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We treat an extension of the Metcalfe and Steedman model of growth and distribution in a small open economy with government activity. We show, simultaneously, that certain kinds of taxation and government expenditures will not affect the essential nature of the “Cambridge Equation.” This is important due to the increasing process of Financial Globalization which can be responsible for changing the profit distribution between capitalists and workers. The present note aims at integrating the public sector and the foreign trade together into the model, based on previous literature that, with few exceptions, treats them separately. To do so, a new framework is proposed. Our contribution shows that workers’ income grows when the Current Account in the balance of payments is in surplus, a result not studied by Teixeira and Araújo. The discussion includes recent literature concerning with limits of applicability of such analytical model, dealing with more realistic economies including the process of globalization.

This comment came to refute and correct the idea of Charles (2007) about the negatively implications in the income distribution when the government expand the consumption in favour to households. We prove that the political choice, to both cases (increasing consumption or increasing profit), impact positively the income distribution and does not affect the essential nature of the Kaldor neo-Pasinetti dynamic equilibrium results and the “Cambridge Equation”. The stability of the model is guarantee by applying the Olech’s Theorem to the case.

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This note presents a historical overview of the important contribution made by Kaldor named “Cambridge Equation” and the debate around the theme. Our main objective here is to summarize this kind of literature from the start to our days. Here, we present the development of such theory by initiating in his seminar article “Alternative Theories of Distribution”, passing to Pasinetti’s contribution by differentiating class, after that the introduction of government activities, extensions with an Open Economy until our days, where the globalization and financial system is considered. We also present the original Solow-Samuelson-Meade and other critiques. Finally, we show the importance of the theory to the present intending to understand social-economic behaviours.