Monetary Economies of Production
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Monetary Economies of Production

Banking and Financial Circuits and the Role of the State

Edited by Louis-Philippe Rochon and Mario Seccareccia

The central focus of this book is the relationship between money, the sphere of production, and the State. It explores how best to adapt the fundamental ideas of the circulationist perspective to achieve a better understanding of the financialisation of the production processes within contemporary capitalist economies. Importantly, the expert contributors illustrate that the true challenge ahead is to address how these new emerging forms can be eventually tamed, a challenge that the recent financial crisis has forcefully proven essential.
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Chapter 3: A historical perspective on the theory of the monetary circuit: from Schumpeter to Parguez

Banking and Financial Circuits and the Role of the State

Claude Gnos


Alain Parguez (1975, 1996, 2001) and a few other academics, notably Alain Barrère (1979, 1990a, 1990b) and Bernard Schmitt (1960, 1966,1984) in France, and Augusto Graziani (1989, 2003) in Italy, have developed what is today known as the theory of the monetary circuit. In doing so, they have drawn heavily on ideas defended by John Maynard Keynes. In particular, circuitists refer to Keynes’s 1933 writings on ‘the monetary economy of production’ (Keynes 1973a [1933], 1973b [1933]), to the ‘principle of effective demand’ that he set out in the General Theory (Keynes 1971b [1936]) and to the ‘finance motive’ that he defined in his 1937 papers on the interest rate (Keynes 1973c [1937], 1973d [1937]). These references have been extensively cited in the literature. This chapter is intended to present another reference that can be considered, along with Keynes, as influential in the development of key elements of the monetary circuit, notably what Schumpeter (1954, p. 276–88) called an ‘interlude of monetary analysis’ that took place sometime before A. Smith (1976 [1776])imposed what is known as ‘real analysis’.

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