Kalecki on the Political Obstacles to Achieving Full Employment

This section from Michal Kalecki’s 1943 Essay on Politics and Ideology is so clear and relevant that it needs to be read widely. Thanks to New Economic Perspectives for flagging it.

From Kalecki:

1. A solid majority of economists is now of the opinion that, even in a capitalist system, full employment may be secured by a government spending programme, provided there is in existence adequate plan to employ all existing labour power, and provided adequate supplies of necessary foreign raw-materials may be obtained in exchange for exports.

If the government undertakes public investment (e.g. builds schools, hospitals, and highways) or subsidizes mass consumption (by family allowances, reduction of indirect taxation, or subsidies to keep down the prices of necessities), and if, moreover, this expenditure is financed by borrowing and not by taxation (which could affect adversely private investment and consumption), the effective demand for goods and services may be increased up to a point where full employment is achieved. Such government expenditure increases employment, be it noted, not only directly but indirectly as well, since the higher incomes caused by it result in a secondary increase in demand for consumer and investment goods.

2. It may be asked where the public will get the money to lend to the government if they do not curtail their investment and consumption. To understand this process it is best, I think, to imagine for a moment that the government pays its suppliers in government securities. The suppliers will, in general, not retain these securities but put them into circulation while buying other goods and services, and so on, until finally these securities will reach persons or firms which retain them as interest-yielding assets. In any period of time the total increase in government securities in the possession (transitory or final) of persons and firms will be equal to the goods and services sold to the government. Thus what the economy lends to the government are goods and services whose production is ‘financed’ by government securities. In reality the government pays for the services, not in securities, but in cash, but it simultaneously issues securities and so drains the cash off; and this is equivalent to the imaginary process described above.

What happens, however, if the public is unwilling to absorb all the increase in government securities? It will offer them finally to banks to get cash (notes or deposits) in exchange. If the banks accept these offers, the rate of interest will be maintained. If not, the prices of securities will fall, which means a rise in the rate of interest, and this will encourage the public to hold more securities in relation to deposits. It follows that the rate of interest depends on banking policy, in particular on that of the central bank. If this policy aims at maintaining the rate of interest at a certain level, that may be easily achieved, however large the amount of government borrowing. Such was and is the position in the present war. In spite of astronomical budget deficits, the rate of interest has shown no rise since the beginning of 1940.

3. It may be objected that government expenditure financed by borrowing will cause inflation. To this it may be replied that the effective demand created by the government acts like any other increase in demand. If labour, plants, and foreign raw materials are in ample supply, the increase in demand is met by an increase in production. But if the point of full employment of resources is reached and effective demand continues to increase, prices will rise so as to equilibrate the demand for and the supply of goods and services. (In the state of over-employment of resources such as we witness at present in the war economy, an inflationary rise in prices has been avoided only to the extent to which effective demand for consumer goods has been curtailed by rationing and direct taxation.) It follows that if the government intervention aims at achieving full employment but stops short of increasing effective demand over the full employment mark, there is no need to be afraid of inflation.2

II

2. The above is a very crude and incomplete statement of the economic doctrine of full employment. But it is, I think, sufficient to acquaint the reader with the essence of the doctrine and so enable him to follow the subsequent discussion of the political problems involved in the achievement of full employment.

In should be first stated that, although most economists are now agreed that full employment may be achieved by government spending, this was by no means the case even in the recent past. Among the opposers of this doctrine there were (and still are) prominent so-called ‘economic experts’ closely connected with banking and industry. This suggests that there is a political background in the opposition to the full employment doctrine, even though the arguments advanced are economic. That is not to say that people who advance them do not believe in their economics, poor though this is. But obstinate ignorance is usually a manifestation of underlying political motives.

There are, however, even more direct indications that a first-class political issue is at stake here. In the great depression in the 1930s, big business consistently opposed experiments for increasing employment by government spending in all countries, except Nazi Germany. This was to be clearly seen in the USA (opposition to the New Deal), in France (the Blum experiment), and in Germany before Hitler. The attitude is not easy to explain. Clearly, higher output and employment benefit not only workers but entrepreneurs as well, because the latter’s profits rise. And the policy of full employment outlined above does not encroach upon profits because it does not involve any additional taxation. The entrepreneurs in the slump are longing for a boom; why do they not gladly accept the synthetic boom which the government is able to offer them? It is this difficult and fascinating question with which we intend to deal in this article.

The reasons for the opposition of the ‘industrial leaders’ to full employment achieved by government spending may be subdivided into three categories: (i) dislike of government interference in the problem of employment as such; (ii) dislike of the direction of government spending (public investment and subsidizing consumption); (iii) dislike of the social and political changes resulting from the maintenance of full employment. We shall examine each of these three categories of objections to the government expansion policy in detail.

2. 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.

3. The dislike of business leaders for a government spending policy grows even more acute when they come to consider the objects on which the money would be spent: public investment and subsidizing mass consumption.

The economic principles of government intervention require that public investment should be confined to objects which do not compete with the equipment of private business (e.g. hospitals, schools, highways). Otherwise the profitability of private investment might be impaired, and the positive effect of public investment upon employment offset, by the negative effect of the decline in private investment. This conception suits the businessmen very well. But the scope for public investment of this type is rather narrow, and there is a danger that the government, in pursuing this policy, may eventually be tempted to nationalize transport or public utilities so as to gain a new sphere for investment.3

One might therefore expect business leaders and their experts to be more in favour of subsidising mass consumption (by means of family allowances, subsidies to keep down the prices of necessities, etc.) than of public investment; for by subsidizing consumption the government would not be embarking on any sort of enterprise. In practice, however, this is not the case. Indeed, subsidizing mass consumption is much more violently opposed by these experts than public investment. For here a moral principle of the highest importance is at stake. The fundamentals of capitalist ethics require that ‘you shall earn your bread in sweat’ — unless you happen to have private means.

4. We have considered the political reasons for the opposition to the policy of creating employment by government spending. But even if this opposition were overcome — as it may well be under the pressure of the masses — the maintenance of full employment would cause social and political changes which would give a new impetus to the opposition of the business leaders. Indeed, under a regime of permanent full employment, the ‘sack’ would cease to play its role as a ‘disciplinary measure. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow. Strikes for wage increases and improvements in conditions of work would create political tension. It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire, and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus adversely affects only the rentier interests. But ‘discipline in the factories’ and ‘political stability’ are more appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the ‘normal’ capitalist system.

III

1. One of the important functions of fascism, as typified by the Nazi system, was to remove capitalist objections to full employment.

The dislike of government spending policy as such is overcome under fascism by the fact that the state machinery is under the direct control of a partnership of big business with fascism. The necessity for the myth of ‘sound finance’, which served to prevent the government from offsetting a confidence crisis by spending, is removed. In a democracy, one does not know what the next government will be like. Under fascism there is no next government.

The dislike of government spending, whether on public investment or consumption, is overcome by concentrating government expenditure on armaments. Finally, ‘discipline in the factories’ and ‘political stability’ under full employment are maintained by the ‘new order’, which ranges from suppression of the trade unions to the concentration camp. Political pressure replaces the economic pressure of unemployment.

2. The fact that armaments are the backbone of the policy of fascist full employment has a profound influence upon that policy’s economic character. Large-scale armaments are inseparable from the expansion of the armed forces and the preparation of plans for a war of conquest. They also induce competitive rearmament of other countries. This causes the main aim of spending to shift gradually from full employment to securing the maximum effect of rearmament. As a result, employment becomes ‘over-full’. Not only is unemployment abolished, but an acute scarcity of labour prevails. Bottlenecks arise in every sphere, and these must be dealt with by the creation of a number of controls. Such an economy has many features of a planned economy, and is sometimes compared, rather ignorantly, with socialism. However, this type of planning is bound to appear whenever an economy sets itself a certain high target of production in a particular sphere, when it becomes a target economy of which the armament economy is a special case. An armament economy involves in particular the curtailment of consumption as compared with that which it could have been under full employment.

The fascist system starts from the overcoming of unemployment, develops into an armament economy of scarcity, and ends inevitably in war.

IV

1. What will be the practical outcome of the opposition to a policy of full employment by government spending in a capitalist democracy? We shall try to answer this question on the basis of the analysis of the reasons for this opposition given in section II. We argued there that we may expect the opposition of the leaders of industry on three planes: (i) opposition on principle to government spending based on a budget deficit; (ii) opposition to this spending being directed either towards public investment — which may foreshadow the intrusion of the state into the new spheres of economic activity — or towards subsidizing mass consumption; (iii) opposition to maintaining full employment and not merely preventing deep and prolonged slumps.

Now it must be recognized that the stage at which ‘business leaders’ could afford to be opposed to any kind of government intervention to alleviate a slump is more or less past. Three factors have contributed to this: (i) very full employment during the present war; (ii) development of the economic doctrine of full employment; (iii) partly as a result of these two factors, the slogan ‘Unemployment never again’ is now deeply rooted in the consciousness of the masses. This position is reflected in the recent pronouncements of the ‘captains of industry’ and their experts. The necessity that ‘something must be done in the slump’ is agreed; but the fight continues, firstly, as to what should be done in the slump (i.e. what should be the direction of government intervention) and secondly, that it should be done only in the slump (i.e. merely to alleviate slumps rather than to secure permanent full employment).

2. In current discussions of these problems there emerges time and again the conception of counteracting the slump by stimulating private investment. This may be done by lowering the rate of interest, by the reduction of income tax, or by subsidizing private investment directly in this or another form. That such a scheme should be attractive to business is not surprising. The entrepreneur remains the medium through which the intervention is conducted. If he does not feel confidence in the political situation, he will not be bribed into investment. And the intervention does not involve the government either in ‘playing with’ (public) investment or ‘wasting money’ on subsidizing consumption.

It may be shown, however, that the stimulation of private investment does not provide an adequate method for preventing mass unemployment. There are two alternatives to be considered here. (i) The rate of interest or income tax (or both) is reduced sharply in the slump and increased in the boom. In this case, both the period and the amplitude of the business cycle will be reduced, but employment not only in the slump but even in the boom may be far from full, i.e. the average unemployment may be considerable, although its fluctuations will be less marked. (ii) The rate of interest or income tax is reduced in a slump but not increased in the subsequent boom. In this case the boom will last longer, but it must end in a new slump: one reduction in the rate of interest or income tax does not, of course, eliminate the forces which cause cyclical fluctuations in a capitalist economy. In the new slump it will be necessary to reduce the rate of interest or income tax again and so on. Thus in the not too remote future, the rate of interest would have to be negative and income tax would have to be replaced by an income subsidy. The same would arise if it were attempted to maintain full employment by stimulating private investment: the rate of interest and income tax would have to be reduced continuously.4

In addition to this fundamental weakness of combating unemployment by stimulating private investment, there is a practical difficulty. The reaction of the entrepreneurs to the measures described is uncertain. If the downswing is sharp, they may take a very pessimistic view of the future, and the reduction of the rate of interest or income tax may then for a long time have little or no effect upon investment, and thus upon the level of output and employment.

3. Even those who advocate stimulating private investment to counteract the slump frequently do not rely on it exclusively, but envisage that it should be associated with public investment. It looks at present as if business leaders and their experts (at least some of them) would tend to accept as a pis aller public investment financed by borrowing as a means of alleviating slumps. They seem, however, still to be consistently opposed to creating employment by subsidizing consumption and to maintaining full employment.

This state of affairs is perhaps symptomatic of the future economic regime of capitalist democracies. In the slump, either under the pressure of the masses, or even without it, public investment financed by borrowing will be undertaken to prevent large-scale unemployment. But if attempts are made to apply this method in order to maintain the high level of employment reached in the subsequent boom, strong opposition by business leaders is likely to be encountered. As has already been argued, lasting full employment is not at all to their liking. The workers would ‘get out of hand’ and the ‘captains of industry’ would be anxious to ‘teach them a lesson. Moreover, the price increase in the upswing is to the disadvantage of small and big rentiers, and makes them ‘boom-tired.’

