Radical Economics General Editor: SAM AARONOVITCH Debates between economists are not just technical arguments amongstpractitionersbut often reflectphilosophicaland ideological positions which are not always made explicit. Discontentgrewwith the prevailingeconomicorthodoxyasthelong period of economicexpansion in the advanced capitalisteconomies came to an end in the 1970s;disenchantment wasexpressed inopen discussion about the 'crisis' in economics and in the rise of various kinds of radical economic theory, often using the general title of 'political economy'. Manyeconomistshavelookedfor a more fruitful pointofdeparture in the ideas ofMarx and the classical economists and also in such contemporary economists as Kalecki and Sraffa. Although it is possible to identify a broad radical stream, it does not mean that there are no significant controversies within this radical approach and, indeed, it would be unhealthy if this were not the case. Can radical economic theory interpret the world better than the currentorthodoxywhichitchallenges?And can itshow also how to change it?This isa challenge which this series proposes to take up, adding to work already being done. Each book will be a useful contribution to its particular field and should become a text around which the study ofeconomics takes place. Radical Economics Published Amit Bhaduri, Macroeconomics Michael Bleaney, The Rise and FallofKeynesian Economics Keith Cowling, Monopoly Capitalism Michael Howard, Profits in Economic Theory Paul Hare, Planning the British Economy Malcolm C. Sawyer, The Economics ofMichal Kalecki Forthcoming Terry Byres, The Political Economy ofPoor Nations Matthew Edel, UrbanEconomics David Purdy, The Theory ofWages The Economics of Michal Kalecki c. MALCOLM SAWYER Professor ofEconomics University ofYork M MACMILLAN © Malcolm C. Sawyer1985 Softcoverreprintofthehardcover1stedition1985 Allrights reserved.No reproduction,copyor transmission ofthispublication maybemadewithout written permission. No paragraphofthispublication maybereproduced, copied or transmittedsavewithwritten permissionorinaccordance withtheprovisions oftheCopyrightAct 1956(asamended). Anyperson whodoesany unauthorisedact inrelation to thispublicationmaybeliabletocriminal prosecution and civilclaimsfor damages. First published 1985 Published by Higherand FurtherEducationDivision MACMILLANPUBLISHERSLTD Houndmills, Basingstoke,HampshireRG21 2XS and London Companies and representatives throughouttheworld FilmsetbyLatimer Trend & CompanyLtd, Plymouth BritishLibrary CataloguinginPublication Data Sawyer,Malcolm C. TheeconomicsofMichal Kalecki.-(Radical economics) I. Kalecki,Michal 2.Economics I. Title II.Series 330.15'5 HB1I4.K28 ISBN978-0-333-34936-6 ISBN978-.1-349-18031-8(eBook) DOl10.1007/978-1-349-18031-8 Contents Preface and Acknowledgements VII An Introduction to Kalecki and His Ideas 2 Prices, Profits and the Degree of Monopoly 20 3 Investment, Business Cyclesand Growth 43 4 Differential Savings, the Degree ofMonopoly and the LevelofIncome 70 5 Money, Finance and Interest Rates 88 6 Wages, Employment and Inflation 108 7 The Political Economy ofFull Employment 125 8 Kalecki and Marx 144 9 Kalecki and Keynes: Comparisons and Contrasts 178 10 Development in Mixed Economies 212 II Kalecki and the Economics ofSocialism 230 12 Kaleckian Macroeconomics:Speculations on Future Developments 268 List ofKalecki's Publications Referredto in Text 301 References 304 Index 316 Preface and Acknowledgements In writing this book,I have sought to satisfyfour majorobjectives. The first one is to provide a systematic and sympathetic discussion of the work ofMichal Kalecki, written to appeal to awideaudience including undergraduatestudents.There isarelativelysmallband of the cognoscenti who regard the work of Kalecki very highly (as discussed in the introduction to Chapter 1).Forexample, Harcourt (l977b)argues that'Kaleckiisamost importantpatron saint ofthe post-Keynesians'. This book seeks to extend the knowledge and enthusiasmof the cognoscentito a much wideraudience. In particu lar,Iwouldargue thatKalecki hasmuch toofferto thedevelopment of a macroeconomics which can help us to understand the crucial problems ofunemployment, slowgrowth, inflation, etc. The second objective is to consider Kalecki's work as a coherent whole.This involvesconsideration of Kalecki's macroeconomics of capitalist economies (Chapters 2 to 7 below) as a complete 'pack age'.Italsoinvolvesadiscussionoftheextenttowhichhisapproach to capitalist economies can be seen to be consistent (in a broad sense)with his approach to socialist and developing economies. The third objectiveisto beginan evaluation ofKalecki's placein the study ofeconomics.This isreflectedinanumberofways.Ishall seekto indicate placeswhere Kalecki'swork can beseenasa (often unacknowledged) forerunner of the ideas of others. In Chapter 1 and atanumberofotherplacesscattered throughthetext,Icontrast Kalecki's approach with the prevailing neo-classical orthodoxy. I seek also to place Kalecki within the broad Ricardian-Marxian tradition in Chapter 1, and this is followed up in Chapter 8 by a comparison between the work of Marx and that of Kalecki. One viii Preface and Acknowledgements reason for making that comparison is that Kalecki was clearly strongly influenced by the work of