Jean Charles Leonard Simonde de Sismondi (May 19, 1773 - June 25, 1842) was a Swiss historian and economist. His monumental History of the Italian Republics in the Middle Ages provided inspiration to Italian leaders. His economic treatises initially supported Adam Smith and the laissez-faire approach to trade. Later, however, he revised his opinions and advocated for government intervention to regulate the accumulation of wealth. Sismondi's later viewpoint was based on his recognition that the study of how to accumulate wealth was not the true purpose of economics in the same way that the accumulation of wealth is not the purpose of life. In particular, he attacked the accumulation of wealth by those in power as causing suffering to others, basically the workers. He also expounded an early macroeconomic model that described the effects of both investing in or borrowing from other nations, as well as promoting the thesis that underconsumption leads to overproduction (glut) and economic crisis. Advocating restraint against unbridled Capitalist accumulation of wealth and concern for the poor, Sismondi offered a humanitarian approach to economic thought.
Jean Charles Leonard Simonde was born on May 19, 1773 in Geneva, Switzerland. His father and all his ancestors seem to have borne the name Simonde, at least from the time they migrated from Dauphiné to Switzerland at the revocation of the Edict of Nantes. It was not until after he had become an author that, observing the identity of his family arms with those of the once flourishing Pisan house of the Sismondi, and finding that some members of that house had migrated to France, he assumed the connection without further proof and called himself Sismondi.
The future historian was well educated, but his family wished him to devote himself to commerce rather than literature, and so he became a banker's clerk at Lyon. When the Revolution broke out, as it affected Geneva, the Simonde family took refuge in England, where they stayed for 18 months from 1793 to 1794.
They returned to Geneva, but still found the state of affairs unfavorable. The greater part of the family property was sold, and with the proceeds they emigrated to Italy, bought a small farm at Pescia near Lucca and Pistoia. Sismondi worked hard there, both with his hands and his mind, and his experiences gave him the material for his first book, Tableau de l'agriculture toscane, which, after returning to Geneva, he published in 1801. In 1803, he published his Traité de la richesse commerciale, his first work on the subject of political economy, which, with some differences of view, continued to interest him to the end of his life.
His celebrated 16–volumed History of the Italian Republics in the Middle Ages (1809-1818) described the cities of medieval Italy as the origin of the European states.
In April 1819, Sismondi married an English woman, Miss Allen, whose sister was the wife of Sir James Mackintosh. Their marriage appears to have been a very happy one. His later years were chiefly spent in Geneva, in the politics of which city he took a great, though as time and changes went on, a more and more chagrined, interest. Indeed, in his later days he became a kind of reactionary.
Sismondi died in 1842.
Sismondi popularized the laissez-faire economics of Adam Smith in his De la richesse commerciale (1803), in which he presents his macroeconic model. His Political Economy (1915) further substantiated his analysis along the lines of Smith's approach.
However, the social effects of the Industrial Revolution in England led him to become a critic of capitalism and develop a precursor of socialism in Nouveaux Principes d’économie politique (1819). In it, he insisted on the fact that economic science studied the means of increasing wealth too much, and the use of wealth for producing happiness too little.
In the algebraic version of his model, net investment is X (the increase in the "necessary" wage bill this year compared with that of the previous year), the previous year’s wage bill is N. Production this year is P, and (P - N) defines "revenue." Consumption out of revenue is then D.
The analysis is extended to an open economy by the inclusion of loans to or from foreigners (C, which when a nation lends to foreigners is regarded as a subtraction from expenditure, and when it borrows from foreigners is added to expenditure). In this case any excess of (P - N) over D may take the form of either net investment or lending to foreigners, both of which Sismondi regarded as contributing to a nation’s progress.
In his illustrative examples, Sismondi assumed given ratios between each of net investment and lending to foreigners on the one hand, and last year’s necessary wage on the other. With both X and C now being expressed in terms of N, Sismondi was able to draw up a "balance" for a borrowing nation between D and P + C - (N + X), and for a lending nation between D and P - C - (N + X), concluding that the nation was progressing or retrogressing respectively depending on whether the right hand side fell short of or exceeded (P - N).
Sismondi’s model thus reinforces Adam Smith’s criticism of the Mercantilist emphasis on the importance of consumption. It is also worth noting that in this open economy macro-analysis, Sismondi anticipated the modern concept of "absorption," which is represented by (D + N + X) in the equation C = P - (D + N + X), where C is the balance of payments on current account.
In his Political Economy (1815) Sismondi further developed his support of Adam Smith's approach:
Adam Smith, author of this third system, which represents labour as the sole origin of wealth, and economy as the sole means of accumulating it, has, in one sense, carried the science of political economy to perfection, at a single step. Experience, no doubt, has disclosed new truths to us; the experience of late years, in particular, has forced us to make sad discoveries: but in completing the system of Smith, that experience has also confirmed it. (Sismondi 1915).