In this situation a powerful alliance is likely to be formed between big business and rentier interests, and they would probably find more than one economist to declare that the situation was manifestly unsound. The pressure of all these forces, and in particular of big business — as a rule influential in government departments — would most probably induce the government to return to the orthodox policy of cutting down the budget deficit. A slump would follow in which government spending policy would again come into its own.

This pattern of a political business cycle is not entirely conjectural; something very similar happened in the USA in 1937-8. The breakdown of the boom in the second half of 1937 was actually due to the drastic reduction of the budget deficit. On the other hand, in the acute slump that followed the government promptly reverted to a spending policy.

The regime of the political business cycle would be an artificial restoration of the position as it existed in nineteenth-century capitalism. Full employment would be reached only at the top of the boom, but slumps would be relatively mild and short-lived.

V

1. Should a progressive be satisfied with a regime of the political business cycle as described in the preceding section? I think he should oppose it on two grounds: (i) that it does not assure lasting full employment; (ii) that government intervention is tied to public investment and does not embrace subsidizing consumption. What the masses now ask for is not the mitigation of slumps but their total abolition. Nor should the resulting fuller utilization of resources be applied to unwanted public investment merely in order to provide work. The government spending programme should be devoted to public investment only to the extent to which such investment is actually needed. The rest of government spending necessary to maintain full employment should be used to subsidize consumption (through family allowances, old-age pensions, reduction in indirect taxation, and subsidizing necessities). Opponents of such government spending say that the government will then have nothing to show for their money. The reply is that the counterpart of this spending will be the higher standard of living of the masses. Is not this the purpose of all economic activity?

2. ‘Full employment capitalism’ will, of course, have to develop new social and political institutions which will reflect the increased power of the working class. If capitalism can adjust itself to full employment, a fundamental reform will have been incorporated in it. If not, it will show itself an outmoded system which must be scrapped.

But perhaps the fight for full employment may lead to fascism? Perhaps capitalism will adjust itself to full employment in this way? This seems extremely unlikely. Fascism sprang up in Germany against a background of tremendous unemployment, and maintained itself in power through securing full employment while capitalist democracy failed to do so. The fight of the progressive forces for all employment is at the same time a way of preventing the recurrence of fascism.

1 This article corresponds roughly to a lecture given to the Marshall Society in Cambridge in the spring of 1942.

2 Another problem of a more technical nature is that of the national debt. If full employment is maintained by government spending financed by borrowing, the national debt will continuously increase. This need not, however, involve any disturbances in output and employment, if interest on the debt is financed by an annual capital tax. The current income, after payment of capital tax, of some capitalists will be lower and of some higher than if the national debt had not increased, but their aggregate income will remain unaltered and their aggregate consumption will not be likely to change significantly. Further, the inducement to invest in fixed capital is not affected by a capital tax because it is paid on any type of wealth. Whether an amount is held in cash or government securities or invested in building a factory, the same capital tax is paid on it and thus the comparative advantage is unchanged. And if investment is financed by loans it is clearly not affected by a capital tax because if does not mean an increase in wealth of the investing entrepreneur. Thus neither capitalist consumption nor investment is affected by the rise in the national debt if interest on it is financed by an annual capital tax. [See ‘A Theory of Commodity, Income, and Capital Taxation‘]

3 It should be noted here that investment in a nationalized industry can contribute to the solution of the problem of unemployment only if it is undertaken on principles different return than private enterprise, or it must deliberately time its investment so as to mitigate from those of private enterprise. The government must be satisfied with a lower net rate of slumps.

4 A rigorous demonstration of this is given in my article to be published in Oxford Economic Papers. [See ‘Full Employment by Stimulating Private Investment?‘]

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143 comments

  1. jake chase

    It breaks your heart when someone who is clearly on the right track cannot write ten paragraphs without putting every reader to sleep. Here is a shorter version:

    1. If people matter at all and 95% of them lack the means to live without working, a society must strive to employ those who have been deemed redundant by the private sector.

    2. So long as it has not surrendered monetary soverignty, there is no necessity for the society to borrow for this purpose. It may spend freely in the same way it now does and has been doing for over fifty years on dubious military escapades, which respectable opinion never seems to question on the ground that we cannot afford them.

    3. Of course, the society does need a sensible plan of public works and one should not overestimate the likelihood of elected politicians forming a particularly good one, but even if the results are limited to Mussolini Modern monuments, the positive effects on total demand will outweigh any negatives apart from the imaginary bug bears of the overprivileged.

    4. Even they will be amazed at the boost to business confidence which results when people suddenly have money to spend on the dreck business insists we cannot live without.

    Keynes put all this much more elegantly and it is amazing that his wisdom has been so easily undermined by transparent propaganda and toadying academic quibbling, but money talks, and talks and talks and talks and talks…..

    1. Antifa

      Thank you for saying it in English.

      In 1943, full employment was very much in vogue. We were fighting and working for our nation and our ideals. Any desires or plans of America’s 1% to own everything were on hold “for the duration.”

      In 2012, America is no longer a rising industrial nation moving men and women from the farms to the factories. It’s a military-industrial giant seeking global hegemony, all under the ownership and control of the 1%, who purchase our government daily at the going price.

      America is no longer a nation looking to employ or even feed its own people. It is an empire dedicated to advancing the wealth of an increasingly transnational 1% whose collective goal is “more.” More wealth. More power.

      Their aims for America are not to look after its citizens but to steal their assets, abscond with their retirement pensions and safety net, and reduce them to working for what peasants elsewhere will work for.

      There is no concept of looking after the nation, and there won’t be until the empire collapses and we are reduced to a nation among nations again.

      The empire is the enemy of the American people, and the American people are the enemy of the empire.

      1. Cynthia

        The de-industrialization of the U.S. is one of the reasons I am pretty doubtful about Keynesian economics solving the present problem. Another is that, in a sense, we have already had a good deal of Keynesian economics in the post-Reagan years, and are having it now, in the form of low interest rates and deficit spending, and it’s not doing anything, except for temporarily keeping things from getting worse—maybe.

        The United States, as a whole, has bankrupted itself with military and economic imperialism while its inept ruling class floats above the wreckage. I don’t think having the government spend more empty dollars is going to make much difference, given the situation we’re in.

        1. Me

          “in the form of low interest rates and deficit spending, and it’s not doing anything, except for temporarily keeping things from getting worse—maybe.”

          What evidence is there that federal spending has done much more than make up for cuts at the local and state level? There might have been some federal stimulus, but not enough to do much more than offset cuts at the non-federal level. How much of that has even made its way to production and non-FIRE sector services?

          I also don’t think that giving trillions to banks, allowing them to transfer trillions of junk onto the tax payer amounts to a stimulus. There has been no structural change to the economy, especially in finance. All the government has done is bail out banks, give them lots of free money, sit back and see what happens.

          I also don’t think the lower interst rates could be called Keynesian. The Mercantilists talked a lot about keeping interest rates low, Marx talked about this in the third volume of Capital, Joan Robinson talked about it in The Accumulation of Capital. Keeping interest rates low and pumping tons of money into the system, throught the banks, is something that monetarists also seem to favor. Wasn’t that what Friedman said caused the Great Depression, the Fed contracting the money supply too much in real terms following the crash in 1929?

          This essay is a classic. It delves into why capitalists might favor cutting spending even when it benefits them and increases the demand for their products and services. The left tends to say that capitalists only care about profits. Kalecki says here that they also care about power, within the market and society. He’s right, isn’t he? If the government gives jobs to people willing to work, doesn’t that take power away from the capitalists? Doesn’t that give workers some power vs. the capitalists, allow them to rely less on the capitalists?

          Kalecki’s “The Fascism of Our Times” is another essay worth reading. It’ll make you think about what we’re faced with now.

          1. Cynthia

            The problem is not the unemployment rate — as bad as that is.

            The problem is not long-term unemployment — as horrible, degrading, and humiliating as it is.

            The problem is that the U.S. economy has been successfully restructured over the past 30 years as a high-unemployment, low-wage economy with most new jobs being created as temporary jobs (whether you are a laborer, a technician, a service worker or a professional) with no job security, low wages and few benefits.

            While social safety nets are crucial as temporary survival mechanisms, they do absolutely nothing to address the restructuring of the economy, and the ability to make a living and live with dignity.

          2. Me

            You are right when you talk about how the economy has been re-structured. I don’t agree that there A problem, there are many. The power difference between workers and capitalists show themselves in many different ways. If the government is taking responsibility as far as hiring workers, it not only gives people a job, needed money and increases effectivev demand, it also emplowers them relative to capitalists.

            Our trade pacts, financialization, de-industrialziation all plays a part. Full employment would help remedy some problems however. I think Kalecki’s article here does a good job of explaining why capitalists might oppose government spending and I think it holds for the world today just as much as it did in 1943.

          3. JTFaraday

            “The problem is that the U.S. economy has been successfully restructured over the past 30 years as a… low-wage economy”

            I think you make a very good point here. One that parsing the problem as “full employment” or a “job guarantee” (usually quite mindlessly in my opinion) does not address.

          4. LucyLulu

            What Kalecki is saying is the unemployment IS the problem, including our high rates and long-term unemployed. It gives the elite more power when jobs are in short supply. If you read the want ads, you can see evidence of this having occurred, with employers making demands that would have been unheard of a few years ago (e.g. Facebook passwords).

            Even if unemployment is realistically 17-18%, or whatever it is, the government could fill in the slack. We sure have a whole lot of infrastructure that needs to be updated. If you got creative, I’m sure that other good ideas for employment could be found, possibly from unemployed themselves. If you subscribe to the MMT economic theory (I’m undecided still…..makes sense to my limited intellect but if it sounds too good to be true….), funding these jobs isn’t a problem. A lot of the infrastructure work needs to be done irregardless. Kicking the can down the road is going to cost us more later on….. e.g. when main water lines burst and dams unleash rivers.

          5. JTFaraday

            “What Kalecki is saying is the unemployment IS the problem”

            Kalecki is making a whole boatload of assumptions about “full employment” in a classical liberal and industrial economy with an arguably (dare we say it?) “‘free’ market in labor” which may be effectively summed up as “when the mill starts churning, the rising tide will push up all boats.”

            Cynthia is wondering whether this mechanical, hydraulic conceptualization– which is the inverse of “trickle down theory,” after all– of how the labor market works may not be so effective in a post-industrial economy, which may also suffer from (commenter Kevin de Bruxelles’) global leaking sieve phenomena, where by “the water” has a tendency to leak out of the model.

            Also, Kalecki himself acknowledges the limitations of “full employment” as a policy goal when he notes the possibility of a not-liberal economy without a market in free labor, which tends to form under corporatist political conditions much like those of today:

            “III. 1. One of the important functions of fascism, as typified by the Nazi system, was to remove capitalist objections to full employment.

            The dislike of government spending policy as such is overcome under fascism by the fact that the state machinery is under the direct control of a partnership of big business with fascism. The necessity for the myth of ‘sound finance’, which served to prevent the government from offsetting a confidence crisis by spending, is removed. In a democracy, one does not know what the next government will be like. Under fascism there is no next government.

            The dislike of government spending, whether on public investment or consumption, is overcome by concentrating government expenditure on armaments.

            Finally, ‘discipline in the factories’ and ‘political stability’ under full employment are maintained by the ‘new order’, which ranges from suppression of the trade unions to the concentration camp. Political pressure replaces the economic pressure of unemployment.

            Kalecki wrote 70 years ago. Personally, I find it odd that in all that time no one has updated this reverse trickle down magical thinking thing.

          6. Calgacus

            LucyLulu says: What Kalecki is saying is the unemployment IS the problem, including our high rates and long-term unemployed. Yup. Unemployment IS the problem. The restructuring would have been much harder without the threat of unemployment. Don’t want the US to have a low wage economy? Raise the JG wage. Problem solved.

