The Last Phase in Transformation [Paperback] [2011] Michal Kalecki

by Michał Kalecki

This volume includes six essays, the first dating from 1935 and the last from 1967, by one of the outstanding economists of our time. The economics presented in this volume is political economy worthy of the a discipline which shows us the social relations, in particular the class and group conflicts, behind the economic quantitative relations. Michal Kalecki, as Joan Robinson has pointed out, anticipated the Keynesian system, from a training in the field of Marxist economics. The translation to English was executed by the author himself, just before his death in April 1970.

Genres: Economics, Nonfiction, Politics

Paperback

First published January 1, 2009

Reviews

[T · Rating 4 out of 5]

“It is a sad world indeed where the fate of all mankind depends upon the fight between two competing groups within big business. This, however, is not quite new: many far-reaching upheavals in human history started from a cleavage at the top of the ruling class” (114).

“Economics presented in this little volume is political economy worthy of the name”

These essays all hit on two fundamental points; 1)politics is vital to our understanding of economics, and 2)capitalism, both in the run up to the Second World War, and following it, is fundamentally changing. The former point is linked to the second point, with capitalism appearing to shift from the laissez faire system which Jean Baptiste Say lauded, and Lord Keynes undermined, which saw a small state sit back and allow the market to harmoniously allocate resources and keep society ticking over, to a new system which embraced or absorbed the state’s functions, subsuming it under capital. However, in the wake of the Great Depression, the threat of the Soviet system, fascism, and the subsequent World War, widespread discontent with the grinding poverty, inequality and uncertainty brought about by the depression, lead to capitalist states embracing the state to deal with the political contradictions which were being unravelled. Despite this being against laissez faire theology, the state allowed for investment, full employment (or at least groping towards it), and imperialism, in the era of monopoly capitalism. Kalecki’s account of capitalism won’t be foreign to those who have read Joan Robinson, Mark Blyth, E.K. Hunt, Eric Hobsbawm, or other post-Keynesian and Marxist accounts of postwar capitalism.
However, aside from Kalecki’s profound and exciting ideas, which have seen a renaissance in recent years thanks to Jan Toporowski and Mark Blyth, I have to comment on the book itself. The book runs at 124 pages, and almost half of them consist of work written by other people. When I pay good money for a volume of essays by Kalecki, I don’t expect to have to sift through reams of pages which consist of difficult specialist text, which is almost guaranteed to be above the reader’s head.

Introduction: Notes on the Life and Work of Michal Kalecki by George Feiwel – This introductory essay appears a little out of place. It does not introduce the general ideas contained in this book, but rather expounds a fairly technical and sophisticated account of Kalecki’s ideas, which is quite clearly not aimed at the lay reader. Cribbing a lot from Joan Robinson, who edited and reviewed the paper, the author explores Kalecki’s anticipation of the Keynesian Revolution (this is of course despite Keynes’ teaching in Marshallian, British economics, and Kalecki’s engagements with Luxembourg and Baranovsky’s Marxian economics), Kalecki’s attempt to bring the importance of money into a Marxian/post-Keynesian economic system, Kalecki’s unpopular technical work in business cycles (which remains largely incomprehensible to me), Kalecki’s work in government for Poland and Israel, despite his efforts often being ignored, and his contributions to some of the problems outlined in Keynes’ system with its single-minded focus on aggregate demand.

Preface by Włodzimierz Brus –Brus, a communist compatriot of Kalecki, who had a similarly prickly relationship to the Polish Communist Party, writes a brief preface which argues that Kalecki’s essays in this volume argue that the changes in capitalism mean that a crisis akin that of 1929-1933 is “no longer imminent”, and that the increasingly technical preocuppations of economists and their economic theories should not distract from the political nature of the system they’re examining (62-63). As Kalecki said, “Theories are being created which may raise problems of great interest but are not very conducive to understanding what actually happened, is happening, or should be happening” (Theories of Growth in Different Social Systems).

Stimulating the Business Upswing in Nazi Germany – This essay examines the importance of armaments for increasing the standard of living and consumption in fascist Germany. Hitler, as a ‘proto-Keynesian’ (see Galbraith’s A History of Economics: The Past as the Present and Blyth’sAusterity: The History of a Dangerous Idea), didn’t care about inflation or public spending, and chose to flip small government capitalism into an authoritarian state economy (to quote Rudolf Hilferding). Focusing less on private investments, and fixing their gaze to public investing, the Nazi government created “a state of semi-autarky” (70), to combat the decline in foreign trade. However, the business upswing that Hitler oversaw, lead to rising government revenues and investment, but it failed to raise consumption in proportion to the upswing, as consumption grew in a lower proportion to the increase in industrial production, as that surplus revenue was siphoned off into the huge army. Whilst in an upswing, it is typically thought that equipment is better utilized, and to a higher percentage (more of what is being produced is used/consumed) Nazi Germany showed that this needn’t be linked with an increase in the standard of living for the majority of its people.

