Annals of the Fondazione Luigi Einaudi

An Interdisciplinary Journal of Economics, History and Political Science

The Annals is a forum for the free exchange of ideas
among scholars working in the field of social sciences
Volume LIV 2 - 2020

Credit, Debt and Distribution in the Monetary Theories of Augusto Graziani and Michał Kalecki

Jan Toporowski,
pp. 311-326
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The Monetary Production Theory of Augusto Graziani provides a rich analysis of the use of credit in capitalist production, showing the endogeneity of such credit and giving new insights into the use of credit as money. The theory suggests a credit system, inflated by loans for production and investment and deflated by loan repayments, with incomes in the form of profits and wages recorded as credit transfers. In Graziani, a key part is played by workers’ saving, and this results in a problem of interest monetisation. The paper shows that this difficulty disappears once it is recognised that capitalists own financial assets and bank deposits, as Kalecki argued. With this modification, Graziani’s principles of monetary circulation are then used to examine Neo-Kaleckian theories of financialisation. The wage rate and workers’ saving, rather than the workers’ borrowing, are a more significant influence on the distribution of income between those classes, and the circulation of money among capitalists, rather than between capitalists and workers, is a more critical determinant of production and profits.