Modern macro economics foundations rest on Keynes and Kalecki. Both believed that employment was determined by aggregate demand and not in the labour market. Both looked at investment as the prime mover in the macro economy. Neither expected low interest rates to promote investment, although for different reasons. Keynes because he expected people to prefer the liquidity of cash to the risks of productive investment, Kalecki because he thought investment would be affected only by long-run interest rates, which are much harder to influence.
Today both wold have advocated an expansionary fiscal policy. The similarity ends there. Kalecki, the communist son of a bankrupted Polish textile entrepreneur would have wanted investment in industrial equipment, and an industrial policy, not just any government expenditure. Keynes, the upper class English don, the futures market gambler who died rich but ruined himself several times on the way, could not have cared less what money was spent on as long as it activated a multiplier effect throughout the economy. Keynes would have ridden the storm and taken the consequences without expecting or offering relief for failure.
Kalecki would have centred on the redistributive effects of the storm and tried to control the elements. Even in a capitalist economy he would have wanted to have his hands on the levers of economic guidance, would have veered towards planning.
Keynes would have concerted reflation world wide, through the IMF, but he died and his IMF was denatured and became an instrument of deflation. Not what we want right now. Unlike Keynes, Kalecki had no experience of the global economy that Maynard had helped to shape, and might well have approved of British jobs for British workers. We are still in the hands of Polish immigrants and of dead economists.
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3 comments:
As I read through this I was thinking "Yes, yes, yes, that's all very well, but they are long gone so what are we going to do about it NOW?"
I then came to your final sentence and so stayed my hand and decided not to post anything..
I had tired of all the articles and posts saying we are all keynesians now. With Brown and New Labour we are in the dead hands of Kalecki.
I lunched in the Institute of Planning last time I was in Warsaw, though it's no longer called that. The dining room - once the combination room for those who controlled and guided the living standards of the Polish people - was still faintly reminiscent of official receptions and sad shindigs on hard to obtain comestibles. Probably we are going to have to do what the Poles did - throw them out by force.
As to the financial and economic crisis, follow Keynes, into ruin and back to riches, but with the policies he wanted practiced in his financial institutions - global co-ordination of fiscal expansion to enable high employment and economic expansion and growth, not superficial fiscal probity and no intellectual or policy resources when lax regulation led to the determined avoiding of its pious strictures.
I am doing my graduation thesis on Financial Crisis. After 5 months seeking for a macro model with financial sector integrated, I've found nothing from the mainstream economics. I start looking into Marxist Economics, Kalecki in particular. So, would you pleased provide me some hints?
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