wrtttings against slavery. Any how, it is about time that a war economy sugar policy inherited from Napoleon, two hundred years ago, was abandoned.

WTO: The agenda after Bali

By Umberto Mazzei

Geneva , 02/04/2014

Strategic background

In international organizations it is always necessary to monitor what happens after reaching agreements, even when texts are carefully negotiated. There is a tendency to have them hijacked by groups that deviate interpretation towards ​​their own interests. If it is a final and definitive form of a negotiated basic text, the risk is greater and vigilance must be constant. The WTO is by no means an exception and therefore there should be a vigilant follow-up to the management of the post Bali Ministerial agenda.

That interpretive risk is even grater at the WTO, because the debate there has a background of economic interests. Advantages obtained there translate into greater wealth or bigger poverty. At WTO the risk of interpretive manipulation is big, also because there is a small group that has a very clear policy goal and therefore takes the initiative. Their goal is simple: to remove space for national policies that hinder big international corporations. Most of the other WTO member countries usually focus on specific interests, which are not always the same and are not always seen with clarity or honesty.

The main obstacle to the triumph of the proposals of the dozen of countries, which with their vassals, promote the interests of international corporations or their domestic lobbies, is paragraph Nº 47 of the Doha Declaration. This paragraph expresses the concept of negotiating every thing as a Single Undertaking, i.e. that nothing is agreed until everything is agreed. The goal is to balance the negotiation because countries do not have the same interest in all issues. This makes easier to yield in one area because there is gain in another. Some countries, for example, care for an opening to financial services while others prioritize the elimination of agricultural export subsidies.

The Single Undertaking pushed the United States to create those administered preferential trade agreements, in order to impose to some what could not be obtained from all, which have euphemistically been called “Free Trade Agreements“(FTAs). The European Union followed suit with their Economic Partnership Agreements (EPAs). Both are adhesion texts where the counterparty can not change anything. They pass for regional economic integration agreements, the kind tolerated at the WTO, but their emphasis is not commercial, but the expansion of intellectual property monopolies and imposition of supranational rules for Investment. Greater participation for owners of Intellectual Property and Investment is the basic idea of global wealth distribution in the narrative of Value Chains, now supported by an agreement on Trade Facilitation.

There is talk for a rapid implementation of the Trade Facilitation agreement, because it would increase trade in about one trillion of U.S. Dollars; a figure without any base, according to a study by Tufts University1. What is known is that it would produce many consultancies, paid for with funds from cuts in other spending. It is a perspective that deserves little priority.

The Post- Bali agenda

It is vital that members of the WTO remember paragraph No. 47 of the Doha Declaration when thinking on Trade Facilitation, in the post- Bali agenda. Paragraph 1.11 of the Bali Declaration talks about the agenda and says: As further evidence of this commitment, we instruct the Trade Negotiation Committee (TNC) to prepare, in the next 12 months, a work program clearly defined on the issues remaining of the Doha Development Agenda. This will be based on the decisions taken in this Ministerial Conference on Agriculture in particular, the development and issues related to LDCs , as well as all other issues under the Doha mandate that are essential to conclude the Round . Priority will be given to questions of the Bali package in which they were unable to reach legally binding results.

All the other issues are given 12 months for the Work Programme, however, on Trade Facilitation a Preparatory Committee for an expeditious entry into force is created and directed that before July 31, 2014, it should have a Protocol with the commitments in the A category, for insertion in Annex 1A of the WTO Agreement and to open that Protocol for adoption before July 31, 2015.

Members should not accept the entry into force of the agreement on Trade Facilitation as a separate instrument and isolated from the context of the negotiation as a whole. In Part II of the Bali Declaration, the caption 1.8 explicitly recognizes Trade Facilitation as part of the Doha programme for development. To accept its entry into force as an isolated accord would alter the negotiating balance. It would also set a precedent for an early harvest of the issues on which developing countries have made concessions and to ignore the issues that require policy changes in developed countries.

There are commentaries in that sense suggesting that what has been negotiated so far in Modalities should be reviewed, because times have changed. Certainly there are changes in the economy, but are not related to trade, which is part of the real economy, but because of scams and speculation going on in the fantastic world of finance.

U.S. diplomats already murmur that everything negotiated on Modalities should be thrown overboard and greater market access in goods (NAMA) and services should de negotiated instead. They forget that the core mandate of the Doha Round is the elimination of agricultural subsidies and those are still there – disguised in the new Farm Bill as insurance, but with bigger ones for rice and cotton – causing trade distortions that starve farmers in poor countries and erode gain in those efficient agricultures that do not subsidize their production.

