Simonde de Sismondi Economic Thought

Simonde de Sismondi; His Economic Thought

Scope of Economics and Criteria of Progress

In his outlook and purpose, Sismondi differed from the Classical School. He was a reformer. Ethical consider­ations played a large part in his thought; and to him economics was largely an art. He aimed to put economics upon a new basis : the economists had taught how to increase national wealth: he would teach how to increase national happiness, and to this end would point out the advantages of government intervention to regulate the progress of wealth.

Accordingly, his views concerning the scope of economics and the criteria of economic progress were at variance with the dominant theories. To Sismondi, enjoyment or happiness is the sole end of accumulation, and in it lies the true wealth of the nation. And he criticizes the current emphasis on produc­tion, calling the Classical economics chrematistique (money-making science). Consumption, then, plays a large part in his system; the history of all wealth is the same, — it is des­tined to yield enjoyments through its destruction or con­sumption.
As limiting consumption, income, he says, rather than capital, .is the important thing. But, as in the "public fortune" the capital of one is the income of another, the economists have been embarrassed in deciding what is income and what capital, and have therefore left revenue out of consideration.

Neither material wealth nor population is an absolute sign of prosperity; that depends on the relation between the two. "Population is an advantage only when each man is sure of finding an honest living by labor."

"I have endeavored," writes Sismondi, "to establish . . . that to allow wealth to contribute to the well-being of all, as being the sign of all the material enjoyments of man, it is necessary that its increase should conform to the increase of population and that its distri­bution take place among that population in a proportion that can be disturbed only with extreme danger. I propose to show that it is necessary for the well-being of all that income increase with capital, that population do not exceed a living income, and that production be proportioned equally to capital which produced it and population which consumed it."

His Scheme of Distribution

According to these notions, Sismondi worked out a scheme of distribution which cannot but remind one of Quesnay's in its pretentiousness. As nearly as it can be reduced to exact statement, — for his terminology is vague and not free from inconsistency, — that scheme is as follows. We begin with the annual national revenue, through which the population is to acquire its consumables. In this national revenue, two parts may be distinguished: (1) profits on capital and land, which, though distinct, may be classed to­gether here; and (2) labor power.

Of these, parts, the former, profits, is of the past. It is the re­sult of the labor of the previous year, in the hands of consumers. Labor power, on the other hand, is future, as it were, only be­coming wealth through opportunity and exchange. Labor acquires a new right each year by new labor; capital holds a permanent right based upon control of past labor. On the whole, there is an opposition of interests between the classes receiving the two shares; yet a certain relation exists between these shares in that they have the same origin.

This national revenue is destined to be exchanged for the annual national production (of the ensuing year), to which it should be equal. The annual production likewise consists of profits and labor power.

The annual national production is, then, consumed annually, labor giving labor power in exchange (for its share), and capital giving of its revenue (or interest). The labor power, we are told, becomes converted into capital, and is then reproduced as is other capital. By this annual consumption, involving the ex­change of one year's revenue for the production of the next, each maintains his consumption or replaces his capital.

If, therefore, true economy be used, and things go pros­perously, the annual consumption will be exactly limited by the national revenue, and the total production will be consumed. When this is not the case, it is obvious that the desired equilib­rium is disturbed, and that either overproduction or under­production must result. Equilibrium involves an exchange of all that is called capital for labor, the former apparently be­coming the revenue of the labor class. Accordingly, if the "rich" spend so much as to consume their capital, the revenue of the poor for the following year is eneroached upon, and in this case, saving (not spending) is required to maintain em­ployment and keeps wages up. On the other hand, oversaving (underspending) would destroy the balance between annual pro­duction and consumption. Sismondi hardly considers the alter­native of underproduction, for he is bent upon overthrowing the doctrines of the Classical political economy concerning the pro­ductivity of capital and division of labor.

Though arguing thus concerning an equilibrium of production and consumption, Sismondi did not advocate an absolute stand­still or a perfect circle; rather he thought of a spiral brought about by a very gradual increase in production. Even this would cause small losses by disturbing the proper equilibrium, but they might be offset by future benefits. A series of small losses coupled with increasing capital and public fortune, — in this consists national economy.

In this general connection, Sismondi takes occasion to criticize "the economists." They had, he thought, confused past revenue with future revenue, and omitted to treat of consumption. They had argued for an increase in labor as being possible and desirable as a first step, which would mean an increase in wealth, in revenue, and in consumption, respectively, consumption thus being placed last. But, Sismondi urges, it is more nearly correct to say that an increase in the demand for labor must come first: that is, increased revenue and consumption must precede the in­crease in labor and production. Accordingly, more wages would have to be paid, whereas wages are fixed in advance, being lim­ited by preexisting revenue.