[OPE] Ricardo and The Iron Law Of Wages

From: Jurriaan Bendien (adsl675281@tiscali.nl)
Date: Tue Jul 15 2008 - 12:03:26 EDT

"Outside of the 'mainstream' of practising economists, Marxists and the 'neo--Ricardian' followers of Piero Sraffa clung resolutely to the notion that wages and investment determine the course of the business cycle. In this view the financial system is a superstructure facilitating the centralised/monopolistic control of industry, and directing capital to its most profitable uses (the 'socialisation of capital by capital'). Finance appears here in the service of industrial capital, reflecting deeper shifts in the relationship between wages and profits, rather than as autonomously directing the capitalist economy. In the later 1980s, a number of Marxists became dissatisfied with a theory based on a productive activity that has been in relative decline in the most advanced capitalist countries, namely manufacturing, and an analysis that ignored the growing sophistication and apparently 'global' hegemony of finance. They sought to break out of their severely Ricardian isolation by developing a 'circuit' theory of credit money. This is a theory of money along Hawtreyan lines, except that credit is used to pay wages in advance of sale. However, this small step away from the economics of factories and manufacturing comes nowhere near examining a capitalism dominated by finance. The need for such an analysis, which Marx and Engels hinted at in their correspondence towards the end of their lives, was realised by Keynes, Kalecki, Steindl and Minsky."

- Jan Toporowski, Theories of Financial Disturbance: An Examination of Critical Theories of Finance from Adam Smith to the Present Day  (Edward Elgar 2005), p. 133.

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