Monday, May 11, 2009

Political Aspects of Full Employment II, 2.

by Michal Kalecki

We shall deal first with the reluctance of the 'captains of industry' to accept government intervention in the matter of employment. Every widening of state activity is looked upon by business with suspicion, but the creation of employment by government spending has a special aspect which makes the opposition particularly intense. Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment). This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of 'sound finance' is to make the level of employment dependent on the state of confidence.


1 comment:

Myrtle Blackwood said...

"Every widening of state activity is looked upon by business with suspicion, ....Under a laissez-faire system...I can't agree with the above, Sandwichman. Corporations are very dependent on the state and the activities of government. Corporations have welcomed the widening of state activities, as long as they incorporated actions that benefited them.

Corporations would not be able to acquire irrigation water and other products of 'the commons' without the state drafting up the necessary legislation to permit such theft, for instance.

We have not experienced a laissez-faire system. Government has intervened in 'the market' to an absolutely extraordinary extent for every decade that I've been alive.

Some excerpts from 'Global Reach' (Richard Barnet and Robert Muller 1974):

" the biggest global giants, such as ITT and IBM, grew to their present proportions with substantial help from the Pentagon..."[p.60]

...."During the 25 years in which the United States was the most powerful nation on earth [the period 1939-1974 appears to be referred to here] the tighter and more notorious were the links between Washington, Wall Street, and Detroit, the better it was for US companies. Whe the CIA removed Mohammed Mossadeq, an obstrperous Iranian premier who "irrationally" tried to interfere with Gulf's and Standard Oil's prospects for taking over his country's oil, or when the same agency rescued Guatemalan banana land fro United Fruit from a popularly-elected "subversive" nationalist, these were US patriotic initiatives applauded by businessmen. ...The readier the Pentagon and CIA were to bring down or raise up governments in underdeveloped countries, the better the investment climate for US corporations. US military power was used to establish the ground rules within which American business could operate. The US Government acted as consultant for rightist coups in Bolivia, Brazil, Chile, Greece and Indonesia [to name a few] and their generals opened their countries to US investment on the most favorable terms. Wherever the flag has been planted around the world, in some 500 major military and naval bases and in the command posts of over a dozen [as of 1974] military interventions, US corporations have moved in....