Money, Banks and Finance in Economic Thought

Piero Sraffa and the revaluation of the lira in Italy:some early thoughts on the open economy?

Gahn Santiago José, Roma Tre University
Siqueira Machado Pedro, The Open University

Since Sraffa’s Production of Commodities by Means of Commodities (PCMC), the discussion on value and distribution has been focused on the closed economy. However, in the early 1920s, Sraffa developed what can be considered revealing insights about open economies. Our goal in the paper is to analyse those contributions and attempt to connect them with PCMC. Sraffa’s Laurea thesis was already concerned with open economies. There, Sraffa claimed: following revaluation “justice would be re-established […] for all those who have been unjustly damaged by the price rise caused by inflation. […] Workers and clerks, whose wages and salaries rose more slowly than the cost of living during the inflationary period, will be compensated for these losses by prices falling more rapidly than wages and salaries” (Sraffa, 1920, pp. 47-49, 53). There are two more interventions from Sraffa that relate the effects of appreciation and the economics of fascism at around the same time of his ‘turning-point’ (Garegnani, 2005). In November-December 1927, Sraffa sustained a discussion with Angelo Tasca. In an article Tasca argued that appreciation was another facet of Fascism supressing workers: both the French and Fascist revaluation methods have in common “The offensive against workers’ wages” (Tasca, 1992, p. 175, our translation). Sraffa wrote a dissent letter to Tasca: “Fascism has voluntarily made a policy contrary to the interests of financiers and industrialists. this revaluation […] is part of an attempt by fascism to acquire the support of the middle classes and some layers of workers” (Sraffa, 1992, p.181, our translation). On November 1927, in a lecture Sraffa claimed that “the revaluation of the currency has had disastrous effects upon every section of the community. The workers have suffered both from a cut in wages that are larger than the fall in the cost of living and from unemployment.” (Sraffa’s Archive, D2/3/1). This paper will attempt, first, to systematize his thoughts and interventions on open economies in the early 1920s. After introducing the Italian case during the ‘20s, we will analyse those contributions to open economies. Those modest contributions are not easily integrated into a new theory of distribution, but it is possible to reach a coherent logical connection between these interventions and his PCMC. As a matter of fact, his thoughts on the open economy did not change around his ‘turning point’, reinforcing our hypothesis. The structure of the paper will be as follows: In Section 2, we will describe the process of appreciation of the lira in Italy during Mussolini’s dictatorship. In section 3, we will revisit Sraffa’s early writings on the open economy. Section 4 will discuss his turning-point’s date. In Section 5, we will present a ‘small open economy’ model through the lens of the Surplus approach showing if Sraffa’s early thoughts on the open economy are internally consistent with his PCMC. Some conclusions will close.


Keywords: Currency appreciation, Income distribution, Piero Sraffa, Small open economy, Surplus approach

Paper file