Competition and demand-led growth: linking different parts of the Sraffian-inspired research program

The paper explores connections between two distinct lines of enquiry in the broader Sraffian research program: the fusion of the Sraffian approach and a demand-led view of growth; and dynamics of competition enforcing a uniform rate of profit. A simplified multi-commodity simulation model incorporating target return pricing and demand led-growth is used to highlight a first connection in the form of competition acting as a perturbation of the process by which capacity adapts to aggregate demand. The implied view of target return pricing is however limited in terms capturing its significance in a corporate setting. Literature on the history of corporate pricing points to a more nuanced view of target return pricing as well as a different view of capital mobility compared with that commonly depicted in the literature on gravitation. This in turn suggests a second connection between the two Sraffian-inspired lines of enquiry. Making use of the target return price equations of the simulation model together with the insights from literature on corporate pricing allows one to identify the kinds of factors which would generate profit differentials sufficient to trigger intersectoral capital mobility. In turn this analysis highlights the importance of ‘normal’ conditions in individual sectors, not least the significance of normal utilization; and changes in autonomous demand as a factor generating relevant profit differentials and structural changes via intersectoral capital mobility.