Krise und Prosperität im Kapitalismus ---- An intellectual top performance

Publication: Metropolis-Verlag (1987, Marburg)

First insertion on Heterodox Gazette Sam de Wolff: 9 march 2015

Everybody who is interested in general political policies must have some knowledge about the budget policy of the state with regard to the conjuncture. The economic theory behind the budget policy is commonly attributed to the English economist J.M. Keynes, but strictly speaking this is not completely right. For, the Polish economist M. Kalecki has published almost the same theory in 1933, and that is three years before Keynes published his ideas¹. Here it must be added, that Kalecki formulates his theory in a more understandable manner than Keynes, and also more complete. Therefore the work of Kalecki has remained popular with some economists, even in Cambridge, the home port of Keynes. For instance, the well-known economist Joan Robinson prefers the formulas of Kalecki in her books.

In 1954 the theory of Kalecki appeared as a textbook, with the title Theory of economic dynamics. More than thirty years later the quality publisher Metropolis-Verlag has published the German volume Krise und Prosperität im Kapitalismus by Kalecki, which contains most parts of the mentioned English textbook. The volume is definitely worthwhile. First the measures are explained, which allow the state to more or less stabilize the domestic effective demand, so that it can curb the economic conjuncture. In later articles Kalecki elaborates on his formulas, and develops a complete theory of the conjuncture, which explains the fluctuations of the national income, including the crisis. In 1955, after a long stay abroad, Kalecki returns to Poland, and contributes to the establishment of the Leninist state. The volume also contains some articles from this latter period.

The texts of Kalecki regularly contain critical remarks about the industry, for instance regarding the formation of monopolies, which at the time was a topical theme. He hopes that the trade union movement develops into a countervailing power². Although he is not a marxist, yet the theory of Marx has inspired him. Kalecki certainly was not an adherent of Lenin, and therefore his final years in Poland have not been very happy. He hardly had any influence. Incidentally, Kazimierz Laski, who writes the preface of the volume, also has collaborated with the regime for some time, motivated by ideals. In the end Laski become so disillusioned, that he definitely left Poland. Then he is already an expert of the work of Kalecki, and that becomes clear in the summary, that he gives in his preface of the book.

The first part of the volume contains the early articles of Kalecki about economic dynamics. Here the mentioned famous study of 1933 can be found. Then Kalecki already displays his insights in the conjuncture, and points to the consequences of delays in the investment process. The prosperity can be furthered simply by making extra investments. The entrepreneurs receive the investments as profits. Still in the same year he adds the consequences of the foreign trade to his model, as well as the state investments (which he calls the domestic-export). In 1935 Kalecki studies the beneficial effect of investments on the employment. As long as the spending power is maintained, the national income will increase due to the effect of the multiplier. Moreover, Kalecki studies the effect of the extra investments on the balance of payments, as far as this requires extra import.

It is interesting to see that Kalecki divides the economy in three branches, following Marx. In his argument about the development of the real wages he assumes, that the industry is an oligopoly, and therefore the product prices are rather rigid. Furthermore, he studies the various types of taxes, and propagates the tax on capital. However, he fears that this infringement on capital (the K-word!) is politically unfeasable. The capitalists will protest³. And Kalecki develops his own price theory, which is difficult to judge for your reviewer. Then in 1943 Kalecki presents his theory of business cycles with well formulated investment functions. This part is rather mathematical, but this has the advantage that the effects of the consumption and of the profit on the economic fluctuations become clearly visible.

Then in 1944 Kalecki presents proposals for realizing full employment. There are three options: deficit spending, stimulating the private investments, and redistribution of incomes. However, Kalecki doubts that the industry will be willing to cooperate in combatting the unemployment⁴. This is a discussion about the practical economic policy and about politics, and a proof of the wide knowledge of Kalecki. Finally, from 1936 there is an interesting reaction of Kalecki on the theory of Keynes. The Polish articles of Kalecki (after 1955) do not have the huge importance of his previous work. Then he specializes in elaborations on the marxist theory, which at that moment has already become a dogma. They are not of economic eminence. The importance of these texts is mainly in the influence, that they exert on the then Polish regime.

In conclusion, Krise und Prosperität im Kapitalismus is a fascinating book. However, the arguments of Kalecki are always so concise and far-reaching, that five years ago your reviewer regularly doubted whether he truly understood everything. Strictly speaking it is necessary to read the material several times, and to compare it with supplementary sources. Incidentally, it seems that the same holds for the publications of Keynes. Your reviewer happily lets the reader decide, whether this intellectual challenge is worth the effort.

1. The work of Kalecki did not directly obtain the recognition, which it deserved. In spite of the initiatives of among others the School of Stockholm, the Kaleckian theory was still such a radical criticism of the neoclassical theory, that she was ignored by the established economic community. The Polish economists had little influence globally, and even within the Polish economic community itself Kalecki was not sufficiently authoritative and respected for receiving appreciation for his theory. However, the economic misery of the Great Depression had made people accessible to a break-through, and the theoretical means were also available. When Keynes in essence published the same theory as Kalecki, the new insights did become the focus of a lively debate. The father of Keynes was already well-known among economists. Keynes himself had an impressive career, and in Cambridge had become a leading professor and advisor of the government. Besides, Great Britain belonged to the leading states in economics. It is true that the economists did not immediately accept and embrace his publications, but they were willing to listen and to ponder over his arguments. Thus Kalecki became the actual inventor of the theory of the economic dynamics, and Keynes became its most important propagandist. (back)
2. In essence the trade union work has indeed been institutionalized, and Piet van Aken describes this on p.31 of his political novel De blinde spiegel: For the moment the professional and branch negotiations had done little else than bargaining and haggling, so that soon the already moderate wage demands and the reduction of the working-hours looked like a childish sketch of a five-years plan: both the wage-rise and the reduction of the working-hours were split into parts of cents and minutes and attached to a phase calendar full of limiting conditions. (back)
3. Capitalists are notoriously greedy, and thus the subject of jokes. "Greedy people are an unpleasant company, but they are excellent ancestors" (Tom Snyder). This goes beyond families. A wife asks: "Do you only love me, because my father left me a fortune?" The man replies: "Of course not. I love you, irrespective of who left you the money". James Agate, an English dramatic critic, had an eager eye for money business: "In order to stimulate myself to earn more, I decided to spend more". The Scottish tea producer Thomas Lipton already understood, that you can never have too much money. During a lecture for a group of business men he stated: "Half of the money, that we spend on advertising, is pure waste. But we do not know which half". Perhaps he also remembered the folk wisdom: You are safer on the right than in a plane. (back)
4. The pressure must be maintained. The Megafoons rightly state in the text of the song De lopende band: The radio is loud, / But I do not hear it. / The factory noise makes me crazy. / I only hear the boss shout. / Every day the assembly line goes faster, / Because they want to sell more. / Now I can not even piss. / The boss can not miss me for a second. (back)