It is said that high prices in Agriculture have made unnecessary the use of subsidies; it is not that prices rise, is that the dollar falls and that is another form of subsidy, as a tribute paid by the rest of the world that still uses the dollar as a reference value in international prices.

The next Work Programme

The Bali Declaration , in paragraph 1.11, as we already saw, orders the TNC to prepare a clearly defined program of work on the remaining issues of the Doha Development Agenda.

That’s what the text says, but according to some interested parties, the Work Programme Post- Bali must include the mutilation of the Doha Round and above all, the inclusion of new issues. The new issues should include:

a) acceptance of plurilateral agreements at WTO, like those admitted by the old GATT (Art.XXIV) : groups of countries accepting commitments on specific issues, valid only among them. On that basis some were inherited by WTO, like Government Procurement, Civil Aircraft, and some new ones in services like Financial Services Agreement, basic telecommunications and on goods related to information technology (ITA). The idea is to introduce into the WTO, under this figure, standards obtained on preferential trade agreements, of a bilateral or regional nature.

The pretext is that with the proliferation of such agreements, the WTO risks becoming irrelevant. If we were to accept this argument, it would be the multilateral standards that would become irrelevant. Preferential trade agreements signed by the United States and the European Union are based on the prosperity of those core economies, a situation that may change in the short term. In that case, preferential standards left outside the WTO, would lose all value as a reference. If accepted as plurilateral related issues within the WTO, the difference between standards becomes murky and plurilateral standards would acquire enough legitimacy as to request compliance from client countries on privileges for Intellectual Property and Investment, even in the case of a commercial collapse of the agreement.

At the recent informal summit in Davos, about thirty countries decided to create at WTO a plurilateral on Environmental Goods, and since at WTO those goods have not yet been defined, they adopted the list of 54 tariff lines negotiated at APEC2. It is known that the emphasis on this issue comes from countries whose corporations own almost all the patents for cleaner industrial production. which should replace the present infrastructure.

b) There are ongoing efforts to introduce a trading approach based on Value Chains. It is true that production is an international issue and even more so since International Corporations exported jobs abroad. There are positive effects for some countries and negative for others. The Value Chain approach implies that among those involved in the making of a product, there are some who deserve better rewards than others. It is an old Ricardian idea, by which in the sale of a cup of coffee, the waiter who serves it earns more than the farmer who grows it. The narrative on Value Chains says – all added- that the reward for know-how, intellectual property and investment should be much greater than the one for the work done to materialize the product.

Remarks on a WTO Cursus Honorum

In ancient Rome a political career required the prior exercise of a sequence of positions called Cursus Honorum . It was an effective way to maintain power in the hands of the senatorial class. At WTO there are moves to install something alike, but without a legal basis. Nowhere is it written that to be, say, Chairman of the General Council, the candidate can only be the incumbent that chairs the Dispute Settlement Body.

Those uses are aimed at perpetuating a group of diplomats, from a restricted number of countries, in positions from which they can influence negotiations. A clear example of this procedure happened when Mr. Pascal Lamy, then WTO Director-General, stated that to be eligible for the post of WTO Director General, it was necessary to have previously been minister in one’s own country. He wanted, with such a false assertion, to disqualify Brazilian Ambassador Roberto de Azevedo, the current Director General. Today everyone agrees that if his false pretence had been followed, the WTO would have lost an able, conciliatory and efficient Conductor.

1 Tufts University, Global Development and Envoronment Institute, Policy Brief , Nº 13-02, Dec. 2013; The Uncertain gains on Trade Facilitation, by Jeronim Capaldo

2 APEC Asia Pacific Economic Cooperation

WTO : Azevedo the Conciliator

By Umberto Mazzei

Geneva, December 24, 2013

The WTO Ministerial Conference in Bali ended with an agreement, something regarded as impossible only six months before. The Ministerial Agreement is a monument to the diplomatic skills and strategic creativity of its new Director General, Roberto de Azevedo. It is an agreement that endorses the foresight of those that voted in favour of a diplomat at the rudder of WTO, instead of a bureaucrat. The agreement confirms the universal preference for the multilateral way instead of the implicit segregation of preferential trade agreements.