            If you subscribe to the MMT economic theory (I’m undecided still…..makes sense to my limited intellect but if it sounds too good to be true….), funding these jobs isn’t a problem. Your intellect is not limited. There are no flaws in the MMTers logic, except they can be too long winded, confusing or timid. The current orthodoxy in economics is just charlatanry covered by fake mathematics.

            The only other real flaw in MMT is that while they pay tribute to their predecessors like Kalecki, they don’t make clear enough how much MMT once was the mainstream, before the tsunamis of excrement and propaganda published by truly limited intellects in the 70s onward created a dark age of economic ignorance.

          7. jonboinAR

            Cynthia:
            “The problem is that the U.S. economy has been successfully restructured over the past 30 years as a high-unemployment, low-wage economy with most new jobs being created as temporary jobs (whether you are a laborer, a technician, a service worker or a professional) with no job security, low wages and few benefits.

            While social safety nets are crucial as temporary survival mechanisms, they do absolutely nothing to address the restructuring of the economy, and the ability to make a living and live with dignity.”

            Me:
            I’m coming more and more to agree with that. The US simply has to get back to producing tradable goods if we mean to have a decent lifestyle for everyone. I’m thinking the means to begin that is with:
            a)industrial policy: the government has to, yes, help to “pick winners and losers” if we expect our industries to successfully compete with those of the other nations that do that, and
            b)protectionism: again those nations with vibrant industries have protected them. We have to maintain tariffs. I’m thinking tariff against failure to protect environment, and failure to pay decent wages.

          8. darms

            Calgacus,
            In my (limited) understanding of MMT there was “no such economic theory” while we were on the gold standard and much of today’s economic disaster is directly due to the insistence that concepts like the national debt & a debt limit are still relevant.

        2. tts

          Deficit spending isn’t working because the money isn’t being spent properly, its almost all going towards the banks and rentiers.

          If the money went towards infrastructure (ie. energy indepedance projects, mass transit where it makes sense, bridge/dam renovation, etc.), job retraining, and the poor (via social welfare programs) the economy and country would be in much better shape.

          Instead more and more money is given to the already rich at the expense of everyone else. This is why the wealth disparity issue OWS harped on about is so important to understand fully.

        3. Procopius

          Oh, for goodness sake, the United States is not bankrupt! You’re buying the Tea Party story, which is intended to frighten and mislead you. Granted, the national objectives have been hijacked and distorted by the imperialists, but this country is not broke! That’s pure bunkum designed to make people acquiesce in destroying the social safety net, which has never been very strong anyway.Social Security works. Medicare and Medicaid still work, even though they’re in trouble. One thing that would help would be real “ftee trade” allowing us to import radiologists and other high-priced specialists. Another thing would be changing the patent system, find some other way to pay for medical research instead of charging billions more than the cost of producing medicines. There are lots of things we could do if we could just stop obeying The Oligarchy. We are not broke; we are not bankrupt!

    2. F. Beard

      1. If people matter at all and 95% of them lack the means to live without working, a society must strive to employ those who have been deemed redundant by the private sector. jake chase

      How on earth did we reach a state where so few workers are needed?

      1) Many of the workers jobs have been automated away with their own stolen purchasing power via business loans from the counterfeiting cartel, the banks.

      2) The workers, being victims of theft, now lack the aggregate demand to purchase the products their stolen purchasing power was used to make. Thus even fewer workers are needed because of lack of aggregate demand.

      The population doesn’t need make-work from the government but restitution for theft. That restitution would:

      1) Make not having a job less problematic. This would reduce downward pressure on wages since fewer people would need jobs.

      2) Increase aggregate demand and thus the need for more workers.

      It’s only government MONEY that is needed; not government make-work.

      It all goes back to the banks or else Occam and many of the most famous people in history are wrong.

      1. rotter

        “How on earth did we reach a state where so few workers are needed?”

        By concentrating all of the jobs into the super-low wage, slave kingdoms of the far east, subsidised by the rulers of the slave kingdom and by our own tax policy..thats how..sasy what you want about automation, or unions, or “the information revolution”..they were allowed to destroy the jobs,they have built up the finance sector to the point where its a danger to everyone and everything else.

        1. djrichard

          Is job destruction only unique to our times? In which case, government spending is the wrong solution?

          Let’s turn this around. How big does an economy need to be?

          This article suggests it should be big enough to have full employment. And it nicely points out how there’s players that benefit if that’s not achieved.

          Michael Hudson has done a nice job too of pointing out how various entities benefit when the government isn’t spending money into existence. He basically points the finger at the other players in the economy who compete in the money supplying business (but who don’t spend it into existence, but rather find markets that want to borrow it into existence). He also points to the rentier class as the class that benefits when economies shrink (in that they benefit more relative to all other classes).

          But while Mr. Hudson suggests the rentier class benefits when the pie gets smaller, this article is the first I’ve seen which suggests the rentier class gets “boom tired” when the pie is growing. In a way, that’s kind of counter intuitive (even though it’s the flip side to what Mr Hudson is saying). Is there anything out there where this “boom tired” facet is explored further? It’d be helpful to see how this plays itself out in practice.

    3. UnlearningEcon

      Readers: do not think this is a good summary. He:

      (a) completely misses out Kalcki’s main insights about the social status of capitalists and

      (b) projects MMT-ness onto Kalcki’s essay when there is none.

      1. djrichard

        (b) projects MMT-ness onto Kalcki’s essay when there is none.

        It’s in there, just in a different guise, where Kalecki says, “In reality the government pays for the services, not in securities, but in cash, but it simultaneously issues securities and so drains the cash off”

        It’s the same thing as MMT except that you also have a nice token interest to savers (as somebody else on this website has put it previously). Then it’s simply a problem of covering the interest. Kalecki does a somewhat nice job of pointing how that is mitigated through taxes. But the real way that is mitigated is by continually depreciating the dollar (and therefore past debts). And for that, you need the Fed Reserve; without their liquidity pump there’d be no “players” naked shorting the dollar. To some degree these chickens come home to roost when the liquidity pump starts operating in reverse (which is kind of happening now in spite of the Fed Reserve’s actions), but I think that’s more of a problem for the Fed Reserve than Treasury.

        1. F. Beard

          But the real way that is mitigated is by continually depreciating the dollar (and therefore past debts). djrichard

          But a monetarily sovereign government has no need to borrow in the first place! Bill Mitchell calls it “corporate welfare.”

          So no, we don’t need the Fed. Nor do we need rest of the the banking cartel, for that matter.

          1. djrichard

            F. Beard, yes, I agree.

            I think the author was trying to fight a bigger battle, that being the myths perpetrated on the masses for the political benefit of the few.

            But it’s also true that one of the major myths being perpetrated on us right now is the myth of the national debt as a limiting factor. I’m all for having MMT through a gov currency as a way to eliminate that myth. And I can easily imagine that that would help us to knock down many of these other myths that the author is going after.

        2. Calgacus

          djrichard: It’s in there, just in a different guise, where Kalecki says, “In reality the government pays for the services, not in securities, but in cash, but it simultaneously issues securities and so drains the cash off”

          Right, absolutely, but that is not “a different guise”, but the MMT description of bonds as reserve drains, far succincter & clearer than modern MMTers, who suffer somewhat from the modern academic practice of verbosity to the point of incomprehensibility. MMT is not about “printing money” but: Noticing that we already have an MMT system – the difference between printing bonds & printing money is a joke, as Kalecki ably describes.

          It’s the same thing as MMT except that you also have a nice token interest to savers (as somebody else on this website has put it previously). Then it’s simply a problem of covering the interest. Kalecki does a somewhat nice job of pointing how that is mitigated through taxes. But the real way that is mitigated is by continually depreciating the dollar (and therefore past debts). Again, this mislabels MMT as “no bonds”, ZIRP, “print money”. There is no need to do anything to “cover the interest”: We just print more money/bonds to cover it. (The real covering is just accepting the bonds for payments to the government.) Depreciating the currency is neither necessary nor really useful, nor really actual – inflation has been low for decades, and was low before the 70s too. MMT/ (good) Keynesian systems, spending for full employments leads to lower inflation by printing more money, not higher inflation. No “mitigation” necessary.

          And in spite of all that, if we had the government spending money into existence, like this article suggests, it would be at least giving a bone to the serfs. But the government has decided it doesn’t want to do that.

          No, we already have the government spending money into existence. The article, the crucial passage you rightly highlight, explains how it is we already have that.

          Government don’t “need to borrow” in their own currency because they simply CANNOT borrow their own currency. The transaction misnamed “government borrowing” is not borrowing as that word is used in any other context. If you want to use the word “borrowing”, which is not a bad idea, then government spending is borrowing.

          As always, my apologies if I belabor the obvious.

          1. djrichard

            Yes. It’s only belaboring if it’s obvious and it’s obviously not obvious :-). If more people understood what you’re saying, the national debt wouldn’t be a focus of the national discourse.

            But consider if we had true money printing (ZIRP coupons) by the Fed Gov. I think it would be easier for people to connect the dots. So for instance, tax policy gets recognized as simply a mechanism for reducing inflation in the economy. And then the politics of picking the winners and losers of who doesn’t and does get taxed is more clearly exposed.

            Regarding this, “No, we already have the government spending money into existence.”I’m with you. I meant that the government isn’t spending as much money into existence as it could, e.g. if it wanted to improve employment. [People think the government has gone nuts with increased spending. What’s really gone on is there’s been decreased tax receipts.]

            Lastly, excellent point about debt depreciation not being required. I keep thinking there’s a reason why the Fed Gov doesn’t constrain the liquidity pump provided by the Fed Reserve. I was thinking it had to do with depreciating the Fed Gov’s own debts. But to your point, maybe that’s not it at all.

    4. Cynthia

      A Keynesian economic policy was never intended to replace a free market industrial or service economy- it’s designed to jump start such an economy out of a serious recession. However, a substantial number of public sector jobs -especially if they result in positive externalities- is needed. I do agree though, the causes of our current Great Recession run very deep and will not go away. Huge trade deficits, offshoring of million of white-collar service jobs, as well as production jobs, an extremely lop-sided tax structure, an insane defense budget will bring us back to modern-day serfdom.

      1. rotter

        Nice theory, meanwhile in reality, the “privatizers’ are about to steal the entire post office and liquidate it for chas, including all the jobs it provides. whole post (irony anticipated) on this subject would not only be appreciate, but is, apprently desprately needed as most people (includin me) havent been aware of the truth of the situation. Basically, in 2006, the Psot Office which operates at a profit normally, was saddled with an absurd mandte to fund the entire cost of its pensions out for 75 YEARS…absurd, obviously. Obviosuly the point was to set up the “default” you may or may not be hearing about, and make the spurious and offensive claims that the post office is “broke”..or that it should “go the way of the telegraph”..beyond offensive, the United States post office is about to be given away to politcal donors. Just like NASA went before it, obama and congress will be giving away the POST OFFICE this time.Only this much worse, much as NASA was important to us culturally, and as costly as all that research was, that was given away to freemarket parasites, I need the post office to deliver my mail.

      2. djrichard

        Huge trade deficits, offshoring of million of white-collar service jobs, as well as production jobs, an extremely lop-sided tax structure, an insane defense budget will bring us back to modern-day serfdom.

        And in spite of all that, if we had the government spending money into existence, like this article suggests, it would be at least giving a bone to the serfs. But the government has decided it doesn’t want to do that. The article is telling us why.

        1. JTFaraday

          I think her whole point is that if the liberal/ progressive/ would-be left side of the policy divide is only seeking to have “the government give a bone to the serfs” then the liberal/ progressive/ would-be left side of the policy divide has really eff-ing low standards– and it would be nice if SOMEBODY in the reputedly critical blogosphere would acknowledge it.

          1. djrichard

            Sorry. I was just trying to shift us back on topic of what Kalecki was writing about. I’m not trying to lower standards.

            I value this site for what others have to say. But this particular article is offering a lot of insights that are very rarely part of the conversation, and actually in our case I think help move the conversation quite a bit.