Marx, and to some degree the work ofMarx permeated that ofKalecki. A number of ideas developed by Keynes in the 1930swere also developed independently by Kalecki at about the same time. In Chapter 9 I compare the work of Kalecki with Keynes's General Theory. This permits further discussion of the work of Kalecki within the general field of economic theory, as wellas dealing with the question of the extent to which Kalecki could be said to have anticipated Keynes (and vice versa). This comparison also allows some indirectcomparisonsbetween Kaleckiand conventional(Key nesian) macroeconomics. The fourth purpose is to establish pointers for possible develop ments of a Kaleckian macroeconomics. In recent years, there has been a considerable interest in development ofsuch a macroecono mics,afterthirtyyearsofsubstantialneglect. InChapter12,Iseekto bring together a number of points raised in the earlier chapters which relate to refinements and extensions ofKalecki'sapproach to economics. A comprehensive intellectual biography of Kalecki is already availableinFeiwell(1975).Whilst sharingwith Feiwellahigh regard for the work of Kalecki, this book has rather different aims compared with Feiwell(1975).I have aimed the book specificallyat alevelsuitableforundergraduates,and aimed for amore interpreta tive book, with more comparisons between Kalecki and other authors. I have limited the extent of biographical detail to the minimum I thought necessary, although in Chapter 9 I have used extensive notes to relate some points of interest on the intellectual relationship between Kalecki and Keynes. In the references I have only listed those works of Kalecki which are actually referred to inthe text. Acomprehensivebibliographyof Kalecki's work is given in Kowalik (1964) (for works before 1964) and inFeiwell(1975).Aselectivebibliographyisprovidedin Oxford Bulletin ofEconomics and Statistics, vol. 39.The collected works of Kalecki are currentlybeingpublishedinPolish, and itisto behoped that an English translation may soon beavailable. My research has inevitably been somewhat restricted by my lack of Polish which means thatsome ofKalecki's articles have not beenconsultedin the preparation ofthis book. Iam verygratefulto many people who have helped with comment Preface and Acknowledgements ix on drafts and with discussion on particular points. The interest which many have displayed in this book has been a considerable spur in its writing. I would like to thank Mrs Ada Kalecki for written informationwhich isused inChapter9with her permission. I was particularly fortunate that during the academic year 1983-4 when this book was being completed, Dr Jerzy Osiatynski was visiting the Institute ofDevelopment Studies, University ofSussex. AstheeditorofKalecki'sworks and aformer studentofKalecki, he was able to provide me with much valuable information. Dr Wlodzimierz Brus (now of Wolfson College, Oxford), a former colleague of Kalecki, provided valuable background information, particularly on Kalecki's involvement with policy discussion in Poland. I am grateful to another colleague of Kalecki, Professor KazimierzLaski (now ofUniversityofLinz,Austria)for permission to refer to unpublished papers. Iwould like to thank those whose comments on earlierdrafts led to considerable improvements in style and content of this book. Philip Arestis (Thames Polytechnic) and Peter Reynolds (North Staffordshire Polytechnic) read through Chapters I to 7ofthe first draft. George Catephores (University College London), Raja Junankar (University of Essex) and Keith Gibbard (Manchester Polytechnic) helped me with comments on Chapter 8, and discus sions with Vicky Chick (University College London) have helped clarify points discussed in Chapter 9. Paul Hare (University of Stirling) and JanToporowski (Polytechnic of the South Bank) read Chapter 11 for me and Sheila Smith (University of Sussex) read Chapter 10. Whilst this book has benefited considerably from their comments and advice, it isstillthe case that those who have helped medo notnecessarilyagreewithwhatIhavewritten (indeed insome cases I know that they willnot agree). Dr Sam Aaronovitch responded enthusiastically to the idea ofa book on Kalecki, and his comments (and our general discussions) have also improved the book. I would finallylike to thank participantsin seminars givenon the relationship between Kalecki and Keynes at the Universities of Dublin and Lancaster, Polytechnic of the South Bank (London), Manchester, Newcastle and Wolverhampton Polytechnics, and the jointseminar of North StaffordshirePolytechnicand Keele Univer sity for comments and stimulus to further thinking. I am very grateful to Mrs Ada Kalecki for permission to quote x Preface and Acknowledgements extensively from the following books and article written by her husband: Selected Essays on the Dynamics ofthe Capitalist Econ omy;SelectedEssays ontheEconomic Growth oftheSocialist andthe Mixed Economy (both published by Cambridge University Press); Essays onthe DevelopingEconomies (published byHarvesterPress); 'Theories ofGrowth in Different Economic Systems', Scientia, nos 5-6 (1970). I am also grateful to Allen & Unwin for permission to quote from M. Kalecki, Essays in the Theory ofEconomic Fluctua tions (1939). University ofYork Malcolm C.Sawyer England January 1985