Mr. Pascal Lamy, Azevedo’ s predecessor, was trained in the French School, which, since Henry IV, has a very centralized and hierarchical view of politics; a tradition transmitted to the European Union (EU). Lamy’s career in those bureaucracies, where he reached the posts of Head of Cabinet of EU President Jacques Delors and EU Commissioner for Trade, did not help him to develop dialogue as a method. His prolonged stay at WTO was marked by frequent authoritarian gestures. The EU wanted to repeat that tendency with the candidacy of Mr. Herminio Blanco, a Mexican bureaucrat of quite a similar tradition.

Azevedo was elected instead of Blanco with the support of many developing countries, some developed ones and of Civil Society, which have proved right. It is now obvious that training and experience in diplomacy should be the norm for representation and dialogue in a multilateral environment, such as Geneva’s international organizations. To conduct one of them successfully it is necessary to have skills as conciliator and perhaps even a psychiatrist, because there are psychotherapy cases. It is well known that in diplomacy Brazil has one of the best schools and teams, where conciliation is an art. It is not the product of chance; it happens that Brazil is the sum of several Brazils, developed in different historic stages, which have to be governed together, listening, understanding and reconciling.

The issues that reached Bali

In Geneva, during the preparatory work for the WTO Ministerial Conference in Bali, it looked as if in some development issues, such as the Monitory Mechanism for Special and Differential Treatment or the package for Least Developed Countries –LDCs, there was, with some flexibility and “creative ambiguity”, the possibility of a consensus. The tough ones were Agriculture and Trade Facilitation, where disagreements on the proposed text were many and distant.

The main problem in Agriculture was India’s decision to keep a vital political space in matters of food sovereignty. It is an issue that has been dragged from the Uruguay Round, because of the US and EU subsidies to agricultural exports, whose elimination was the base for the Doha Round. The Agreement in Agriculture allows flexibility to protect national production, under the label “de minimis”, which is 10%, but in the case of India it was around 40%. Exporting countries wanted to reduce it. The discussion was about permitting and for how long, the apparent violation of an agreement, whose calculus is based on 1986 obsolete data. India – with thousands of peasants immolating their lives- was firm in keeping its policy.

Trade Facilitation is about harmonizing customs procedures and techniques. It is an initiative that can be useful in the fight against customs corruption that parasites trade in many countries. The problem is that the proposal is in fact, one to harmonize the world with the U.S. system . At the Singapore Ministerial (1996 ), developed countries proposed 4 issues for negotiation, that were rejected. One was Trade Facilitation , which in 2004 , was finally accepted for negociation. The negotiations were conducted under the jurisdiction of the Council for Trade in Goods. The proposed negotiation text still had about 600 disagreements (brackets) at the failed Ministerial of 2011. In 2012, two more energetic ambassadors were appointed to help the Chair and disagreements were reduced to about 60. Under the intervention of the DG those were reduced to a dozen, but very difficult ones.

In this state of things, the dilemma was to delegate the negotiation in Bali to the ministers or close the negociation. Azevedo chose the latter. That left all out of balance, as when pulling a rope that is released. Then Australia , New Zealand , Chile, Mexico and other countries supposedly neutral requested the Director General to resume negotiations up to Bali.

The ministerial Cuban suspense

At the end, an agreement on the Ministerial Conference depended on Cuba. During the debates in Geneva, Cuba wanted a phrase on the text about discrimination – obliquely referred to the U.S. blockade on Cuban trade- which had been deleted in the Bali text. It is odd that on this issue Cuba gets at the United Nations Cuba an almost universal support- but for Israel – but at the WTO , support on the same subject is reduced to a few.

At the end, when Cuba was given the floor, there was a tense silence. “Cuba is willing to negotiate,” said the Cuban Vice – Minister. Applause, because it seemed that Cuba agreed to the text. She really should have said “Cuba does not accept the text, but is willing to negotiate, here in Bali.” There is a rule at international organizations, that an absence of explicit rejection is considered acceptance. Cuba had to speak again to correct the misunderstanding. Finally, in an early morning, after a direct pulse the US, Cuba managed to get her mention at the introduction of the Ministerial Declaration. Then, in a joint political paper , the ALBA countries accepted the Ministerial text.

Uncertainties

According to Inside U.S. Trade , a specialized American publication , Mr. Michael Punke , Assistant Representative of the United States, said he would not be required to submit to Congress the Trade Facilitation Agreement for ratification. That leaves a serious doubt on its legality in the United States and the possibility of appeal to the U.S. authorities in the event of default by US customs. It is possible that Mr. Punke believes that ratification is not necessary because commitments are a copy of the system that is already operating in the US.