          2. JTFaraday

            “Sorry. I was just trying to shift us back on topic of what Kalecki was writing about.”

            Well, then you must assume she didn’t understand what Kalecki said. She damn well did understand what Kalecki said, and she’s questioning the validity of a model that assumes you can rev up an industrial machine that then has market incentives to run by itself when that’s probably not the economy we have 70 years later. Just off the top of my head–

            Today, if you put money in the pockets of “consumers,” they buy electronics made in East Asia– after they’ve down their debt.

            Instead, today the “job guarantee” proposal is to pay somebody’s mother minimum wage so she can go fulfill some work requirement so some defunct economist can pat himself on the back that the lazy bitch is not sitting on the couch eating bonbons all day– while someone else makes minimum wage watching her kids. I think this is kinda dumb, and I’m not even going to be one of the chess pieces thus manipulated.

            Today, public infrastructure is being turned into rent seeking opportunities for the new robber knight toll collectors. Today, public employees are already under attack and a new-normal minimum wage “public job guarantee” combined with an educated under-employed work force is just what the corporatists need to in-fight the currently employed and the minimum wage public job guarantee recipients in order to compress wages in public service jobs in order to maximize their investment in things like charter schools. **See Kalecki comment below.

            How policy initiatives play out depends on the social and economic conditions under which they’re being proposed. This is not only not-off topic, it is THE critical issue.

            And let me add, that it is NOT being addressed seriously discredits the proponents of political action, which is why I have a hard time even taking them seriously– never mind tolerating the unbearable whining of the tenured economists among their ranks about how their careers are limited by the lack of attention they get from their better situated colleagues.

            **Pace Kaecki’s comments about fascism at III.1:

            “III. 1. One of the important functions of fascism, as typified by the Nazi system, was to remove capitalist objections to full employment.

            The dislike of government spending policy as such is overcome under fascism by the fact that the state machinery is under the direct control of a partnership of big business with fascism. The necessity for the myth of ‘sound finance’, which served to prevent the government from offsetting a confidence crisis by spending, is removed. In a democracy, one does not know what the next government will be like. Under fascism there is no next government.

            The dislike of government spending, whether on public investment or consumption, is overcome by concentrating government expenditure on armaments.

            Finally, ‘discipline in the factories’ and ‘political stability’ under full employment are maintained by the ‘new order’, which ranges from suppression of the trade unions to the concentration camp. Political pressure replaces the economic pressure of unemployment.

          3. jonboinAR

            I agree with you and with Cynthia. The problem has most likely become structural (is that right?) instead of just cyclical. I gave my rough ideas above as to what to do regarding the structural part.

          4. djrichard

            JT

            Kalecki was saying we already have the basic solutions at our disposal (government is essentially already MMT-based and the only thing stopping it from spending money into existence is ourselves). I suggest we solve that mental block first. And then we can move on from there to solve more of the challenging problems you bring up.

          5. JTFaraday

            “I suggest we solve that mental block first.”

            Most people on this site and people with today’s ill-thought out full employment policy proposals do not suffer from that mental block. The mental block from which they suffer is the mental block that promoted by the use of the term “full employment.”

            Full employment, in and of itself, doesn’t do shit except occupy time.

          6. djrichard

            Fair enough, but I do think that mental block is almost pandemic:

            – the bulk of the posts on this site about MMT assume we don’t already have an MMT mechanism in place

            – the bulk of the posts on other sites about MMT are ones of suspicion and doubt.

            – the bulk of humanity wouldn’t recognize MMT if it bit them on them on the rear end. But they do recognize (or think they recognize) what a national debt is. And based on that false recognition they assume we can’t afford anything.

            I’d say a wide-scale campaign is called for. Something along the lines of “we can afford it”.

          7. Calgacus

            JTFaraday: Most people on this site and people with today’s ill-thought out full employment policy proposals do not suffer from that mental block. The mental block from which they suffer is the mental block that is promoted by the use of the term “full employment.”

            The MMT full employment policy proposals aren’t ill-thought out, but exceedingly carefully thought out, to the point that the sheer mass of arguments can obscure essential features.

            There is no mental block ‘promoted by the use of the term “full employment.”’, but the reverse. Djrichard et al are quite right that the first thing to do is to remove the mental block against “full employment.” Historical experience & theory then shows that the other “mental blocks”, the other “problems” are comparatively trivial. One person being unemployed is an insane, unnecessary, destructive crime committed against him. To the point that on any rational morality, he then has the right to (noviolently) “steal” (from the gov).

            (Full) Employment at doing good stuff does more than occupy time. It does good stuff. The trivial changes that our economies have had in the 70 years since Kalecki (rather smaller than the 70 years before his paper) have not invalidated anything he says, whether he was right or wrong.

            Today, if you put money in the pockets of “consumers,” they buy electronics made in East Asia– after they’ve down their debt. And what on earth is wrong with that?

            Instead, today the “job guarantee” proposal is to pay somebody’s mother minimum wage so she can go fulfill some work requirement so some defunct economist can pat himself on the back that the lazy bitch is not sitting on the couch eating bonbons all day– while someone else makes minimum wage watching her kids.
            No, it is to give “somebody’s mother” the choice to do this. Most JG proposals give her the choice to be the “someone else”, to be paid for watching her own kids.

            I think this is kinda dumb, and I’m not even going to be one of the chess pieces thus manipulated.
            Once you have “decided” (there isn’t much choice) to engage in monetary transactions in a monetary economy, you have become one of the chess pieces being manipulated. People need money to live. Refusing them a way to get it, at their will, not a paternalistic, corruptible state’s, is insane. A monetary economy without some kind of Job Guarantee is an insane idea. Premonetary economies have no unemployment, because they understood themselves better than the monetary economies which developed out of them, and share their essential features. The natural rate of unemployment is zero. Premonetary economies did not systematically, violently prevent their members from contributing to the general welfare. They knew they were too poor to afford such lunacy.

            A Job Guarantee is just the right of someone starving to wash dishes at the restaurant he ate at to work off his tab. Rather than be shot. Doesn’t mean that the restaurant owner is not a serial killer. Doesn’t mean that he didn’t poison the dish soap. Doesn’t mean that the number of dishes isn’t outlandishly large or small.

            A Job Guarantee is a necessary condition for a sane economy, not a sufficient one. As you say, it is a “really eff-ing low standard”. But first achieve the low standard, then the higher ones. Walk before you run. Then observe empirically that running, once you understand walking, is pretty damn easy.

            For in practice, such objections are feeble. A JG is pretty near a sufficient condition. And the bad guys know this very, very well. They don’t have no mental block, but today’s liberal/ progressive/ would-be left surely does. When Kalecki wrote, the US had pretty near a minimally decent, sane MMT economy. The very first thing that the bad guys did – during the war, 1943 – was to remove the crucial JG component, the WPA. And the next, 1946, was to successfully fight the postwar Full Employment Act to water it down into the Employment Act. They knew what they were doing. They knew with something like a JG, minimal sanity, in place, institutionalized, result is: bad guys lose.

  2. J Sterling

    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 is so important. If I could get one thing across to everybody, it would be that rich men cause recessions.

    And because by the time the rich are in a position to cause recessions, they’re almost always in control of government, we get austerity thinking, at just the worst moment. If they don’t want to employ workers privately, they certainly don’t want to employ them at one remove via their taxes.

    1. Kyrie Eleison

      Forgive me in advance if this sounds too simplistic, but in addition to having to pay all these new government hires via taxes, isn’t one of their main concerns regarding the cost of labor itself?

      When government “meddles” in the “free market” by hiring the untouchables, not only do the “obstinately ignorant” have to pay for it in (some) taxes but also in the “artificial demand” this creates driving wages upward?

      It’s interesting that CEOs and others rail on about “price fixing” in the form of government intervention such as this, along with the minimum wage, and how it is an affront to the “free market” and yet wax oblivious to their own arrangements sitting on each other’s compensation boards.

      Perhaps the cumulative effect of countless snifters of Hennessy? Selective amnesia?

      1. foppe

        Wray (sorry, site eats my comment if i add link; it’s a recent post called “Neoliberal Supply Side versus Keynesian Demand Side Approaches to Unemployment”):

        The anti-JG critic’s belief is that it would be inflationary to give jobs to the unemployed. For some reason producers would not be able to meet additional demand for food, electricity, and TVs. Hence, the newly employed would get in a bidding war with the already employed. So, best to leave them hungry, cold and in the dark, and without entertainment.

        To be sure, I have not seen critics of the JG/ELR opposed to allowing Wal-Mart or other private employers from offering jobs to the unemployed. For some reason, it is OK for Wal-Mart or Wall Street employees to bid for food and electricity and entertainment. Inflation that results from food purchases by low-paid workers in dead-end jobs in the private sector is apparently OK. And as well, it is perfectly fine for Wall Street’s fat-cats to buy petrol for their gas-guzzling stretch limos. That sort of competition for scarce food and energy and manufactured products is apparently fine to our inflation-worrywarts who hate the JG.

        I’m not sure why. Seems to me that if one believes more employment necessarily creates an inflationary bidding war for scarce output, then one ought to oppose any additional employment, period.

      2. J Sterling

        Kyrie, I think you’re right. They also don’t like social security, partly because they pay for it in taxes, and partly because it allows workers to turn down work, and so drives the wages up.

        (unemployment is a kind of government job, where they don’t give you a job to do)

        Every now and again a shill complains that unemployment money is so high it’s worth more to some workers to stay unemployed than to take a job with lousy wages. From their point of view this is an outrage. From mine, it’s the system working as it’s supposed to, forcing employers to offer better than lousy wages.

        1. Kyrie Eleison

          Ok, so let me get this straight:

          Certain circles are baffled that the imposition of artificial scarcity and creation of artificial demand have precipitated in … artificial scarcity and artificial demand?

          I suppose Newton’s Third Law is just the stuff of fairy tales.

          My head hurts.

  3. charles 2

    It good to see that you quote someone who understands that there is such thing as a “small rentier” and his/her interest are aligned with the big rentier.

  4. mafer

    Great post.

    Since it was written in 1943, we need to remember that conditions today are somewhat different. This time around, there are much higher levels of consumer debt (unlike during WW2). Also, rentier interests are far more politically powerful today, whereas the Henry Ford industrial “big business” of the article is greatly diminished in terms of political clout.

    Frankly, capitalism has exhausted its potential in the US. Financial parasitism is the final stage of capitalism and rentier interests will not give up their power without a fight. It really is that simple.

    1. Chris Rogers

      Regrettably,

      Your conclusions are almost certainly correct.

      Had we lived in a more enlightened and less selfish epoch, I’m confident what we are witnessing today would never have come to pass.

      However, a small minority, supported by another small minority of wannabe parasites can see no further than the end of their noses.

      Its time the majority in the US and elsewhere looked at matters via the looking glass of the ‘class system’ and stopped falling hook, line and sinker into the trap laid for them by the ruling elite – its one thing to aspire to benefit ourselves and society as a whole, quite another to aspire to benefit ourselves and our family at the expense of society in general.

      Once people understand this, we may once again have claim to call ourselves civilised and enlightened until then, we live in a Hobbsian dystopia full of death, destruction and unfulfilled dreams.

      What a wonderful World our Masters have constructed for us, the majority, and them, the tiny monied minority with absolute power.

      Time to change this equation me thinks!!!!!

      1. Mafer_

        One correction: Socialism in One Country was a theory put forth by Joseph Stalin in 1924, elaborated by Nikolai Bukharin in 1925 and finally adopted as state policy by Stalin. Lenin was dead when this theory surfaced.

        1. Mafer_

          Oops. I replied in the wrong place.

          This was a reply to the following:

          “Indeed, and having studied pre and post WWI Germany and Russia, I can assure you that once the Bolsheviks, namely the minority Russian SDP, under Lenin decided on ‘Socialism in one Country;, the similarities between it and Nazis Germany were stark indeed, and, highly dysfunctional to say the least.”

