| Summary: |
The Note examines the theory of interest put forward in Shaikh’s recent book Capitalism, Competition, Conflict, Crises which presents the classic Ricardian theory of interest, in which the rate of interest is determined by the industrial rate of profit, as the basis for the book’s analysis of banking and credit. The Note argues that the classic theory of Anwar Shaikh holds true only under special assumptions, namely when money is a produced commodity, and credit is external to the system of capitalist production. However, in the modern capitalist economy, credit is endogenous to the system of production and distribution. In this more general case, debt and interest have the function of redistributing income, but are unrelated to the rate of profit from production.
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