Inflation, Unemployment and Capital Malformations

Inflation, Unemployment and Capital Malformations The volume deals with the main problems faced by capitalist economies, inflation and unemployment, in a new and original way, and provides the theo- retical foundations for quantum macroeconomic analysis. Its aim is to allow English-speaking economists and interested readers to have a direct access to the analysis provided by Schmitt in his 1984 book Inflation, Chômage et Malformations du Capital. Orthodox economics has failed to provide a consistent insight of the pathologies hindering our economies, and both the academic and the economic worlds are much in need of an alternative approach capable of explaining the origins of these pathologies and how they can eventually be disposed of. Schmitt’svolume provides a revolutionary explanation of the cause of today’s economic disorder as well as an innovative solution allowing for the passage from disorder to order. Neoclassical and Keynesian theories of any type are essentially based on equilibrium analysis and this is why none of them has ever been able to provide a consistent macroeconomic analysis based on macroeconomic foundations. This is what Schmitt’s book aims for: developing a new analysis built on identities rather than conditions of equilibrium, in order to explain the objective origins of inflation and unemployment. In this volume, Schmitt introduces a new, revolutionary analysis centred on the concept of quantum time. The topics analysed by Schmitt cover the entire field of national macroeconomics, from production to capital accumulation, the leading role in this ground-breaking investigation being played by what he calls the theory of emissions. The ensuing macroeconomic theory is built on a set of laws derived from the monetary nature of our economic systems and defines the logical framework of inquiry into modern macroeconomics. Bernard Schmitt was a full professor of Monetary Macroeconomics at the Universities of Burgundy (Dijon), France and of Fribourg, Switzerland. He was also the co-director of the Laboratory of Research in Monetary economics at the Centre for Banking Studies in Lugano, Switzerland. Among his main publications are: La formation du pouvoir d’achat, Monnaie, salaires et profits, Macroeconomic Theory, A Fundamental Revision, Théorie unitaire de la monnaie, nationale et internationale, La France souveraine de sa monnaie, External Debt Servicing. A Vicious Circle, and a number of contributions to collective books as well as papers published in peer-reviewed journals. English translation and foreword by Alvaro Cencini, Università della Svizzera italiana, Switzerland. Xavier Bradley, Université de Bourgogne, France. Routledge Frontiers of Political Economy Capital Theory and Political Economy Prices, Income Distribution and Stability Lefteris Tsoulfidis Value and Unequal Exchange in International Trade The Geography of Global Capitalist Exploitation Andrea Ricci Inflation, Unemployment and Capital Malformations Bernard Schmitt Edited and Translated in English by Alvaro Cencini and Xavier Bradley Democratic Economic Planning Robin Hahnel A History of Monetary Diplomacy, 1867 to the Present The Rise of the Guardian State and Economic Sovereignty in a Globalizing World Giulio M. Gallarotti Markets in their Place Context, Culture, Finance Edited by Russell Prince, Matthew Henry, Carolyn Morris, Aisling Gallagher and Stephen FitzHerbert China’s Belt and Road Initiative The Impact on Sub-regional Southeast Asia Edited by Christian Ploberger et al For more information about this series, please visit: https://www.routledge. com/Routledge-Frontiers-of-Political-Economy/book-series/SE0345 Inflation, Unemployment and Capital Malformations Bernard Schmitt Edited and Translated in English by Alvaro Cencini and Xavier Bradley First published 2021 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 52 Vanderbilt Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2021 Bernard Schmitt The right of Bernard Schmitt to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. The volume is the English translation of the book Inflation, chômage et malformations du capital, published in 1984 by Economica: Paris, and Castella: Albeuve (CH). British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record has been requested for this book ISBN: 978-1-138-36980-1 (hbk) ISBN: 978-1-032-00703-8 (pbk) ISBN: 978-0-429-42846-3 (ebk) Typeset in Times