          Sorry :(

    2. citalopram

      I’m still debating with myself whether these 1 percenters would use the army, navy, airforce and marines against the 99 if there ever was a violent uprising.

      1. Carla

        With the deployment of privately owned drones and armed private security forces, would the 1% even need the military?

        1. Generalfeldmarschall Von Hindenburg

          I really see this as the biggest crisis for democracy. Private armies built by magnates living on big estates….hmmm..what does that sound like?

      2. Antifa

        Historically, successful police states just keep removing the people who speak out and speak up and lead. Take them away and the rest think long and hard before they stand up.

        It may take sweeping up 10% of the population before you get compliance, but it works.

      3. Chris Rogers

        Why think about it, the facts are plain and simple in the USA, UK, France and Germany in the late nineteenth Century and early twentieth century the ruling elite used all means necessary to undermine/defeat all leftwing progressive thought and movements.

        Indeed, the ‘Great Myth’, and I say this a a Brit, seems to me how anyone one in the USA can think their country has a proud liberal heritage, when the facts are firmly against this perception – when you can order the National Guard to shoot striking workers, women, children and babes in arms – all in the pursuit of profit, then I ask myself what right has any nation to call itself civilised, never mind of a liberal disposition.

        At least here in the UK, that is England & Wales, we are equally taught the good and the bad – be it concentration camps in South Africa during the Boar War, attacks on peaceful protesters in India, or actually turning guns on striking miners in Wales.

        Regrettably, even having been taught considerable truths, a significant minority of the non-elite, be they working class or middles class, keep voting for the Party of the elite – and that was even before the Labour Party was hijacked by neoliberal conservatives led by that master of disguise, Tony Blair!

        So, if as an educated working class middle aged man, I’m incredulous at the crass stupidity of my own nation, imagine my considerations on the USA presently.

        However, and stopping ones personal rant, the fact remains that its a no brainer that ‘full employment’ is economically feasible and desirable, regrettably your 1/4 percent (0.25%) ruling elite are opposed to this – obviously, they will not be satisfied until the USA resembles the People’s Republic of China, which last time I checked – i’ve just opened my door and took a peek outside – is an authoritarian dictatorship that has the audacity to call itself Communist!!!!!!

        1. Kyrie Eleison

          Branding is all about word choice, not accurate descriptions.

          Hence things like the “sunshine unit”.

  5. Eleanor

    I have encountered Kalecki’s name many times and read a number of quotes from him, but this may the first time I’ve read an entire essay. I liked it. Thanks for posting it.

  6. AussieSandino

    Indeed. Excellent article that still is valid in spite of the major changes that capitalism has undergone since the early 1940s. Thanks for posting it

  7. F. Beard

    Nice article with lots of food for thought but:

    and if, moreover, this expenditure is financed by borrowing Michal Kalecki

    Always with the borrowing, usury and the banks! Does near every economist have a pro-usury, pro-bank bias?

    1) There is no need for a monetarily sovereign government to issue interest bearing securities; suppliers will accept non-interest paying fiat. Why? Because fiat is the only means to extinguish tax liabilities. Interest is an unnecessary and thus fascist expense. It is almost as bad as a gold standard except for the cost savings of using paper/electronic bits over using gold.

    2) Always with the jobs! Who needed a job before the banks stole family farms and businesses?

    3) What is acutely needed now is not government make-work or work that competes with private businesses but government MONEY so people can payoff their debts to the counterfeiting cartel, the banks, and so non-debtors can receive compensation for years of negative interest rates on their savings.

    4) Big government is controversial; government MONEY isn’t! Who sent back their “stimulus checks” they got from GW Bush and Obama?

      1. Nathan Tankus

        are you really arguing with a 70 year old essay? Neo-Chartalists current adjustment to the verbiage around government bonds is one i support, but the underlying ideas come from Kalecki’s work. Simply because he uses the parliance of the time (a time when most economists accepted something like the Chartalist’s vision of monetary operations) doesn’t mean he has a “pro bank bias”

        Kneecap someone who deserves it, not one of the fathers of Post-Keynesian and thus Neo-Chartalist economics.

        1. F. Beard

          I did say it was a nice article. But I am very sensitive to an economy of, by and for the banks. And surely Kalecki was aware of Tally Sticks, Colonial Script and Greenbacks? So why pretend that government money issuance required government borrowing?

          Money creation is an area where we need absolute clarity and straightforwardness:

          “The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.” John Kenneth Galbraith writing in ‘Money: Whence it came, where it went’ (1975) from http://en.wikipedia.org/wiki/John_Kenneth_Galbraith#Quotations

        2. F. Beard

          Here ya go wrt a “pro-bank bias”:

          2 Another problem of a more technical nature is that of the national debt. If full employment is maintained by government spending financed by borrowing, the national debt will continuously increase. This need not, however, involve any disturbances in output and employment, if interest on the debt is financed by an annual capital tax. Michal Kalecki

          If I read this correctly then this is a wealth transfer from businessmen to the banks and other usurers. Still think I’m being harsh?

        3. F. Beard

          OK, I should have added this:

          Further, the inducement to invest in fixed capital is not affected by a capital tax because it is paid on any type of wealth. Whether an amount is held in cash or government securities or invested in building a factory, the same capital tax is paid on it and thus the comparative advantage is unchanged. Michal Kalecki

          So he is saying the government should tax back the usury it pays too? But why not simply not pay usury in the first place? Just spend government money into existence without borrowing?

        4. F. Beard

          Simply because he uses the parliance of the time (a time when most economists accepted something like the Chartalist’s vision of monetary operations) doesn’t mean he has a “pro bank bias” Nathan Tankus

          Good point. Perhaps Michal Kalecki was a stealth reformer who had to hide the subversive nature of his teachings just so they could be widely disseminated – leaving it to later generations to connect the final dots.

          1. Leverage

            F.Beard, do you realize this essay was written in a time when exchanges between nations were still dominated by gold 8even if indirectly)?

            This is extremely important, as WWII (the period in which the essay was written) was indirectly created by this (WWI was the product of ‘hard money’ as well as subsequent depressions).

            Off course there were technical difficulties created by this structure of the international monetary & banking system.

    1. jake chase

      FB, you may be on to something. The government issues the money, the creditors pay off the debt. Then what? I think you need to dig up Henry George and his single tax. You tax land on its (unimproved) use value and all that unused land morphs into family farms. The cities empty and the population hoes and sows all day long and watches cable television at night.

      1. F. Beard

        The cities empty jake chase

        Not empty, just less full.

        and the population hoes and sows all day long jake chase

        Maybe all day at certain times of the year but with modern farm machinery.

        and watches cable television at night. jake chase

        I don’t know how modern farmers entertain themselves but I’d bet they don’t watch much TV. With land one can entertain himself! Apartment dwellers? Not so much.

        1. jake chase

          Why the jobs? Because like it or not work must get done for people to live. Who will do it if money is free? We already support a 5% rentier class. Another 5% is engaged in propaganda, advertising and public relations. 5% shuffle paper. 25% is unemployed, but that still leaves 60% working to support all the rest.

          1. F. Beard

            Who will do it if money is free? jake chase

            Restitution for theft is NOT free money. It is deserved. And unless we are willing to let people starve or be homeless then a Minimum Income is needed too. Beyond that people would have to work.

            I’m not sure how to get people back on family farms though. Maybe a new Homestead Act after the big corporate farms are nationalized?

          2. Darias

            What was stolen, and how much?

            Who has it?

            If you are looking for restitution, it suggests you will take from thieves and give to victims. Issuing new currency is doing exactly what you preach in fixing. You are merely forcing devaluation, theft, on citizens.

            I rather have banks.

          3. F. Beard

            Issuing new currency is doing exactly what you preach in fixing. You are merely forcing devaluation, theft, on citizens. darius

            Wrong. The new currency issuance would be combined with a ban on new credit creation. Since “loans create deposits” then “loan repayment destroys deposits.” The new currency issuance could be metered to just replace the destroyed deposits for no change in the total money supply (reserves + credit). So your devaluation charge is baseless.

            I rather have banks. darius

            No surprise based on your other comments.

          4. Darias

            How much was stolen and by whom?

            Before waiving your hands with “solutions”, you should make th he case

          5. F. Beard

            How much was stolen and by whom? Darius

            Since “loans create deposits” and is thus a form of counterfeiting then at the very least all debt to the banks is morally invalid. But since credit creation cheats non-debtors too (via negative real interest rates) then non-debtors deserve restitution too. So debt-forgiveness is not the solution; a universal bailout with new fiat would go equally to non-debtors too.

    2. The Black Swan

      @ #2,

      Yes! Why do we need jobs? This has been puzzling me for quite some time. A society that forces people to work in order to cover their basic needs (food, shelter, healthcare) seems like a society of slavery. Let us reap the rewards of modern efficiencies and enjoy lives of leisure.

      1. djrichard

        It’s not obvious, but the author is pointing out how to achieve just that:

        The reply is that the counterpart of this spending will be the higher standard of living of the masses. Is not this the purpose of all economic activity?

        I’ve often thought that one way to fight fire with fire is change the mind set on living on food stamps – eliminate the shame and the righties would go spastic. But I don’t think that’s how people really want to live, even if it does raise the standard of living.

        Some of that is pure selfishness: people want to discriminate themselves from the competition. And in that is the seeds of why we have the elites and the 1%.

        But even without selfishness at play, I think people don’t want to live on handouts. Nobody wants to feel less than equal.

        Personally, I’m thinking small. We need to think about creating our own personal gardens of eden (rather than living in somebody else’s) and down-size our expectations dramatically. Of course if that took off in any real way, that would destroy a debt-based economy. But I’m under no illusions – as PTB said, there’s a sucker born every minute. But personally, I’m down sizing my desires.

        1. LucyLulu

          djrichard,
          Having worked with many people who collect public benefits, I wholeheartedly agree that most would prefer to have a job and be working. Yes, there are some who are lazy and enjoy a life of subsidized living (and it ain’t much of a life), but they are the exception, not the rule. I used to have clients beseeching me to please help them find a job. Mentally ill, they had difficulties making it past any interviews, and I was a nurse, not a vocational specialist. I have also found myself in the position of being unemployed. I don’t like it, not at all. I’d much rather be working. I think most people would make the same choice, especially after spending a few months without a job. There should be a definite difference in standard of living though between those who work and those who don’t. It seems to be narrowing these days. Those who work 40 hrs should earn real wages that lift them out of poverty, not minimum wage.

          1. djrichard

            I’m with you 100%. I have kids who are in college and one is about to graduate. She doesn’t have a STEM degree, and is trying to figure out where her passions are.

            What a bad joke we play on our kids. It’s like we bring them up in our own mini garden of eden. And then we cast them out. I’ll be happy if I can get my kids to understand that they’re not going to find the garden of eden out there. They’ll have to create their own (without debt financing I keep admonishing).

            At least they’ll have family to fall back on. How much harder it must be for those that don’t. And for those who are truly “cast out” into the wilderness, I just can’t imagine.

            I can a little – I had to turn to religion to gain my sanity. It was hell for me for a good long while.

          2. F. Beard

            I can a little – I had to turn to religion to gain my sanity.

            Me too! Or at least I’m insane in the same way as millions of the most successful people (Jews and Christians) who have ever lived.

      2. Darias

        Wow..

        Sometimes you have to wonder…

        Where do you suggest food, clothing, medicine, transportation come from?

        People twiddling their fingers? For all the hype on automation, what jobs are fully automated?

        People don’t need stupid pieces of paper, they need food, clothing, etc..

        Oh, and the more of those you have, the cheaper they become.. It’s not rocket science people.

        1. F. Beard

          People don’t need stupid pieces of paper, they need food, clothing, etc.. Darius

          People need those “stupid pieces of paper” to keep from losing their homes. Do you care about that?

          1. Darias

            Right..

            You think people will care about their mortgage when they cannot feed themselves with the gazillion f beard bucks you sent them.