He wrote about exchange that first arose from superabundance: "Give me that article, which is of no service to you, and would be useful to me," said one of the contacting parties, "and I will give you this in return, which is of no service to me, and would be useful to you." (Sismondi 1915). From this, Sismondi expounded on the way humankind accomplishes more and more through cooperative effort:
The same principle which at first separated the trades of the husbandman, shepherd, smith, and weaver, continued to separate those trades into an indefinite number of departments. Each felt that, by simplifying the operation committed to him, he would perform it in a manner still more speedy and perfect. The weaver renounced the business of spinning and dyeing; the spinning of hemp, cotton, wool, and silk, became each separate employment; weavers were still farther subdivided, according to the fabric and the destination of their stuffs; and at every subdivision, each workman, directing his attention to a single object, experienced an increase in his productive powers. In the interior of each manufactory, this division was again repeated, and still with the same success. Twenty workmen all laboured at the same thing, but each made it undergo a different operation: and the twenty workmen found that they had accomplished twenty times as much work as when each had laboured separately. ... Thus men, combined in society, produced more than if each had laboured separately; and they preserve better what they have produced, because they feel the value of it better (Sismondi 1915).
Speaking of humankind, he wrote, "It invents machines, in which the wind, the fall of water, the expansion of steam, are substituted for the power of limbs" (Sismondi 1915).
The application of science to art is not limited to the invention of machinery; its result is the discovery of raw materials, dyeing ingredients, preservative methods more sure and economical. It has produced better work at a cheaper rate; it has protected the health of laborers, as well as their produce; and its effect in augmenting wealth has almost always been beneficial to humanity (Sismondi 1915)
The classical economists' theories of accumulation were combined with a static conception of equilibrium that obliged them to explain disturbances of the system's equilibrium by reference to factors outside the system. The appearance of crises of general overproduction or "glut" led Sismondi to renounce classical theory and soon to doubt the laissez-faire system as a whole.
In his opinion it was exactly the general competition, based on nothing but prices, which, instead of resulting in equilibrium and general welfare, opened the way to the misery of overproduction. The anarchy of capitalist production, the passion for exchange value without consideration of social needs, gave rise to production in excess of effective demand and therefore to periodic crises. The underconsumption resulting from the unequal distribution of income was the cause of overproduction and the accompanying drive toward foreign markets. His thesis that underconsumption and its consequent overproduction could be widespread, and not just for a specific commodity, was shared by Robert Malthus, and came into disagreement with the views of Say and Ricardo in the "General Glut Controversy." Sismondi was thus the founder of the theory, still widespread today, of underconsumption as the cause of capitalist crisis.
The classical liberalism of the French Physiocrats, Adam Smith, and John Locke favored civil liberties and economic freedom. Sismondi looked at the economies of the early 1800s, plagued with poverty and social problems, and concluded that economic science studied the means of increasing wealth too much, and the use of wealth for producing happiness too little. That by no means meant that Sismondi wanted less freedom, he simply felt that a government should, at times, regulate the wealth excesses.
It was Sismondi who wrote of profits as a surplus. But he was a welfare statist rather than a socialist.
In his Nouveaux principes Sismondi attacked wealth accumulation both as an end in itself, and for its detrimental effect on the poor. Despite his favorable attitude towards the poor, he was himself attacked by Marx for lacking positive aims. Marx, said Sismondi "dissected with great acuteness the contradictions in the conditions of modern production" but his recommendations were reactionary, wanting only to restore the old means of production.
Sismondi considered literature to be a natural product of political and social institutions. It was his custom for a long period of years to never work less than eight hours a day. The chief of the works that he produced are Littérature du midi de l'Europe (1813), a historical novel entitled Julia Severa ou l'an 492 (1822), Histoire de la Renaissance de la liberté en italie (1832), Histoire de la chute de l'Empire romain (1835), and Précis de l'histoire des Français, an abridgment of his own book (1839), with several others, chiefly political pamphlets.
Meanwhile he began to compile his great Histoire des Republiques Italiennes du moyen age. In 1807, appeared the first volumes of the book on the Italian republics, which, first made Sismondi prominent among European men of letters. The completion of this book, which extended to 16 volumes, occupied him, though by no means entirely, for the next 11 years. He lived at first in Geneva and delivered there some interesting lectures on the literature of the south of Europe, which were continued from time to time and finally published.
On completing his great book on the Italian republics (1809-1818), he undertook a still greater work, the Histoire des Français (1821-1844), which he planned on a vast scale, and of which during the remaining 23 years of his life be published 29 volumes. His untiring industry enabled him to compile many other books, but it is on these two that his fame chiefly rests. The earlier displays his qualities in the most favorable light, and has been least injuriously affected by subsequent writings and investigations; but the Histoire des Français, as a careful and accurate sketch on the great scale, has been superseded.
As an economist, Sismondi represented a humanitarian protest against the dominant orthodoxy of his time. For the science of economics, the most important contribution was probably his macroeconomic model, which was the very first ever to appear.
De la Richesse commerciale has a number of original features. For example, it includes an early statement ascribing the international exchange of goods to differences in factor endowments and factor prices: England, being plentifully endowed with capital, will import labor-intensive goods, such as lace from France, from countries where capital is relatively scarce and wages low. Sismondi points the way to doctrinal developments that were bought to full fruition by Bertil Ohlin in the twentieth century but were overshadowed during the nineteenth century by the Ricardian doctrine of comparative cost, which was primarily designed to demonstrate the gains from trade.
But, the model notwithstanding, he was above all, a historian whose economic ideas passed through different phases but always generated thought-provoking discussion. The acceptance of free-trade principles in De la richesse commerciale was abandoned in favor of a critical posture towards free trade and industrialization.
In his Nouveaux principes Sismondi criticized Capitalism, in particular for its emphasis on wealth accumulation. His critique was noticed by Thomas Malthus, David Ricardo and John Stuart Mill, but despite his favorable attitude towards the poor, he was attacked by Marx, Lenin, and other socialists.
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