Money, Banks and Finance in Economic Thought

Sustainable reproduction and the role of finance

Vaggi Gianni, University of Pavia

Reproduction is at the core of classical political economy and sustainability is a central theme in today’s economic debate. Agenda 2030 approved by the UN in September 2030 highlights the three aspects of sustainability: economic, social and environmental. By making use of a scheme based on different reproduction cycles the paper explores the contributions of Petty, Quesnay, Smith and Marx to the view of sustainable reproduction. In different ways each author adds a specific element to the classical description of economic reproduction which culminates in Marx’s reproduction schemes and also in Sraffa’s ‘Production of commodities by means of commodities’. The paper shows how their views, including Sraffa’s, on the working of the economic systems allows a wider interpretation of reproduction, which includes the aspects of natural resources and of labour. In the jargon of today debates on development land and natural resources can be called ‘planet’ and labour ‘people’. Four main reproduction cycles can be described. Petty allows to describe the main features of a ‘universal reproduction cycle’, urc. With Quesnay and Smith the economy becomes much more concerned with the increase of national wealth; the accumulation of means of production different from wages become extremely important, this correspond to an ‘growth oriented reproduction cycle’ gorc. This feature is strengthened in Ricardo’s work, but it is with Marx that we have a ‘capitalistic reproduction cycle’, crc, in which means of production and technology take a dominant role. Thanks to these contributions we can then describe a ‘sustainable reproduction cycle’, src. In it not only commodities appear both as inputs and as outputs, but natural resources and labour too have to be accounted for also as outcomes of the production process. Moreover the ‘sustainable reproduction cycle’ requires that the process of transformation of inputs into outputs should take place according to the same three dimensions of sustainability indicated above, which is hardly compatible with the capitalistic reproduction cycle. This conclusion is reinforced when the banking and financial systems enter the picture. Banks and finance lead to a ‘financial reproduction cycle’, frc, and leads to a situation of Financial Mercantilism. ‘frc’ inserts itself into the ‘capitalistic reproduction cycle’ and reinforces its tendency towards a situation of oligopolistic competition. This condition is characterised by large power imbalances in the distribution of income and in investment decisions. This far away from anything which can be regarded as a sustainable production and consumption system.

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Keywords: Reproduction, sustainability, finance