It touches on the most sensitive political contradiction in a capitalist society: the balance of power between labor and capital. What Kalecki argues is that the economic case for full employment had basically been won, but political opposition, buttressed by “so-called ‘economic experts’ closely connected with banking and industry”, was the remaining hurdle. By Michal Kalecki* I. We have considered the political reasons for the opposition to the policy of creating employment by government spending. 5: M. Kalecki, Capitalism: Business Cycles and Full Employment, op. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Kalecki’s most fundamental argument seems to be (iii), which is concerned with the capitalist dislike of the social and political changes brought about by ongoing full employment. For another, profitability will be a bad criterion when considering any activity with a public good aspect or involving an externality. And many other possibilities could emerge. Chapter 2 analyzes the internal relationship between capital and labor and their interaction in the production process within firms. Bill Mitchell, for example, wrote a post back in August last year that explains his position in some detail. Strikes for wage increases and improvements in conditions of work would create political tension. The attitude is not easy to explain. hospitals, schools, highways). Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the “normal” capitalist system. The maintenance of full employment would cause social and political changes which would give a new impetus to the opposition of the business leaders. what should be the direction of government intervention) and secondly, that it should be done only in the slump (i.e. In an extremely important and prescient paper, published in 1943 titled "Political aspects of full employment" Kalecki displayed skepticism about the political possibility of maintaining full employment. Kalecki showed that the traditional objection focusing on the problems of financing fiscal policy are easily overcome. For this reason, some Modern Monetary Theorists have responded in considerable depth on the issue. Learn more. ). The entrepreneur remains the medium through which the intervention is conducted. But “discipline in the factories” and “political stability” are more appreciated than profits by business leaders. Perhaps capitalism will adjust itself to full employment in this way? Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the “normal” capitalist system. Kalecki is case in point. We shall examine each of these three categories of objections to the government expansion policy in detail. Should a progressive be satisfied with a regime of the political business cycle as described in the preceding section? The reaction of the entrepreneurs to the measures described is uncertain. We discuss why the United States’ institutional breakdown won’t stop after Trump leaves office and what can be done to improve things for working people. A solid majority of economists is now of the opinion that, even in a capitalist system, full employment may be secured by a government spending program, provided there is in existence an adequate plan to employ all existing labor power, and provided adequate supplies of necessary foreign raw materials may be obtained in exchange for exports. (In the state of over-employment of resources such as we witness at present in the war economy, an inflationary rise in prices has been avoided only to the extent to which effective demand for consumer goods has been curtailed by rationing and direct taxation.) He lists hospitals, schools and highways as examples. The social function of the doctrine of “sound finance” is to make the level of employment dependent on the state of confidence. POLITICAL ASPECTS OF FULL EMPLOYMENT' By M . It may be asked where the public will get the money to lend to the government if they do not curtail their investment and consumption. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow. Full employment conflicts with the interests of capitalists as a class. A solid majority of economists is now of the opinion that, even in a capitalist system, full employment may be secured by a government spending programme, provided there is in existence adequate plan to employ all existing labour power, and provided adequate supplies of necessary foreign raw-materials may be obtained in exchange for exports. Kalecki observes that capitalists frequently oppose full-employment policies. (emphasis in original). But it is, I think, sufficient to acquaint the reader with the essence of the doctrine and so enable him to follow the subsequent discussion of the political problems involved in the achievement of full employment. ‘Three Ways to Full Employment’. The dislike of government spending, whether on public investment or consumption, is overcome by concentrating government expenditure on armaments. I have argued here and especially here that sovereign currency systems open up enormous social possibilities, irrespective of the political persuasion of a given society. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow. In reality the government pays for the services, not in securities, but in cash, but it simultaneously issues securities and so drains the cash off; and this is equivalent to the imaginary process described above. In current discussions of these problems there emerges time and again the conception of counteracting the slump by stimulating private investment. The breakdown of the boom in the second half of 1937 was actually due to the drastic reduction of the budget deficit. And the policy of full employment outlined above does not encroach upon profits because it does not involve any additional taxation. He also served as the deputy director of the United Nations Economic Department in New York City. I think closer to the truth is that capitalists would like to keep the “scope for public investment” narrow and so will oppose attempts by government to broaden social and economic activity on the alleged grounds that there is “no scope” for such public investment. The entrepreneurs in the slump are longing for a boom; why do they not gladly accept the synthetic boom which the government is able to offer them? However, this type of planning is bound to appear whenever an economy sets itself a certain high target of production in a particular sphere, when it becomes a target economy of which the armament economy is a special case. In the slump, either under the pressure of the masses, or even without it, public investment financed by borrowing will be undertaken to prevent large-scale unemployment. The regime of the political business cycle would be an artificial restoration of the position as it existed in nineteenth-century capitalism. If capitalism can adjust itself to full employment, a fundamental reform will have been incorporated in it. Kalecki’s closing paragraph would still seem timely if written today, given the increasing resort to police-state measures to quell dissent: But perhaps the fight for full employment may lead to fascism? During the 1950s, Kalecki was influential in the monopoly capitalism school of Marxists, through the work of Paul Sweezy and Josef Steindl. What the masses now ask for is not the mitigation of slumps but their total abolition. Mainstream economists periodically rescue authors from what they see as the economic graveyard. Collected Works of Michał Kalecki: Vol. note 3, p. 148-149, emphasized by Kalecki. Large-scale armaments are inseparable from the expansion of the armed forces and the preparation of plans for a war of conquest. 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