The problem is that the U.S. Constitution requires that international agreements, or any modifications to such agreements, must be ratified by Congress, to be applicable in the US. Thus, it may be that other countries change their laws and remain bound by them, but without being able to recourse violations of the agreement committed by US Customs in U.S. courts . In smaller scale, the case of the League of Nations can be repeated, when the US proposed its creation and then remained outside of the deal.

Another issue is the possibility that some members remain de facto or legally outside the trade facilitation agreement. What was agreed is a reform of an existing WTO agreement and the General Council must first pass a ” reform protocol ” for it to be part of the WTO agreement . Is not known what changes the Bali text may undergo in this second process, intended to reduce it to the appropriate legal language and it is advisable to be very alert. Some members may even be unrelated to the reform, because member countries have the right to refuse any subsequent amendments to the original WTO agreement.

Conclusions

It was a successful Ministerial Conference because it showed that a multilateral approach is the most fair, balanced and convenient route. India won an indefinite Peace Clause for the protection of its peasants. The Trade Facilitation text has now enough elasticity to accommodate everyone. In particular, developing countries are not required to change their customs systems if they are not given funds to change their legislation and apply the changes. There was also agreement on a mechanism for monitoring them Special and Differential Treatment. ALBA, that at the 2011 Ministerial, blocked an arbitrary and thoughtless text, had again a high profile and managed a creative accommodation. After Bali, even those who voted against Azevedo for Director General, are now happy with him. The triumph was for the Multilateral Trading System, which worked, this time, under the leadership of its new Director General.

Sismondi: from yesterday for tomorrow.

By Umberto Mazzei

Geneva, 07/09/2013

National Income consists of only two parts: the first is the profit that spring from wealth; the second is labor power which springs from life.

Sismondi, New Principles of Political Economy, Second Book, Chapter II.

There is a world-wide wave of protests, in Brazil, Turkey, Greece, Spain, Italy, England, USA. Protesters may be called “occupiers” or “indignados”, but the root reason is the same: the awesome concentration of wealth in the infamous 1%, which is not even that.

Capitalism and its often condemned mechanics towards wealth concentration is not a new phenomenon. Sismondi already said, in the XIX century, that when it happens in large scale, it is a sign of decadence; that is how he explains the collapse of the Roman Empire. Land property concentrated in huge estates thanks to slave work which displaced those small owners that were the nerve of Rome’s economic and military efficiency. A fate for those “opulent nations where public misery grows along with national wealth and where the class that produces everything is everyday closer to enjoying nothing. Such is the situation of nations in decadence”1

Current capitalism – liberal or neo liberal, as you please – evolved since the Industrial Revolution, trough the nineteenth and twentieth centuries, but results are quite clear now: the government of the rich, for the rich. That bias is attributed to the Scottish philosopher Adam Smith, but it false. Smith knew it and rejected it: “Wherever there is great property, there is great inequality”. Or Our merchants and masters complain much of the bad effects of high wages in raising the price and lessening the sale of goods. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains.”2 The real father of that iniquitous policy was the customs agent and stockbroker David Ricardo, who in his time called to abolish the Corn Laws3 and open cereal imports, in order to make bread cheaper so that wages could be lowered and profits of factory owners increased.4

Modernity of Sismondi

The first to denounce Ricardo’s deviation was Jean Charles Sismondi, a Swiss cosmopolitan historian and economist whose writings have a very modern sound. He contradicted Ricardo’s and Jean-Baptiste Say’s ideas that limited economic policies to create profit for the rich and industrial policy to overproduction; what is now called Supply Economics. He said: “Political Economy is not a calculus science; it is a moral science”5, a most necessary remainder today.

He added to the economic discoveries of Adam Smith a social vision that included wealth distribution among the population, as the real measure of national wealth: “Wealth is not an advantage until it spreads prosperity into all classes; population is an advantage only when every person is sure to find through work an honest life.6 He went further: he asked for state intervention in order to limit the exploitation and abuses of power born of enormous wealth. A genuine Genevan, he supported private land ownership, but as a usurpation allowed because of its social utility.

