Marx Inside the Circuit: Discipline device, wage bargaining and unemployment in a sequential monetary economy

Abstract

The aim of this paper is to show that Marxian labour theory of value can be consistently interpreted in terms of the monetary circuit model, where firms need initial finance to start production and where the money supply is endogenous. In contrast to the recently revived Marxian monetary models, in particular the New Interpretation, it is argued here that although the money wage is bargained for on the labour market, the real wage is determined by firms' choices, since firms autonomously determine the structure of production and hence real consumption for the working class as a whole. This does not mean that firms are able to set the real wage without economic and social constraints. Starting from our circuitist reading of the labour theory of value and distribution, a model is developed in order to determine the level of employment and income distribution, on the assumptions that (i) the industrial reserve army affects wage bargaining and labour effort and that (ii) workers react to the failure of their expectations on the real wage by reducing their work intensity. In this context, it is shown that firms may increase their share of profits over time only be means of innovations.

The Ethics Inside the Monetary Circuit: How Bank’s Social Responsibility Affects Money Creation

“…Forges Davanzati & Realfonzo, 2004), Marxim (see e.g. Bellofiore, 1989Bellofiore, , 2004Bellofiore, , 2005Bellofiore & Realfonzo, 1997Bellofiore, Forges, & Realfonzo, 2000) and Institutionalism (see. e.g.…”

Keynes’s ‘Revolving Fund of Finance’ and Transactions in the Circuit

“…The above, however, omits the problem of interest on debt! Graziani acknowledges this-in contrast to some Circuitist papers that abstract from the problem, in a manner that is embarrassingly reminiscent of the neoclassical approach to logical conumdrums (Bellofiore et al 2000: 410-footnotes 8 and 9). It appears that firms are unable to pay interest: even in the most favourable case [corresponding to workers spending all their wages], the firms can only repay in money the principal of their debt and are anyhow unable to pay interest.…”

Solving the Paradox of Monetary Profits

“…The mathematical conundrum about whether capitalists can make a monetary profit when the source of their initial capital is borrowed money exists independently of this philosophical debate. The consensus to date has been that it is mathematically impossible for capitalists in the aggregate to make profits (see for example Bellofiore et al 2000). I abstract from these philosophical and ex origo debates in order to focus simply on the mathematical issue, to show that this consensus is false.…”