New Roman by Taylor & Francis Books Contents List of figures x Acknowledgements xii Foreword by Alvaro Cencini and Xavier Bradley xiii Foreword by the author xxvii General introduction 1 1 Production and time 3 2 Expenditures and time 20 3 Production and expenditure constitute one unique event: the emission 29 PART I The functioning of the domestic economy: from wages to capital 31 4 From production to consumption: the creation and destruction of wages 33 5 Capital 84 PART II The dysfunction of the domestic economy: from capital to capitalism 103 6 The quantitative theory and the quantum theory of inflation 105 7Inflation and unemployment have the same aetiology: empty emissions 111 8 The two benign cases of empty emissions or of inflation 113 viii Contents 9 It is precisely because fixed capital is the property of a non-person (the disembodied set of firms), that its amortization causes the malignant emissions 127 10 In the most advanced capitalism, a third of the industries in the country issue empty wages 138 11 The malignant emissions and unemployment 145 PART III The remedies usually proposed, their inefficiency evaluated in the light of the theory of emissions 149 12 Money does not circulate in the economy 151 13 Far from being independent from each other, global supply and demand are logically merged into one unique magnitude; only confusion in the mind can separate them 160 14 Inflation and unemployment are totally independent from the behaviour of economic agents 170 PART IV The solution is in the division of the activity of banks in three departments. Liberated from empty emissions, the domestic economy follows Say’s law: it ensures full employment 191 15 The division of banks in two departments 195 16 The economy equipped with a network of deposit banks all divided into three departments will be totally free from empty emissions 205 PART V General conclusion: the micro-macro distinction in economic analysis 215 17 Macroeconomics is the domain of absolute exchanges 217 18 Confrontation between the two paradigms: absolute exchanges, relative exchanges 231 19 The determination of wages 245 Contents ix 20 The circuit, the macroeconomic concept par excellence, is the identity of income’s outflow and inflow 264 SYNOPSIS of quantum macroeconomics 285 21 Production and time 287 22 Production and expenditures 295 23 Measurement in the economy and in economics 298 24 The creation of money 307 25 Capital 318 26 Inflation is a “malformation” of capital 333 27 At the core, inflation is caused by the systematic dysfunction of fixed capital’s amortization 340 28 Production of the second sector, inflation is defined in quantum time; its measure in continuous time does not let the magnitude of the disorder become apparent 356 29 Involuntary unemployment would necessarily be nil if the domestic economy did not include any dual production 363 30 Neither inflation nor unemployment would exist in an economy where all monetary capital transits through financial markets 373 Glossary of the main concepts 382 Afterword 384 Appendix 388 FOREWORD BY HENRI GUITTON, MEMBER OF THE INSTITUT DE FRANCE Bibliography 400 Index 401 Figures 1.1 Production as a constant function of time 6 1.2 The staircase representation of production as a function of time 8 1.3 The relation between production and quantized time 18 2.1 Expenditure as a function of time 21 2.2 The “cumulated multiplier” 24 4.1 The bank emission 45 4.2 The two half-spheres of monetary creation 53 4.3 Production as a net increase in income 55 4.4 The exchange between good and money 61 4.5 The exchange between two goods 61 4.6 The intermediation of money 61 4.7 The formation and expenditure of profit65 4.8 Formation and expenditure of wages as disjoint events 67 4.9 The formation-expenditure of wages 68 4.10 The division of the product in wages and profit68 4.11 The sale of the product to income holders 73 4.12 A two firms’ economy 74 4.13 The replacement of M2 by M1 74 4.14 The identity of each firm’s fluxes and refluxes 75 4.15 The flows of the creation-destruction of wages and of the creation-destruction of profit76 4.16 The production of wage-goods 78 4.17 The production of non-wage goods 78 4.18 The production of wage- and non-wage goods by each firm 79 4.19 The expenditure of wages and the purchase of non-wage goods 81 4.20 The circular flow of profit within the circuit of wages 83 5.1 Banks’ lending

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