by Michal Kalecki
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.
If the government undertakes public investment (e.g. builds schools, hospitals, and highways) or subsidizes mass consumption (by family allowances, reduction of indirect taxation, or subsidies to keep down the prices of necessities), and if, moreover, this expenditure is financed by borrowing and not by taxation (which could affect adversely private investment and consumption), the effective demand for goods and services may be increased up to a point where full employment is achieved. Such government expenditure increases employment, be it noted, not only directly but indirectly as well, since the higher incomes caused by it result in a secondary increase in demand for consumer and investment goods.
" ... and if, moreover, this expenditure is financed by borrowing and not by taxation (which could affect adversely private investment and consumption), the effective demand for goods and services may be increased up to a point where full employment is achieved."
Once achieved, what are the "ifs" required to maintain full employment? Do we run into "Prosperity Without Growth?" issues?
One step at a time, Shag. Long before we run into PWG issues, we run into growth-without-full-employment policies. Kalecki's analysis shows why.
Of course, this paper was where the idea of a "political business cycle" was first presented, which actually entered the Principles textbooks for a long time, until the Mankiw people got to them and it was decided that nobody should talk about "business cycles."
Might it be possible for you to put some of your upcoming Kalecki posts "under the fold," please, rather than driving off all the other posts here?
Of course "full employment" is simply the amount of labor necessary to produce what we consume. The way to achieve it is to strengthen the link between effort and consumption, and eliminate all the baffles and eddies (subsidized waste, embedded rents on artificial property rights, etc.) that disrupt the flow from effort to consumption.
An autarkic farmer works enough to meet his consumption needs. If he invents a labor-saving machine that cuts the labor needed to feed himself in half, he doesn't worry about "not having enough work." If we find that "not having enough work" is a problem when we move beyond the autarkic farm, it's because the distribution of claims on output interferes with the laborer getting the full value he produces.
If the worker produces the value of what he consumes in 15 hours a week, but must work 40 hours to live, something is wrong. In the oddly appropriate words of the utterly odious Phil Gramm, somebody needs to get out of the cart and help pull.
It was only the Keynes post that was missing the "under the fold" command. I've fixed that now. All of the Kalecki ones are just one paragraph on the front page with the rest past the fold.
Once the eexecutive branch get involved it is no longer capitalism. There are subsidies: the result is mercantilism.
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