Krugman on Kalecki ... and Marx

If you read the interview with Bob Pollin in our current issue, Beyond Debt and Growth, then you saw the little sidebar we had about Polish Marxist economist Michal Kalecki. Here it is:

The Legacy of Michal KaleckiPolitical Aspects of Full EmploymentPollin had said this about him:  "Kalecki, of course, recognized this a long time ago, saying you can have a model of capitalism based on repressing workers. (He noted that it’s helpful, if you’re going to do that, to have a repressive fascist government—not that he was advocating doing that, of course.) After a while, and this was in the Financial Times today, workers are going to see that they’re not getting any benefit from a recovery, and it’s going to create all kinds of political results, and we don’t know what they’re going to be. But people are going to be pissed off."

Paul Krugman's column today, Phony Fear Factor, mentions Kalecki in a similar connection: how when government creates jobs directly and achieves full employment, it undercuts the ability of "captains of industry" to hold the economy hostage:

The Polish economist Michal Kalecki published “Political Aspects of Full Employment” 70 years ago. Keynesian ideas were riding high; a “solid majority” of economists believed that full employment could be secured by government spending. Yet Kalecki predicted that such spending would, nonetheless, face fierce opposition from business and the wealthy, even in times of depression. Why?

The answer, he suggested, was the role of “confidence” as a tool of intimidation. If the government can’t boost employment directly, it must promote private spending instead — and anything that might hurt the privileged, such as higher tax rates or financial regulation, can be denounced as job-killing because it undermines confidence, and hence investment. But if the government can create jobs, confidence becomes less important — and vested interests lose their veto power.

Kalecki argued that “captains of industry” understand this point, and that they oppose job-creating policies precisely because such policies would undermine their political influence. “Hence budget deficits necessary to carry out government intervention must be regarded as perilous.”

When I first read this essay, I thought it was over the top. Kalecki was, after all, a declared Marxist (although I don’t see much of Marx in his writings). But, if you haven’t been radicalized by recent events, you haven’t been paying attention; and policy discourse since 2008 has run exactly along the lines Kalecki predicted.It's great--really great--that Krugman is using his platform to promote and praise Kalecki (I think he's done it before).  But notice that he can't do it without throwing Marx under the bus (though I guess he could claim that all he is saying is that his younger self was anti-Marxist--which I'm sure was the case).  This is par for the course in mainstream economics, which remains McCarthyite--actually more so since the 1970s than in the 1950s, I'd bet!  Imagine what the discipline would be like if undergrads and grads were required to study and understand economic history, including ideas from Marx and Kalecki (or even Keynes's own works).  Note also that it is often liberals like Krugman who go out of their way to distance themselves from Marx and Marxists ("I don’t see much of Marx in his writings"), lest anyone think they are flaming radicals.

--Chris Sturr