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Since Piero Sraffa’s Production of Commodities by Means of Commodities (PCMC henceforth), the discussion on value and distribution has been mainly focused on the closed economy. However, in the early 20s, while Italy was introducing a revaluation of the lira, Sraffa developed, under different circumstances, what can be considered some early revealing insights about open economies.

Proffesor Sraffa's very first thoughts written in his Laurea's thesis supervised by Luigi Einaudi, although still ``in line with the dominant tradition of the quantity theory of money'' (Roncaglia, 2009, p. 2), are a proof of this. There, Sraffa claimed that as a result of the appreciation, ``In this way, justice would be re-established, not only for lenders to the state but also for all those who have been unjustly damaged by the price rise caused by inflation. Pensioners, bond holders and, generally, money lenders and people with a fixed income would see money brought back to its original purchasing power and their rights restored. Workers and clerks, whose wages and salaries rose more slowly than the cost of living during the inflationary period, will be compensated for these losses by prices falling more rapidly than wages and salaries [...] Perhaps workers and clerks, for an initial short period of time, would benefit from the price fall: their wages and salaries might decrease more slowly than other prices and, during the adjustment period, they would enjoy higher real pay.'' (Sraffa, 1920, pp. 47-49 and p. 53, emphasis in pencil in the Sraffa Archive, D3/1; Harcourt \& Sardoni, 1993, pp. 21, 23 without emphasis). Sraffa's dissertation is dated November 1920 in the Archive and there is plenty of literature related to Sraffa's interest on currency and banking (i.e., Panico, 1988), his thesis was just his first `publication' and his writings on the Italian currency continued after that.

After more than 50 years of lira's stability - from 1861 to 1914 - abrupt nominal movements were kind of a surprise. Since the beginning of the First World War until 1926 the nominal depreciation reached 334.93%. Piero Sraffa wrote an article, requested by Keynes on `The Bank Crisis in Italy' and it was published in The Economic Journal. In this article, Sraffa comments, among other things, an episode which reflects a run against the lira in 1922. Professor Sraffa argued that ``The withdrawal of foreign deposits from Italian banks must certainly have been heavy, and the exchange suffered thereby, the sterling going up from 91.59 on the 20th December to 98.30 on the 29th December'' (Sraffa, 1922a, p. 190) and that these circumstances could be explained by Italy's productive structure and its dependency on foreign countries: ``This state of things is the result of a variety of causes, such as the preponderance of agriculture and the consequent possibility enjoyed by a large proportion of the population of supporting themselves almost without recourse to exchange; the lack of division of labour between manufacturers and traders, and above all the fact that the foreign trade, which gives rise to the largest volume of commercial bills, is financed by other countries'' (op. cit., p. 194).

It would not be accurate to consider his Laurea's thesis (Sraffa, 1920), his two public articles in banking (Sraffa, 1922a, 1922b) and his early draft note on fascism (Sraffa Archive, 1923) the basis for an alternative theory of distribution. However, there are at least two more interventions from Professor Sraffa that can be related to the issue of the appreciation and the economics of fascism at around the same time of his `turning-point' (more on that later).

In November-December 1927, two letters from Piero Sraffa to Angelo Tasca were published in `Lo Stato Operaio', the official monthly magazine of the Italian Communist Party (Potier, 1991; Panico, 1988, Vernengo, 2001; Roncaglia, 2009). These two letters were a response to Angelo Tasca's article called `The revaluation of the lira and the American loans' published in that magazine in March-April 1927. According to Tasca, France was able to stabilize the currency without the necessity of debt nominated in foreign currency and without putting into risk the industrial heritage. In the only footnote of the article, Tasca while comparing the French `revaluation method' and the Italian one he claims that ``The superiority of the French revaluation method on the Fascist one does not mean that it does not have its unknowns; a stroke is common to both: The offensive against workers' wages'' (Tasca's article reproduced in Villari, 1992, p. 175, our translation; Sraffa Archive, C309.).

Sraffa wrote a first dissent letter to Tasca on September 17th [or 22nd]  of 1927 in relation to this article and was partially reproduced in the magazine. Sraffa argued that ``Fascism has voluntarily made a policy contrary to the interests of financiers and industrialists. My explanation is, as I said, that this revaluation (as well as due to reasons of prestige and similar stuff), is part of an attempt by fascism to acquire the support of the middle classes and some layers of workers - since it is undeniable that the only ones truly advantaged by the revaluation are in those classes'' (Sraffa's letter reproduced in Villari, 1992, p.181, our translation, emphasis added in italics). Until this point we are able to confirm that he had not changed his point of view in relation to the possible consequences of the nominal appreciation of the lira on distribution.

On top of this, on November 3rd of 1927 at 8:15am, Sraffa has given a lecture to the Emmanuel Economic Society called `Revalorization of the lira'.\footnote{By 1927, he also gave a lecture - it seems to be on the 14th of November at 8:30am as can be seen from his diary (Sraffa Archive, E1) - at the `Keynes Club' called `The corporative state' where he explicitly said that ``the larger the product, the larger the share that will fall to each, and the greater the national power. It is only when we come to the division of the product that the interests are opposed, since the larger is the share of anyone the smaller must be the share of the other'' (Sraffa Archive, D2/2/1, f.4, recto) describing the Classical (and also Neoclassical) negative relationship between wages and profits, in this case, applied to the Italian situation. Moreover, referring to the `official' fascist thought, he claimed that ``The superior interest of production is, in the official interpretation, that `production should take place at low costs, so as to enable Italian producers to compete successfully with the foreigner' - which of course means that wages should be kept as low as possible.'' (Sraffa Archive, D2/2/1, f.12, recto, emphasis added in italics)} There, publicly, he claimed that ``the revaluation of the currency has had disastrous effects upon every section of the community. The workers have suffered both from a cuts in wages that are larger that the fall in the cost of living – and from unemployment.'' (Sraffa Archive, 1927, D2/3/1, f.12, recto, underline in the original, emphasis added in italics).

This paper will attempt, first, to systematize his thoughts and interventions in open economy in the early 1920s. Along this line of thought, after introducing the Italian case during the `20s, we will analyse his article on Italian banking (Sraffa, 1922a), some discussions with Angelo Tasca in the public sphere (Villari, 1972) and, finally, his public speech at the Emmanuel Economics Society called `Revalorization of the lira' (Sraffa, D2/3) and his intervention at the Keynes Club. Although these modest contributions cannot be analyzed explicitly as if they were a grand unified conceptual framework before his publications in the 1950s and 1960s, it is possible to reach a logical and coherent theoretical connection between these interventions and his magnum opus PCMC. Subsequently, after discussing Sraffa's turning-point date, we will present analytically a `small open economy' model and demonstrate the theoretical coherence between these interventions and his `equations' through the lens of the Surplus approach. As a matter of fact, his thoughts on the open economy did not change after what might be considered the starting of his `turning point', reinforcing our hypothesis.

The structure of the paper will be as follows: In Section 2, we will describe the process of appreciation of the lira in Italy during Mussolini's dictatorship. In section 3, we will revisit Professor Sraffa's early writings on the open economy and, after that, we will discuss his turning-point's date. In Section 5, we will present a `small open economy' model through the lens of the Surplus approach showing if Sraffa's early thoughts on the open economy are internally consistent with his magnum opus. Some conclusions will close.

 

References

 

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