Political Aspects of Full Employment – This essay is perhaps the essay Kalecki is most known for. Jacobin ran a piece in 2018 which examined the contents of the essay, and its prophetic relevance to the full employment policies of post-war Western nations, and their subsequent crises in the 1970s with the British and American stagflation crises. Kalecki asks, “why is full employment resisted by big business?”. Kalecki notes that full employment would be paid for largely by government spending, and would raise profits for struggling businesses, but yet in the 1930s the business community rejected the proposal in the capitalist world (with the exception of Nazi Germany of course). “Captains of industry” reject the proposal for a number of reasons, firstly, on principle capitalists reject the notion of government interference in the market (markets are self-equilibrating remember?), the increased wage-bargaining power would only result in inflation, and the rentier class would lose money. But, most importantly, “the sack would cease to play its role in as a disciplinary measure” (78). Capitalists cannot afford an unruly workforce, as “their class instinct” tells them that full employment is harmful to the system which they benefit from. Fascism removed the problem of full employment argues Kalecki, since it removes the power of democracy, and “political pressure replaces the economic pressure of unemployment” in that case (79). Simply put, workers will not act up under an authoritarian state, but a liberal capitalist society cannot take this risk. Rather than intervene to help the working class, Kalecki argues that “the businessman remains the medium through which the intervention is conducted” (81). Then in a prophetic proclamation, Kalecki states “this is a state of affairs is perhaps symptomatic of the future economic regime of capitalist democracies…” (82).

The Economic Situation in the United States as Compared with the Pre-War Period: Kalecki analyses the post-war economy of America, noting that the huge increases in GDP, and rise in employment was caused largely by the increased spending on the armed forces, and that more importantly, the gains in the standard of living were due to increases in productivity, and not the decreasing unemployment rate (88). Again, in an argument similar to the first essay in the volume, Kalecki argues (based on the data for national product) that the gains of state intervention were swallowed up by the state’s military. The data showed a decrease in personal consumption from 1937 to 1955, but an increase in productive investment, residential building, gross accumulation, budget deficits, taxes on corporate profits, and net government revenue. As Kalecki put it, “[…] we face the absorption of accumulation by the armament-imperialist complex” (92). “In fact, the decline in the unemployment percentage was to a great extent offset by the rise of the relative share of the armed forces and of government employees in the labour force” (94). The gains in the standard of living fell behind the general increased in total national product. The “anti-capitalist undercurrent which had characterised the New Deal period had slackened” and the state had adapted to the conditions of advanced monopoly capitalism, argues Kalecki (96-97).

The Fascism of our Times – Michal Kalecki here explores the ‘fascism’ of post-war America and France. Replacing the old Nazi ideology with fresh face, Kalecki argues that post-war fascists were Goldwaterites who, like Nazis, support big business, oppose trade unions, are rabidly anticommunist, and hold reactionary views. However, unlike the Nazis, laissez faire capitalism is defended against the creeping gains that the working class had forged, which lead to a fear that socialism was on the horizon. Decolonisation in French dominated Africa, anti-war activism and the Civil Rights struggle in the USA, and deNazification in Germany, are all currents which the 1960s fascists opposed. “For Goldwaterism is wanted by the ruling class as a pressure group against an excessive relaxation of international tensions in order to restrain the Negro movement. Goldwater will exist not only because of the support of ‘predatory’ groups of big business and ‘angry’ elements of the military machine, as well as of his racist and reactionary followers, but most of all because he wil be saved by those to whom he lost” (105).

Vietnam and U.S. Big Business – This penultimate essay, which acts as a continuation on the previous essay, published 3 years prior in 1964, Kalecki argues that the war in Vietnam was an attempt by America to reassert itself through rabid anticommunist intervention, military Keynesianism to raise revenues, and also to reassert its influence in Europe which Kalecki saw as waning.

Intermediate Regimes –This final essay considers underdevelopment in imperialised countries. For Kalecki, rather than engage in genuinely progressive development, imperialist powers use their might to block trade with socialist countries and create political difficulty for the countries to free themselves from the extractive imperialist investment and the power of foreign capital. The class structure, Kalecki argues, allows this to happen, by preventing a strong middle class, and pitting the lower middle class against the native peasantry. “The terror that rages not only against Communists but against radicals in general is probably considered an adequate substitute for progressive economic and social policies” (124).

[Jon · Rating 4 out of 5]

A great set of essays from the Polish Socialist economist Michał Kalecki:

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 in output and employment.... This gives to 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 level of employment dependent on the state of confidence.

[Lucille Nguyen · Rating 3 out of 5]

A series of fascinating articles by the Polish political economist Kalecki. However, his later work beyond "Political Aspects of Full Employment" betrays a certain analytical weakness in treating Capital as a single class. While in "Political Aspects" he had focused on both big business and rentier interests, his later analyses make no such distinction. And recent political history demonstrate that the interests of the car dealers, landlords, and small businessmen of America have much different interests than that of Google or Disney. Thoughtful, yet ultimately flawed, essays from a leftist economist trying to make sense of his times.