Recentring Political Economy: Why You Should Read Political Aspects of Full Employment by Michal Kalecki
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Michal Kalecki is a name unfamiliar to most undergraduate economics students. Though Kalecki is one among the most distinguished economists of the 20th century, he is confined to the heterodox and pluralist branches of economics today. He is known for his critical contributions to expanding Keynesian ideas and integrating them with Marxian class analysis.
Kalecki’s ideas on macroeconomy are key to envisioning an alternative economics that breaks away from the destructive convictions of neoclassical capitalist economics. The work that most succinctly captures his ideas, and remains as relevant as ever, is quite likely his short essay titled ‘Political Aspects of Full Employment’ published in 1943 during a tumultuous period in history (during the Second World War right after the Great Depression).
Political Aspects sketches a brief picture of how a government can achieve and maintain full employment — a situation where all people demanding work are employed and producers find it difficult to find more workers to hire — and the various reasons why businesses and “experts” are opposed to such policies as they strive to protect the wealth and power of their class. Kalecki’s analysis ties together not just the economic compulsions at work, but also the political and ideological battles being fought between government and business. These help us understand why governments have become increasingly reluctant to enact policies to achieve full employment.
Kalecki argues that counteracting slumps — periods of economic decline and unemployment — by stimulating private investment (through reductions in income tax and interest rates or providing subsidies to the private sector) is futile. It does not prevent mass unemployment and only perpetuates the “political business cycle”, which must be opposed. In this “political business cycle,” Kalecki argues that “full employment would be reached only at the top of the boom [a period of rapid growth], but slumps would be relatively mild and short-lived.” He advocates for productive public investment and subsiding consumption (by means of family allowances, pensions, cuts in indirect taxes, subsidising necessities’ prices etc.) to maintain full employment. His arguments are also couched in a simple sentiment: These raise the standard of living of the masses — “is not this the purpose of all economic activity?” he asks.
Kalecki also details how fascism is enabled by the alliance of authoritarian governments and the capitalist class in the midst of chronic unemployment and economic upheaval. The capitalist class’ attitudes to government spending and policies to achieve full employment in such regimes are of particular interest in the essay. In fact, the drive to full employment through state planning and labour suppression leads to a fascist “armament” economy which curtails consumption, as happened in the German Reich. The maintenance of full employment is thus also “a way of preventing the recurrence of fascism”, according to Kalecki.
Kalecki’s points are pertinent today as we see the “political business cycle” play out in ever shorter time intervals and neoliberal capitalism inspiring and aiding a new wave of fascist regimes across the globe amid economic pressures, worsening inequalities and cost of living crises. Kalecki’s exposition is one that discredits the neoliberal principles that govern much of the world today and instead prompts us to recentre political economy in our analyses and use it to critique the status quo. For those studying and working in economics and related fields, such an analysis helps us to more accurately and effectively address the issues plaguing our economies and societies today.
Political Aspects is thus an excellent introduction to heterodox economics, one that we at Rethinking Economics India Network encourage students everywhere to read and learn from.
Find Political Aspects of Full Employment here.
This blog is curated by Lintha Saleem. Lintha is a volunteer with the Project Resources team at the Rethinking Economics India Network. She looks at the curation and dissemination side of the project. Lintha is currently studying for her Masters at the Centre for Economic Studies and Planning at the Jawaharlal Nehru University.