Simonde de Sismondi: Critic of Capitalism

Born in Geneva and trained as a historian, J. C. L. Simonde de Sismondi (1773-1848) acquired practical experience in business and finance in France while he was very young. He later became one of the first and foremost critics of classical economic theory and method in the nineteenth century. In so do­ing, he laid much of the ground-work for the method of analysis later advanced by the German historical school (see below).

Sismondi the Critic

Examining the effects of the industrial revolution with the historian's eye, Sismondi observed that economic cooperation, the hall­mark of the guild system, gave way under the industrial regime to conflicts of interest between labor and capital. Moreover, he found that improvements in living conditions among the workers lagged seriously behind the tremendous increases in wealth wrought by the machine age. Unrestrained competition, in­stead of increasing social welfare, led to universal rivalry, large-scale produc­tion, and oversupply. The latter, in turn, precipitated commercial crises and depression.

Some fifty or more years before Marx, Sismondi anticipated the class strug­gle between labor and capital that was to distinguish Marxian economics. Whereas Saint-Simon believed that economic cooperation and organization were the inevitable outcome of the advance of civilization, Sismondi blamed the class struggle on the institutions of capitalism. But unlike Marx, Sismondi did not see class struggle as a permanent phenomenon. It was merely the result of existing social institutions and could be eliminated through appropriate changes in those institutions. What escaped Sismondi, moreover, was the re­alization of precisely which factors constitute the driving force of historical de­velopment.

One of Sismondi's most telling attacks on classicism concerned machinery. In general, classical economists viewed the introduction of machinery as ben­eficial since it improved economic efficiency, lowered costs of production and product prices, and thus increased consumer welfare. Sismondi, on the other hand, while recognizing the cost-reducing advantages of machinery, felt that such benefits did not justify the harm incurred by technological unemploy­ment. The introduction of labor-saving machinery displaces workers. More­over, since machinery is expensive, it is usually concentrated in the larger firms, so that many small manufacturers are driven out of business. According to Sismondi, since each individual so unemployed is a consumer who finds his income drastically reduced while more machines simultaneously produce more output, overproduction and economic crisis inevitably follow. Sismondi's con­clusion does not necessarily follow, however. He was either unable to see or unwilling to admit that the growth of output frequently creates additional em­ployment opportunities.

It is important to note that Sismondi's criticism was not aimed at machinery per se but at the social organization that allowed workers to be subjected to the vagaries of competition. About this he was explicit:

Every invention in the arts, which has multiplied the power of man's work, from that of the plough to the steam engine, is useful__Society had made progress onlythrough such discoveries; it is through them that the work of man has sufficed for his needs__It is not the fault of the progress of mechanical science, but the fault of the social order, if the worker, who acquires the power to make in two hours what would take him twelve to make before, does not find himself richer, and conse­quently does not enjoy more leisure, but on the contrary is doing six times more work than is demanded (Nouveaux principes d'economie politique, I, p. 349).