Sir William Petty was a structuralist: inflation, wages and planning

Sir William Petty was a structuralist: inflation, wages and planning
Sir William Petty was a structuralist: inflation, wages and planning

The relationship between the productive factors capital, land and work and their remuneration, profit, income and salary allows us to locate ourselves in the recovery of the classics: Smith, Ricardo and Marx. Objective theory of value Are there other classics? Yes, it starts in England with Sir William Petty and in France with Boisguillebert and concludes in England with Ricardo and in France with Sismondi.

Petty conceives “real” work, Marx would say, in its global social form, as a division of labor. Instead of Smith’s pin, Petty adopts the example based on a clock (An essay concerning the multiplication of makin…3rd edition, 1686) and considering a city and an entire country from the point of view of large manufacturing establishments.

What is the bridge of thought between structuralism and these early classical authors?

MacCulloch in “The literature of political economy, a classified catalogue” (1845), describes Petty as the founder of a new science. He claims that his method is “not traditional.” That instead of weaving together a series of “comparative and superlative words”, and speculative arguments, he has undertaken the task of speaking “in terms of number, weight or measure”, of using only arguments derived from “sensory experience”, and take into consideration only causes that have visible foundations in nature. Not everything is explained by a drought, it is the starting point, not the arrival point. Furthermore, Sir William is against taxation and advocated “liberty of conscience as a condition of commerce.”

However, looking for our link between one tradition and another, between the center of thought and the periphery of thought, there is a set of ideas that by “adapting” achieves a synthesis of thought, Latin American Structuralism.

Let’s return a little to the idea of ​​”division of labor” that is a source of wealth and used until the 20th century and still occurs in classrooms, this idea that was disseminated with Smith, for Petty leads to the “political arithmetic”, is the birth of political economy as an independent science. Furthermore, any division of labor involves exchange, planning, which results in socioeconomic development. Who carries out this planning? Production is an area of ​​knowledge of numbers, weight or measurement; far from the sensory idea of ​​the economy, which in this case would be the subjective theory of value, the neoclassical school. The price signal is the cornerstone of analysis. This is the basis of neoclassical, Austrian and monetarist theory. Which has another simple conclusion: emission generates inflation. Analyzing these economic and political phenomena from a single perspective such as money or the financial system is what confuses and generates more uncertainty. In Creole terms, Sir William Petty would put his eye on the real economy, as he currently says.

The real economy and the productive structure in Latin America and the Caribbean are far from resembling the central economies. Therefore, a single uniform and universal explanation is not enough.

It is important to know that this stage closes with the contributions of David Ricardo. The political solution “There is no money” or idea of ​​“Austerity” It is based on the fact that: emission generates inflation, which spends more than it earns, in itself the primary deficit. This restriction is associated with shortages. David Ricardo in 1816 in his book “Principles of Political Economy and Taxation”, in the first chapter, called “On Value” concludes that the object of political economy is to study reproducible commodities to which work can be applied – use tools to this, mental and physical effort-, which are characterized by utility and scarcity, the laws of supply and demand, as well as by being value of use and exchange; But there is another set of merchandise that, although they are governed by the laws of supply and demand and have the powers of scarcity and utility, no work can be applied to them, these are art paintings – a Dalí or a Picasso – .


The idea of ​​“austerity”, in the recent book published by Shaikh “Capitalism, competition, conflict and crisis” in its section on “Politics lessons and possibilities: Austerity versus Stimuli” makes it clear that “the theoretical position of the defenders of this “AUSTERITY” policy is rooted in a vision of near-perfect markets that quickly recover from a “shock” and quickly provide employment to all who want it, while in practice it aims to protect and preserve large businesses. .

Therefore, the bridges between one continent and another are the analysis of exchange, planning and socioeconomic development. In the unequal exchange of foreign trade, Prebisch contributed the idea of ​​center and periphery, we export raw materials and import manufactures, the terms of trade (TOT), which is the relationship between export and import prices, we speak of deterioration of the TOT when the prices of exports tend to decrease when the price of imports is rising. From Brazil, Celso Furtado, added the idea of ​​social groups, social classes derived from productive factors and that have interests in maintaining the status quo of the different productive structure, in this case “peripheral”. Consolidating the old trade relationship. Planning arises as a need to industrialize and understand the economic sectors that can change the social relations linked to the productive structure. For this reason, it is the State that is above the economic sectors and organizes internal and external exchange. List would say “neither is a tailor the nation, nor is the nation a tailor.”

As every development has historical problems that generate other contributions, one issue is inflation and what it means. For Prebisch, inflation generates a regressive distribution but deflation would not generate a redistribution. At this point Prebisch suggests that to redistribute income we must use the fiscal tool: collect taxes.

Another necessary contribution for these times and that is in line with Petty’s contributions, was the one made by Julio Hipólito Guillermo Olivera in “structural inflation and structuralism” who stated: “It is impossible to fully understand the chronic inflation of some Latin American countries if we look at only to the monetary side of the system: whether the supply of money or monetary spending is considered, as in the demand inflation hypothesis, or the monetary price of labor (or other supply factors), as in cost inflation.

To some extent, changes in such magnitudes have not truly been the causal factors of the process. They have not been autonomous changes, but rather induced by other economic variations. It is essential, therefore, to explore beneath the monetary surface, into the underlying region of physical flows, real prices and sector imbalances.”

This is demonstrated in the inflation and primary deficit table, there is no direct relationship between spending and inflation, therefore, adjusting spending, going to austerity was not the way to solve socioeconomic problems. We must study and analyze the economic sectors, products, markets, production, internal and external exchange, plan to ensure that there is no lack of energy in companies. Make numbers, weight or measure –objective theory of value– and not just go to a salary adjustment and job destruction, between December 2023 and March 2024, 86,000 salaried jobs were destroyed in the private sector, not counting the public.

Economist UBA and professor of Latin American Structuralism UNDAV

Source: Ambito

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