        2. F. Beard

          Oh, and the more of those you have, the cheaper they become.. Darias

          That depends on several things but assuming future credit creation is banned then a vast amount of new currency could be issued over time without increasing the total money supply.

          I suggest you learn some MMT before you embarrass yourself further.

        3. RanDomino

          You’re exactly right that people need material things rather that pieces of paper, which is what we should be thinking about rather than assuming that a jobs-based economy is the only option.

          There are plenty of reasons why people would (and do) make necessary and useful things, other than for money. Solidarity used to mean something, you know!

  8. Generalfeldmarschall Von Hindenburg

    German economic and finance policies during the early Hitler era deserve a close look. The noxious ethnic policies of the NS government overshadow everything, but some interesting methods of finance and employment schemes were worked out very successfully.

    1. Max424

      This is impossible, Feldmarshcall, because the human mind is incapable of separating the peas from the carrots.

      Just the other day, I was eating my Del Monte Peas&Carrots, and as my fork poked at them, I noted, one is green, the other is orange, one is round, the other is square, one rolls, the other one bounces.

      And I realized, peas and carrots are the exact same thing!

      So you see, impossible.

  9. Susan the other

    The warning is incomplete: The elite oppose altering their control over the business cycle because they can exploit society either way and it gives them an advantage over the poor who cannot live without earning a living. This thesis is that capitalism can take only one of two forms: fascism or socialism. Fascism is caused by a too conservative consensus preventing government from promoting full employment by financing better living standards which then leaves the government to turn to the only acceptable-to-elites method – that of an aggressive armaments industry, etc. Fascism is the reaction to and the result of capitalism by private means. I wish he could come back and explain fictitious capital-financialization and where it will lead. We already have the world’s most powerful military. And we seem to be caught in a no-mans-land between fascism and socialism where capitalism doesn’t exist because it can’t make up its mind.

    1. Chris Rogers

      Susan,

      How you can claim that ‘Capitalism’ is stuck in a no mans land of fascism and socialism is beyond me, as it stands presently, and by any political definition yardstick, both the USA, and indeed the UK, are moving in a fascist direction, that is a full merging of the State apparatus with corporate interests, and this marriage ignores the body politic, namely the vast bulk of society.

      FWIW, you can only have Socialism, that is Socialism in its European context, if you have a conscious awakening among the majority of society, the majority by any and all definitions being working class – once we look at matters realistically and recognise that the vast bulk of any nation in a modern industrialised or post industrialised nation are by definition working class, you can then move towards a more democratic and socialised governing body.

      Socialism is a bottom up political expression and must be expressed by the working class itself, and not well meaning agents of any other class.

      All history attest to one fact as far as true Socialism is concerned, that fact is that most movements have succumbed to middle class interference and been hijacked ultimately by middle class intellectuals, we have seen this in Russia – Lenin, Cuba, Castro, North Vietnam, Ho Chi Minh, etc, etc, etc.

      We must also be careful in our use of the term ‘fascist’, fascism grew in Italy and France after WWI, it also had a presence in Germany, but ultimately was subsumed/ incorporated into National Socialism via the NASPD – better known as the NAZIS Party.

      Indeed, and having studied pre and post WWI Germany and Russia, I can assure you that once the Bolsheviks, namely the minority Russian SDP, under Lenin decided on ‘Socialism in one Country;, the similarities between it and Nazis Germany were stark indeed, and, highly dysfunctional to say the least.

      As such, if we want change, change that means not only a better life for ourselves, but also for all of mankind, Socialism, rather than having negative connotations, is actually positive – further, and rather than impinging on Liberty as most would have you believe, Socialism actually affords for individuals to actually be rugged and individualistic, much in the myth of John Wayne.

      Regrettably, when it comes to ‘positive’ and ‘negative’ interpretations of Liberty, most American’s seem at a loss, which is regrettable, given that this debate played a huge part in the development of the Federal Constitution, regrettably, the left-wingers actually lost that debate in 1787-89 and you are now living with the results of this failure – which to put it bluntly, is a fascist, rather than a socialist state.

      1. Susan the other

        I agree with what you are saying. The reason I call us a no-mans-land politically is because capitalism is not working either for improved conditions for the poor, providing employment (because of the obstructionist loonies in the House), or for the similar “improvements” which the benefits of fascism a la fascist Germany also provided. We already have over-the-top military power so where is a dedicated fascist to go to find an excuse to spend money to improve living standards? The final section to this 1943 essay never considered apex fascism getting itself paralyzed. So if I were to write the final section I would say how ironic it is that fascism had to save itself by going socialist. And hope that it does.

        1. Chris Rogers

          Susan,

          If you are implying that presently, the form of Capitalism being undertaken today, is basically the State funding of an elite minority, then obviously, I concur, for as we have witnessed since 2007 is basically a socialism for the rich at the expense of the poor.

          However, please be careful with your use of the word ‘fascist’, which many of us use far too often without utilising its exact meaning. FWIW, fascism was, and still is, an outright political expression against Socialism, and basically is the intertwining of the State with corporate interests – which is very undemocratic given the small elite numbers involved.

          Obviously the original author penning this article in 1943 had no way of knowing which way the war would go, so we have the benefit of hindsight.

          Suffice to say, fascism must be seen for what it is, highly corrosive. Further, when the State itself prostitutes itself in the service of a small corporate monied elite, you eventually get problems, namely, greed and power lust, and ultimately a moral denigration.

          Now, the above sentence aptly sums up the USA today, and indeed the UK – a matter that upsets me greatly, particularly given the number of lives wasted and deaths caused by war – wars fought in our name, by our children, but certainly not in our interests.

          Up until recently, I believed it possible to change this via democratic means, regrettably, our elites have corrupted all democratic institutions so thoroughly, that, as with many other posters, ultimately it seems change will only occur via violence – which is why I remarked earlier, the US State and federal authorities certainly would use violence, that is the armed forces to protect its selfish interests – the question thus arises, as it did in the Soviet Union, whether the armed forces will do as their corrupt masters ask of them – remember, when Gorbachev was imprisoned and a coup orchestrated, for once the military did the right thing and sided with the people.

          So, there you go, there is hope, but it certainly will come out of the barrel of a gun.

          1. Susan the other

            I think the concept of self sacrifice and choosing the group over the person is as old as the first 3 people. I think it is far more instinctive than individualism because liberty is just a pretty story and an emotional refuge unless it is inclusive, and then it borders on fantasy because you are only as free as your next breath. So I think that fascism, or anything that harms society, will not succeed. I would have said that war was a thing of the past before Little George took over. So now I have been duly shocked and have sobered up a bit. But I’m still pretty optimistic.

      2. mafer

        One correction: Socialism in One Country was a theory put forth by Joseph Stalin in 1924, elaborated by Nikolai Bukharin in 1925 and finally adopted as state policy by Stalin. Lenin was dead when this theory surfaced.

        1. Chris Rogers

          May I offer an apology for my historical mistake – I was going from memory, rather than quickly doing a Google – which should not be necessary given I have a Masters in this particular area – still, its been nearly 25 years since I was at Uni.

          However, my thrust remains valid I trust?

          1. mafer

            Chris, I agree with almost everything you have said and your comments are excellent.

            We should cut Lenin a little more slack, since the Bolcheviks attempted to implement a Marxist program in conditions that were considered, by Marx and by Lenin, to be unsuitable for Socialism.

            Russia in 1917 was a feudal agrarian society with a small industrial working class (about 10% of the population). Marxist theory had always held that industrial capitalist development was a historical prerequisite for Socialism. without this development, the only hope for the Russian Revolution was for the Revolution to spread to Germany. Lenin stated several times that Socialism in Russia was doomed without a revolution in Northern Europe.

            The power struggle between the Left Opposition (Trotsky and others) on one hand, and the centrists (Stalin) in league with the right wing of the party (Bukharin and others) was principally over this question of Socialism in One Country. The left opposition argued that it was necessary to internationalize the Revolution. Obviously, the corollary of this policy would be further hostilies with powerful states (165,000 foriegn troops from the US, The British Empire, Czechoslovakia, etc, had already invaded in 1918, see “Allied Intervention in The Russian Civil War”).

            Stalin and the right wing of the party said that peaceful coexistance was possible, since Russia could industrialize itself without the prerequisite of Capitalist development. This was the message a war weary party wanted to hear, although it contradicted Marxist theory.

            As it turns out, Stalin knew it was impossible to industrialize under the Soviet Democracy that existed under Lenin. The stalinist purges, the concentation of power and the Gulags were needed to convert the Soviet Union to State Capitalism. It was in this context that the Soviet Union was able to rapidly industrialize (at the cost of alienating the Russian People with its brutality). The lack of Democracy allowed the party to rapidly become corrupt, laying the groundwork for a full capitalist restoration.

            The failure traces back to the very beginning. Attempting Socialism in a feudal agrarian society contradicted Marxist theory. Lenin said that Socialism in Russia would inevitably fail without a socialist revolution in Germany. He was right.

          2. mafer

            Sorry: please understand “Western Europe” instead of “Northern Europe” as I had originally wrote in my reply above.

          3. Prostalino

            Good post, mafer. It’s not often that we see mention of the USSR as an anomaly in Marxist theory from the very outset. That’s partly a product of its revolutionary intelligentsia being quite Europeanized. But also, some of those Bolsheviks were so ambitious and so energetic that they wanted to adapt the concept of a “vanguard party” to the task of retroactively engineering a modern state for the proleterian vanguard to control.

            I think that Stalin was quite aware of the theoretical difficulties confronting Marxism in Russia at the time. His conflict with both the left and right factions was sincere within a Leninist context.

            By the time 1924 had rolled around, the “left” Bolshevist expectations had been shown false. The end of the Great War saw no wave of socialist revolutions in the modern capitalist states. In most of the victor nations there was no more than some transitory labour unrest, quickly suppressed or co-opted. In Italy, there was a revolution, but it brought to power an authoritarian, nationalist, militarist regime that gave us the word, “Fascism.”

            In the defeated nations, there were revolutions, but in Germany and Hungary they proved abortive. In Turkey, a revolution was successful, but brought to power, as in Italy, a nationalist, militarist, authoritarian government with no sort of red agenda.

            China too had unrest, but it was even more backward at the time than Russia.

            So Stalin could very well turn and say, “Alas, my left deviationist friends, all your fond hopes have proven vain. Yet upon them you would stake all for which we have fought and risked in five years of desperate civil war.

            “Do you not understand that, absurd though it might seem, ours is the only country that has had anything remotely resembling a successful worker’s revolution?

            “Do you not understand that, once the capitalist and imperialist powers have recovered from the debilitating effects of the world war, that one of them, or several in combination, are likely to renew their efforts to destroy our nascent workers’ state? Marshal Foch, that commander of imperialist forces in France, has already openly remarked that another war is to be expected within less than twenty years.

            “Have you so soon forgotten how badly our country had fared when pitted in battle against a modern capitalist state during the recent war, mostly because Russian armies suffered from a crippling lack of modern arms? Have you forgotten that Germany forced us to sue for peace, and looked fair to annex and enslave some of our most populous and fertile regions? Have you forgotten that the only reason this didn’t come to pass was that, fortuitously for us, Germany itself succumbed in the nick of time to its imperialist rivals?

            “Have you failed, my little left deviationists, to realize that the dastardly intervention in our civil war by the other imperialist powers, was likewise fortuitously rendered weak and half-hearted, owing to their exhaustion in the long struggle against Germany? Do you expect always to be so lucky? Since when is a mystical belief in some kind of fortune or destiny a substitute for a materialist examination of actual events–at least for those of us who claim to be students of Marx and comrades of Lenin?

            “So, then, when some of us insist that the USSR has no choice but to modernize almost entirely on its own resources, and that the principal focus of our modernization must be upon the prompt development of the heavy industries needed to produce modern arms, we do so with reason.

