Michal Kalecki, One of the Greatest Economists Ever

Kalecki is probably most famous for having invented the theory of effective demand, as in Keynes' General Theory, prior to and independently of Keynes. I cannot read Polish, so I cannot document this claim. I have read a later 1965 work of Kalecki's, in which he lays out his views on business cycles and the level and the rate of growth of the national income.

But I want to describe another aspect of Kalecki's work. Kalecki demonstrates that at least some of those who advocate Keynesian policy do not think of government as staffed by far-seeing and disinterested philosophers working entirely for the good of society, whatever that may mean. Rather, Kalecki described government policy as refracting conflict within society, including conflict resulting from the divergent interests and views of members of different classes.

For instance, in Kalecki (1967), he analyzed the prospects of governments coming to power in third world developing economies in which representatives of the lower middle class do or do not find themselves serving the interests of big business, in alliance with remnants of the feudal system. Kalecki analyzes, for example, how land reform can be expected to change the balance of class forces.

Apparently that article was of importance in the literature on development economics. But I am more aware of Kalecki (1943). In this article, Kalecki explains why a government in a first world country might be unwilling to maintain full employment through increased deficit spending. Kalecki's explanation has several aspects:

• Full employment policy threatens big business' ability to carry out a capital strike.
• Public spending might start with "objects which do not compete with the equipment of private business, e.g., hospitals, schools, highways", but is unlikely to stop there, and might lead to newly nationalized industries and subsidization of consumption.
• Under full employment, if maintained, '"the sack" would cease to play its role as a disciplinary measure.'

Still governments have been thought for many decades accountable for downswings in business cycles. How can governments manage this tension between the needs to maintain full employment at election time and to maintain the social position of business leaders? Kalecki suggests one can expect large scale spending on armaments, an emphasis on tax cuts (as opposed to increased spending), and the emergence of a political business cycle. Kalecki's observations on political economy might have something to do with, say, United States government policy over later decades.

References

• Kalecki, Michal (1943). "Political Aspects of Full Unemployment", Political Quarterly, V. 14 (Oct.-Dec.): 322-331
• Kalecki, Michal (1965). Theory of Economic Dynamics: An Essay on Cyclical and Long-Run Changes in Capitalist Economy (Second Edition), George Allen & Unwin
• Kalecki, Michal (1967). "Observations on Social and Economic Aspects of 'Intermediate Regimes'", Coexistence, V. 4, N. 1: 1-5