The essence of his economic ideas is that capitalism can only be prosperous and stable if good wages are paid, because workers salaries constitute the indispensable marketplace to sell the products. He says that if the rich capture all the English national wealth (at the time of the Industrial Revolution) it will be necessary to conquer markets abroad (imperialism) and that if there is not a balance between production and demand, the system is destined to live from crisis to crisis.

Sismondi’s influence on Marx is well known and Marx uses Sismondi’s definitions and in The Capital (1867) quotes him frecuently. Before that, in the Communist Manifesto, (1847) in the first thirteen lines praises him and in the last six calls him “utopian” and ” petty bourgeois socialist”; something that can be attributed to typical Nineteen Century taste for theatricals. Any how, Sismondi’s ideas are more practical today, considering present capacities for espionage and repression; but Marx was right about Sismondi not wanting barricades, but to turn proletarians into petty bourgeois.

Sismondi wants to build sustainable social economic order with a sense of equity in wealth distribution. We should rescue Sismondi’s contributions for a modern socialism or an equitable modern capitalism, it may be said. In a time of terminal systemic crisis, it is urgent to build a new proposal. One that learns from the past and adopts political solutions from those socialist or capitalist examples which had economic and social success, but without forgetting to learn from those that are barely alive and from those that collapsed.

In such a study area we should include the versions of social democracy that thrived in capitalist Europe by a confluence of Sismondian/Keynesian ideas, labour union power and fear of the Soviet Union. In Latin America those ideas were only for political posturing and in the United States they reluctantly worked with the New Deal. Their legacy is a valid social protection system, which is now being dismantled because there is no money to keep it, since politicians gave away public funds to save reckless bankers in trouble.

A range of contributions for the future

Sismondi was a prolific writer and left us two types of contributions for this century, which are complementary. One concerns the political system and the other the economic system. In this paper we will just do a nod to his institutional political concerns; the emphasis will be given to highlights in his writings for a social economy that would be more realistic, more stable … and less tragic.

a) Contributions on Political System

He wrote many books and essays on politico-institutional subjects. His best known books are “Studies in Social Sciences”, “Studies on the Constitutions of free peoples” , History of the Italian Republics in the Middle Ages” , “History of the French” . The most famous one is his analysis of the prosperous Italian municipal republics that ended up under royal and papal absolutism. There he tells how they flourished and innovated under a representative system that included the “live” producing forces in a municipal government based on principles of participation, independence and reciprocity.7 That communal system brought Europe out of the Middle Ages and spawned the cultural and economic revolution we know now as the Renaissance. One vestige of such communal model is the Swiss cantonal system.

It was a representative republican model, which adheres better to organic social realities than the much vaunted Athenian model, which was not even egalitarian or inclusive.8 The study of this History and the analysis of the free people’s constitutions give us ideas for a better republican system, one more representative of real public needs. It has been noted that the current republics do not represent the population, but shepherd anonymous masses through expensive electoral campaigns and mass media control in order to elect marionettes moved by other concerns.9 Present systems cover hidden tyrannies which recall Sismondi’s words: “When most of the men were born under its yoke, [Tyranny] finds itself supported by all the inert part of the nation, from all those who, unable to form and think themselves alone, are content with borrowed ideas and blindly accept all notions that are convenient for the government to inculcate.”10

b) Contributions on Economic System

The main economic work of Sismondi is “New Principles of Political Economy or wealth in relation to the population”, first published in 1819. There he says that crises are implicit in Ricardo’s version of the capitalist system. Marx said about that:”Ricardo’s analysis is often absurd. Sismondi instead points out the limits [need to adapt production to demand] that are intrinsic to capital, which clashes with its contradictions”11 and adds “For him crises are not accidents, as Ricardo says, but essential explosions”12. Marx’s opinion is clear: “The history of modern political economy (…) is complete with Ricardo and Sismondi, two antipodes”13. In the first book of The Capital, Marx praises and quotes Sismondi14 and also in the second book15, even if he says in another paper that Sismondi’s study on the relationship between capital and income “has not one scientific word.”16

It was Sismondi who replaced Francois Quesnay’s 17 three classes division (productive, homeowners and sterile) with one that reflects the industrial revolution: capitalists and workers. It is a functional and schematic concept, which puts on one side capital income (rents, profits, interest) and on the other, its necessary counterpart, consumption, which he divides in two types: a) essential consumption (survival) and b) luxury consumption.