            “We cannot rely upon the sympathy of the oppressed proletariats in the capitalist imperialist powers to save our revolution from the onslaught that is almost certain to come. We must rely on our own strength. That strength cannot come from revolutionary spirit alone. We must have a tremendous store of modern weapons, and soon.”

            Having thus dismissed the left deviation in Soviet policy, Stalin would turn to his “right” colleagues and say,

            “We all know that our country is altogether unready for modern socialism. First, of course, it must modernize.

            “Ideally, Lenin’s NEP scheme of allowing to emerge a species of tame local bourgeois class, functioning under the political guidance of an historically-conscious worker’s vanguard party, would in time help to create the conditions of a modern industrial state. In effect, our modern society would have had its revolution in the ownership of the means of production take place before its revolution in the technique of production. As long as the Party retains its historical and revolutionary consciousness, it might well be able to succeed in such an ambitious and epochal feat–the first time that History itself would have been engineered and managed on such a scale!

            “However, we will simply not enjoy the sort of undisturbed passage of time necessary to allow a systematic and sequential development of economy and society through a tame, attenuated strain of bourgeoisie and rich peasantry.

            “Danger is too pressing. War is coming soon. Under such circumstances, classes of rich peasants and local bourgeois will not remain politically tame. Instead, those classes will form a deadly danger to the revolution and will league themselves with foreign imperialist powers to help destroy it.

            “Therefore, the right deviationist project of a lengthy organic modernization taking place under the auspices of the proletarian vanguard party, although a theory pleasing to the intellect, nevertheless in our real case constitutes nothing but a fatal delusion.

            “What, then, is the correct line of policy? We must first augment the armed strength of the USSR in order to protect the revolution, even at the cost of postponing the organic emergence of a modern workers’ state. We must concentrate all modernizing sectors under direct party control, because it is too dangerous, in the USSR’s beleaguered condition, to permit the emergence of even minor propertied classes.

            “Finally, given the arduous and painful task of unnaturally accelerating heavy industrial development and the accumulation of arms, even while so many of the urgent human needs of the workers and peasants remain unmet, it is necessary to maintain the utmost party unity and wholehearted dedication to the correct policy line.”

  10. RanDomino

    Full employment is based on the idea that “those who would eat must work”. Why should a person’s ability to live be contingent on their having an opportunity to contribute? If we could build self-maintaining robots to do all the work, thereby putting everyone out of a job, it would be insane to call that a bad thing!

    This uncriticized assumption that everyone’s got to have a job must die. It’s what leads to the Newspeak term “job creators” that we all know is wrong, but can’t articulate why because to do so would mean confronting the idea that jobs are necessary or good.

    What’s actually happening is this: The economy says “you have to have a job to make money to buy necessities” and the State says “you have to have a job to make money to pay taxes so you can live indoors”; IOW Moloch tells each person, “Get a job or I will FUCKING KILL YOU”. Then it’s up to each person to scramble to find a job (at least in days of chattel slavery the bosses spared us the indignity of having to compete to have a master!); when a person does, Moloch says, “Congratulations! Now I won’t have to FUCKING KILL YOU!”… and people celebrate!

    Why do we put up with such a fucked-up system? Isn’t the real root of the problem Moloch aka Capitalism, the State, and the Spectacle? Why do we spend so much time and trouble scrambling for scraps instead of going to the root of the problem and slaying the beast?

    1. F. Beard

      If we could build self-maintaining robots to do all the work, thereby putting everyone out of a job, it would be insane to call that a bad thing! RanDomino

      Correct. Robots will soon be able to do all the tedious, non-creative work. And those robots will be built with the stolen purchasing power of those they replace. Such is the nature of “credit creation” – the means by which the so-called “credit-worthy” steal from everyone else.

        1. F. Beard

          why do we accept the legitimacy of their claim? RanDomino

          Because there is a LOT that is right about the current system. It did beat the Nazis and the Communists and neither the Germans nor the Russians are pushovers (nor are the Japanese, for that matter).

          We need to fix the current system without throwing away the baby.

          1. Chris Rogers

            Dear F. Beard,

            As a Brit, and whilst not from Yorkshire, may I be blunt and call a spade a spade.

            First and foremost, Capitalism did not, nor never has, overcome NAZISM or Communism – if you mean by Communism, the National Socialism undertaken by Germany circa 1933-1945 and Russian Communism, undertaken by the Soviet Union – this being the Russian Empire – circa 1922 – 1989, actually, I could even infer that Russian National Socialism died with Stalin, but I digress, but you get my gist.

            Whilst I’m more than able to pen an extensive response and explain clearly why you are wrong, time presently is against me given I’m 12 hours minimum ahead of you – suffice to say, your comment is plain wrong and highly simplistic, hardly the type of comment I usually recognise you for.

            To put it bluntly, Capitalism did not put Nazism down, the sacrifice of millions of Europeans, Commonwealth soldiers and a fair few US soldiers achieved this, and at a considerable cost to the UK, a cost that ultimately benefitted the USA greatly.

            Further, neither the USSR or present day China, or China under Mao were Communist, they should be labelled for what they are or were, which is National Socialist and like oil and water nationalism and socialism do not mix.

          2. RanDomino

            Your historical myth-telling aside (for example that there was nothing free-market capitalist about the WWII war economy), the problems with this system are endemic. Why should people be kept homeless while there are empty houses? The more common answer is that capitalism values profit over humanity, and no profit is made by letting someone get something for free; but there’s another side to it: Homelessness is a threat, a club to hit you over the head with to keep you working for someone else’s profit. It’s not a side effect- it’s the core reason!

            If you’re thinking about changing it through politics, good luck. What’s really needed is a value shift to a system that functions on radically different principles (and it must be total, because each of the mechanisms of capitalism only works as part of the entire system). But that’s not reform… it’s revolution.

          3. F. Beard

            Homelessness is a threat, a club to hit you over the head with to keep you working for someone else’s profit. It’s not a side effect- it’s the core reason! RanDomino

            The irony is that those empty homes were built with the stolen purchasing power of the homeless.

            It all goes back to the banks. What part of “usury for stolen purchasing power” sounds like the basis for a sound economic and social system?

          4. F. Beard

            First and foremost, Capitalism did not, nor never has, overcome NAZISM or Communism – Chris Rodgers

            Well, call it what you will but US material support and entry into WWII was decisive.

            As for the Commies, the once thriving US middle class was a severe reproach to them.

            This is not to say that the US system does not have severe problems; it does. It’s money system is fundamentally crooked.

          5. skippy

            “Well, call it what you will but US material support and entry into WWII was decisive.”… beardo.

            Yep I completely agree!

            With out the american industrialists and bankers the war would have not even got off the ground.

            Skippy… help start a war… then claim to have won it almost single handily… and help rebuild the vanquished… spreading democracy!… what a bunch of great guys!

    2. Cynthia

      The PTB, at least the ones with political clout, want all of us plebs working, but working for a lot, lot less. Their motto is, “race to the bottom for you plebeians, but NOT for us plutocrats.”

    3. Kyrie Eleison

      Everybody wants to rule the world, as the song goes. The limitation to how much they can actually do it, however, seems to vary wildly.

      If I only have a patch of grass with some ants, I am God to those ants. I suppose if I had a lot more I could accomplish more.

      I agree completely and wonder why myself, it’s kind of why I am here.

      1. F. Beard

        Everybody wants to rule the world, as the song goes. Kyrie Eleison

        Not me! I used to but not for a long time now. With the power comes the responsibility and I want no more than I can handle and possibly less.

        1. Kyrie Eleison

          I am also in line with that way of thinking, however the generalization is supported by the way our society is currently structured and the lack of outrage to it.

          Hidden inside of every American is a millionaire waiting to be let out, or so I’ve heard.

          1. F. Beard

            Hidden inside of every American is a millionaire waiting to be let out, or so I’ve heard. Kyrie Eleison

            Because it’s a winner-take-all system. Also there is the presumption that the system is just so there is no disgrace in being rich.

    4. The Black Swan

      I posed this upthread, but I’ll say it again. Why do we need jobs? Why don’t we allow humanity to enjoy the rewards of technological efficiencies and enjoy lives of leisure? Being required to work under threat of death is more or less slavery.

      1. F. Beard

        Being required to work under threat of death is more or less slavery. The Black Swan

        And murder in the case of the unemployable who fall through the safety net; though exposure to the elements is the proximate cause of death.

        In the US we specialize in making murder seem like suicide or self-defense so as to escape the responsibility for it.

    5. Lambert Strether

      No. One can still argue that demand creates jobs, and that everybody should be able to choose to have one, since the demand, in the aggregate, is created by society as a whole. In fact, I just did.

      Ergo, “jobs guarantee” does not imply “job creators,” at least not in the sense of the prevailing meme.

      I do understand why, from an anarchist perspective, it’s necesary to destroy the premise that the state can act for public purpose, which is fine, as long as it’s not done from false premises, as here.

    6. enouf

      Well..

      I can’t recall any point in history when a King or a Queen ever “needed a job”, can you?

      and yet, here we are, some 200 million(?) (guess-timate) of us little ‘Kings and Queens’ (all men/women over age 18) occupying a geographic location on the continent of North America whose area is defined by fictional boundaries, allowing our “servants” to not only run the asylum, but to kidnap us, cage us, grope us and our children, disrespect us and act dishonorably, and murder in our good name.

      …We each allow this? why?!

      Once you can answer that honestly to yourself, then you will be able to exert and exercise the Sovereign Power of your Being endowed to you by your Creator.

      Note: I personally believe all First Nations’ Peoples are due some reparations — 1st and foremost even.

      Love

  11. bdy1

    “It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire, and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus adversely affects only the rentier interests.”

    Question: Can anyone explain exactly how full employment might hurt rentier interests? Is Kalecki assuming a direct relationship between public debt and unemployment?

    1. NotTimothyGeithner

      Its about power not money. The barons of the 19th century didn’t burn $20 bills because they had so much money. It was about power and what they could do. Except for assholish behavior, the standard of living of the 0.01% will scarcely be impacted by a sane and just society, but its not about standards of living. Its about control.

      Academic work has been done on the mafia and mob-controlled areas, and if you look at the scale of the operations, mobs could have eased up on their protection rackets and allowed local businesses to flourish or expand providing greater pay outs in the long run. Interviews conducted with wise guys and bosses demonstrated that they knew this, but the whole point of being a wise guy or mafioso was never about money. Its about power.

      1. djrichard

        I think you just answered my question further above on what it meant to the rentier class to be “boom tired”.

        1. enouf

          Ding Ding! ;-)

          Yes indeed – also though, there are times for “harvesting” – just remember; they slowly and methodically steal the Peoples’ wealth, and they do so via the boom/bust (Gobble/Gorge during the bust).

          Although it’s true they are ‘sitting on tons of ca$h’, and .. ignoring their incestious (All In The Family) derivatives (‘shadow’, or otherwise) trades of ‘monetized debt’ ‘securitized’ “instruments” WMDs betwixt themselves, and calling it “profit”! (hahahaha) , .. …

          ….they always have credit/cash/assets available to gobble up real wealth, and this bubble ain’t entirely deflated (heck, I’d say far from it), so the ROI (Return-On-Investment) ratio (200:1 – 7000:1) isn’t even close to what it is for Lobbying a CongressCritter (or State and Local pols for that matter).

          Love

    2. J Sterling

      how full employment might hurt rentier interests?

      It’s not clear to me how technical you’re being with the word “rentier”, so I’ll take it in a broad meaning:

      Full employment is exactly the same as a “labor shortage”. It is a labor shortage relatively, and like all shortages it drives the price up. They don’t like labor having a high price. “Oh! what plumbers charge. Oh! the cab fares. Oh! the never being able to find a gardener or a housecleaner.”

      Surplus labor drives the price down; now the employer class can afford a pool boy, or a nanny, or another cook, and the waiters are more attentive.