Sismondi’s ideas had affinities with other known thinkers. He coincides with Thomas Malthus in defending small owners threatened by the industrial revolution, because their income is part of the “effective demand” necessary to balance production and consumption. His words sounds very modern: “There are no more peasants in the fields, no more artisans in the cities or independent chiefs of small industries, there are big factories only” but does not join Malthus on the idea of ​​slowing industrialization nor in his fears of food scarcity.

There is a paragraph that I want to quote, because it paints a familiar picture: “With a few years apart, two crises terrible ruined part of bankers and spread desolation in all English manufactures, while another crisis ruined farmers and lowered the retail trade. To make matters worse, that trade, despite its large size, ceased to employ young people who wanted a career; all places are taken and in both, the upper ranks of society and in the lower, many offer in vain their work without being able to get a salary.”18

We recommend the study of Sismondi, also because he opposed overproduction, as the cause of losing the sense of usefulness in exchange value and of a struggle for markets that caused bankruptcies and unemployment. Nikolai Boukharin and Rosa Luxemburg said that Sismondi was right and that it was under-consumption which gave a logical base to Marxist theory on capitalism periodical crisis. It can be perfectly applied to the overproduction of financial means, such as “sub-prime” mortgages, which caused our present systemic crisis. The Bank of International Settlements (BIS) from Basel says that there is a floating circulation of some 360 trillion in financial debt, but the Gross World Product (GWP) is only 60 trillion (2012). There is no place to land them.

On that issue, a century later, Keynes wrote. “The enlargement of the functions of government, involved in the task of adjusting to one another the propensity to consume and the inducement to invest, would seem to a nineteen century economist or to a contemporary American financer to be a terrific encroachment on individualism. I defend it, on the contrary, both as the only practicable means of avoiding the destruction of existing economic forms in their entirety”.19 The whole Keynesian thought is full of coincidences with Sismondi, including the need to match production or investment with consumption.

A hint of tomorrow

A few years ago, Deng Chao Ping initiated in China a policy that made room for individual initiative, but within a framework aimed at balancing production with demand. China is now the second largest economy in the world and the healthiest one, but its greatest feat is that it took out of poverty over 500 million Chinese and continues to do so. Sismondi would have been delighted, but Marx could have felt uneasy with so many new petit bourgeois socialists.

1 Nouveaux Principes d’Economie Politique ou de la Richesse dans ses rapports avec la population

2 TheWealth of Nations

3 The Corn Law protected English cereals production. Its repudiation caused unemployment and poverty in rural areas and emigration towards urban centres that made labor cheaper. Read Charles Dickens

4 The Principles of Political Economy and Taxation

5 L’Economie Politique n’est une science de calculs; elle est une science morale. Nouveaux Principes de Economie Politique. Vol. I

6 La richesse n’est un bien que lorsqu’elle répand l’aisance dans toutes les classes ; la population n’est un avantage que lorsque chaque homme est sûr de trouver par le travail une honnête existence. Ibid.

7 Francesca Dal Degan, L’economia e gli interessi vivants negli scritti di Sismondi, Il Pensiero Economico Italiano, N.2, 2001, pp. 53-66

8 Aristotle, when he reports on the Constitution of Athens say that only those that did not work in manual activities were considered citizens. That provision excluded some a very large part of the population; of half a million inhabitants only 20 thousand were citizens. ost of ay that only those that did not work in manual activities were considered citizens.r la producci’

9 Read so many different authors as Jose Ortega y Gasset in The rebelion of the masses; Jack London in The iron heel; Maurice Duverger in Les parties politiques; Giuseppe Maranini in La Constituzione di Venezia.

10 Quoted by Luca Michelini in Modernity of Sismonde de Sismondi. Inequality and crisis, Florence, 2013.

11 Karl Marx, Principes d’une critique de l’Economie Politique, Ouvres I, Pléiade, pag 261 y 262.

12 Karl Marx, Ibid, Ouvres II, pag. 1682.

13 Karl Marx, Ibid, Ouvres I, pag 175

14 In order to define Capital, Price of labor, relative plus-value, simple reproduction, the capitalis production precess, the accumulation of capital, the primitive conversion of money into capital, the antagonic character of capitalist production and the notion of salary owner.

15 To define constant and variable capital, the circular movements of income, the theory of crisis and in the role of credit in the production precess.

16 Karl Marx, Ouvres I, pag. 751.

17 French Economist who founded the first systemic school of political economy and was Louis XV physician.

18 Nouveaux Principes d’Economie Politique.

19 The General Theory of Employment, Interest and Money. Chapter 24.