      1. J Sterling

        I see I failed to clarify why the rentiers alone suffered from this. “Rentier”, broadly defined, gains income from the ownership of assets, while the rest of us gain income from the employment of our labor. Full employment means we pay others more to fix our plumbing, but we in turn are paid more, so it’s a wash. But because full employment raises the price of labor relative to assets, asset owners lose out. Hence the “servant problem” caused by an insufficiently small army of reserve labor.

        This phenomenon also applies to the upper middle class 1%. They mostly have jobs, they aren’t independently wealthy. But they are employed at a privileged rate, so they are to a certain small extent asset owners themselves. They still crave cheap servants, so they are still against full employment. (they’re just for full employment for themselves and their children)

  12. F. Beard

    Nor should the resulting fuller utilization of resources be applied to unwanted public investment merely in order to provide work. The government spending programme should be devoted to public investment only to the extent to which such investment is actually needed. The rest of government spending necessary to maintain full employment should be used to subsidize consumption (through family allowances, old-age pensions, reduction in indirect taxation, and subsidizing necessities). Michal Kalecki [emphasis added]

    Bingo! Take that you JGers!

    Mr. Kalecki is growing on me.

  13. Hugh

    This is a good article for being 70 years old. The reference’s to borrowing and debt are out of date, but he makes the connection between economics and politics. He is a step beyond Keynes because he recognizes the importance of tying jobs to worthwhile projects. He is very practical in recognizing too that aggregate demand can be increased not just by jobs but also by direct and indirect cashflows to the public. I take his capital tax as a way of addressing the problem of interest, by effectively taxing it away from those who accumulate its benefits.

    What I come away with and what I find most striking is Kalecki’s intelligent look at the actual economy and political conditions of his time. Contrast that with the completely divorced from reality, kleptocracy enabling ideologues who have dominated economics for the last 40 years.

  14. SH

    I’m stepping in way over my head here. My arc on this should be discredited.

    Here is how I read Kalecki’s thesis.

    1. If people are not happy, that leads to fascism. Nazi Germany is the case in point.

    2. Our goal is to avoid fascism. It’s 1943 and we’re losing lives fighting this fight so let’s figure out how and the hell to prevent it.

    3. In our political domain, when people are unhappy, we avoid fascism by adhering to capitalist principles.

    4. Capitalist principles are inadequate to to prevent the peoples’ unhappiness because capitalism is not dynamic enough to satisfy everyone at once (a little spin).

    5. If we give tax breaks, build out infrastructural in the Keynesian ideal or let those that don’t want anything to do with it, no one will be happy.

    6. Even if we do find a way to stimulate it is more likely than not to become a highly political battle where the fight causes problems to the business cycle as we try and up and down the stimulus to create zero business cycle (I cannot see how this argument differs from the anti-Fed rhetoric).

    7. Consumption is the best way to redistribute income because it is not inflationary. Tah Dah!!! Let’s all redistribute and consume equally.

    And yet personally, I cannot see how rationing and huge military budgets are not fascist in and of themselves. That was his day so I see some irony.

    Having the government mandate that you have to pay a private insurance company money as a tax is text book fascism. That is our reality and makes me think twice about what he said.

    Too much to think about.

    Scott

  15. SH

    I think you have to clarify why consumption is not inflationary. Basically, if we have a symbiotic relationship between labor and capital and the flows move back and forth equally, then if you take some profits from the business owner and give it to the worker, then its a closed circle. There is no inflation. It’s a happy no growth circle. Dream on.

  16. Lafayette

    Well-written and poignant. But a bit outdated as regards political systems.

    Americans must understand what gridlock means, since it is a hallmark aspect of its political system. It means the adamancy of either party in a two-party system.

    It means also that Americans have an inculcated belief in economic simplicities. For instance, that “free-markets” always gives access to the maximum number of suppliers such that consumers always avail themselves of the most competitive price. Whereas our hell-bent rush to consolidate markets shows that many approach that of an oligopoly. That is market share is severely diminished to a handful of players.

    The above article also does not consider a factor that was perhaps beyond the writer’s perception at the time. That by significantly reducing Total Income taxation, people could be induced to “game the system” in order to win wildly inordinate rewards. The consequence of which has been grossly unfair Income Disparity.

    Which brings us to the question, “What is the purpose of economic policy”. To generate grotesque incomes for a select minority of our population. Or to provide a decent living, in decent conditions, for the well-being of most American families.

    We’ve not really answered that question. And most Americans expect, perhaps, the latter to be provided by the former? (That is the rich get richer and create jobs? Yet another inane simplicity.) And yet, it is the former that is staring us in the face, whilst far too many Americans are incarcerated in long-term poverty.

    What ever happened to their “pursuit of happiness”? They were made road-kill on America’s Highway of Life.

    1. Lafayette

      For what it is worth, here is what has happened to income distribution in two distinct cases over recent history. The data comes from the Paris School of Economics’ Global Income Database (established by T. Piketty).

      Who has obtained the Lion’s Share of the wealth generated by the sweat of all employed Americans? The Global Income Database shows that the share of Total Income of the Top 10% of American households increased from 31.5% to 46.3% over the past five decades:
      1970 31,51%
      1980 32,87%
      1990 38,84%
      2000 43,11%
      2010 46,26%

      That’s nearly FIFTY-PERCENT of total income generated by the American economy, which goes to only 10% of American households. Think about it …

      Let’s look at the Top-10% of households in a high-tax country, say, France – where it has remained constant over the past four decades:
      1976 33,19%
      1986 31,39%
      1996 32,04%
      2006 32,81%

      Does the above give an explanation of how France affords its citizens the best National Health Care system in the world? (According to the World Health Organization.)

      Or an educational system that provides nearly-free postsecondary schooling allowing one the skills to find decent work – without putting an average debt-albatross of $20,000 around each and every neck of its graduates as does the US?

      It should …

      (PS: I could make the above comparison with just about any member country of the European Union.)

      1. Darias

        Which economy has grown faster and more?

        Could it be that the non 10 presenters in the US faired better than the ones in France?

        1. enouf


          Darias says:
          August 3, 2012 at 6:21 am
          Which economy has grown faster and more?

          Could it be that the non 10[%’s] presenters [percenters] in the US faired better than the ones in France?

          there; fixed it for you ;-)

          Love

          p.s. My intention is NOT to poke fun, but to constructively move forward…although, even fixed your comment seems to make no sense to me, but maybe it’s just me. Love

          1. Lafayette

            Regardless of how much income is generated and how much earned, the question is “fairness” – as in Income Disparity or Inequitable Income. Or as in “Sharing”. (Btw, “equitable” does not mean “equal” – almost the same words but with very different meanings.)

            Nonetheless, I’ll grant that you asked a good question. Still, we are talking percentages of a total. And that makes all the difference. (I.e, it’s not race and speed is not what we are measuring. We are measuring, in a growing pie, who gets the Lion’s Share and who gets Screwed Royally.)

            Besides, in terms of Total Income, I could not find what I thought were comparable series of revenues plus capital gains. For some silly reason, the authors think Compensation is Income and Capital Gains are “Rents”.

            But that is because they are French, methinks … because BOTH are incomes, only their sources are different – and who cares about the source of income except nitpickers?

  17. Schofield

    In the end it is not about Perfection because in an ever-changing world where life-forms have to adapt to survive who can expect all to be Perfection. It is a compromise. It is all about Attitude, about selecting the best Attitude. The best Attitude for human beings to adopt would seem to be that we’ll submit to the leadership of the Few provided that these Few do not use their power to abuse the Many in which event the Many have the right to counter-dominant. This is the basis of the Egalitarian Code that Hunter-Gatherers evolved over many thousands of years and to which we are now returning having seen a pressing need to better control the use and abuse of money.

    1. enouf


      … we’ll submit ….

      Therein lies the crux; and NO, I DO NOT CONSENT!

      Love

      p.s. I could rant on for hours about this … please reconsider submission to anything or anyone, for YOU and each living being is ‘special’ — So long as One remains peaceful, honorable and does not-> “Initiate Aggression”, each one of us are Kings and Queens. Full Stop.

    2. Lafayette

      HEGEMONY

      The best Attitude for human beings to adopt would seem to be that we’ll submit to the leadership of the Few provided that these Few do not use their power to abuse the Many

      In any socio-economic context the above is tantamount to no cultural evolution whatsoever, which defies historical record.

      It has taken humanity at least 3000 years to evolve from a handful of rulers who share power with no one and therefore obtain the Lion’s Share of whatever the economy generates to the present where incomes are accounted and taxed and redistributed as Public Services.

      Why the great change? Because humans had enough of being exploited unjustly. In fact, many are still dying every day to free themselves from a tyrant in a distant country. Many others have already died elsewhere over the past year to obtain a Fair Deal, to free themselves from the dominance of a select few.

      And here we are, in (supposedly) the Greatest Nation on Earth and we surrender income willingly/legally whilst, in contrast, others are dying to obtain theirs? We freed ourselves from the hegemony of an English Monarchy to institute much the same in the form of a moneyed plutocracy?

      MY POINT?

      It is unconscionable, illegitimate, unfair and wrong that 10% of the population should obtain half the Income that our sweat and labor generates. Whilst others are incarcerated in poverty left as road-kill on the Highway of Life.

      Why is such injustice so difficult to understand? Are we collectively blind or stupid or both?

  18. dbak

    In the nineteen thirties when I was a young lad growing up on a farm it was the usual practce to use animal manure to fertilize the fields rather than chemical fertilizers now common.So in that context as to the present discussion on the distribution of wealth in the world I offer a remark that I heard a long time ago. Money is like manure. Spread it around and it will do a lot of good. Pile it in one place it will stink like hell.

  19. enouf

    Money is like manure. Spread it around and it will do a lot of good. Pile it in one place it will stink like hell.

    No .. ‘Pile it in one place’ and it “destroys” (the ecological system, environment, …) You are dealing with ‘Destroyers’, psycho-sociopaths, plain and simple. Re-take your crown that was stolen from you, ….or succumb to the Stokholm Syndrome – I suggest the former.

    Love

    1. Lafayette

      WE, THE SHEEPLE

      {You are dealing with ‘Destroyers’, psycho-sociopaths, plain and simple.}

      Pure rant.

      Cupidity is not, unfortunately, psychopathic – which entails violent behaviour. It is, unfortunately, legal.

      We, the sheeple, are entirely responsible for its corporate version. We stood by and said nothing when Reckless Ronnie rewrote the Tax Code schedules and brought Marginal as well as Capital Gains taxes down from above 70% to 33% today. Further diminished another 10% or so by “deductions”.

      So, imagine, you are Golden Boy on Wall Street and you want to be One Of “Them”. Meaning a high-flyer. Can you imagine the temptation to game-the-system – particularly when it is entirely legal but inevitably calamitous in general – when for every million dollars of income that you “earn” you keep $750K? And when you put that money up for capital gain (i.e., “rent”), you get to keep 85% of the interest?

      Who can resist that siren-song, when lucre sings it so temptingly?

      WHAT TO DO?

      The most fundamental way we can diminish the greed-incentive in America is by modulating the Tax Code. Once upon a time, before 1960, marginal income was close to 95%. Was American TopManagement de-incentivized by the high taxes postwar up until the 1960s? Were they more incentivized when taxes in the early 1960’s dropped to 70% and then again in 1982 when Reckless Ronnie brought them down to 50% and then again when he brought them down to 28% in 1988 – one last bone to the dogs who financed his elections.

      Yes, that is when the greed became highly incentivized at the top. And we, the sheeple, said nothing. But there is a mighty squeal across the land nowadays because we feel “wronged”. Yes, we’ve been had – and had legally.

      We should have thought of that consequence when the top rates came tumbling down twenty years ago … it’s too late now to cry over spilt milk.

      But what we can do is vote progressives into office with a mandate to increase top rates (on both income vectors, compensation and capital gains) to around 80% in steps for incomes beginning at $250K per year.

      This measure will finally vitiate corporate greed. Boy-oh-boy, will the Plutocrats howl.

      And that will be music to our ears …

  20. Schofield

    Of course we submit to leadership. We submit to political representation by voting for representatives. This is why we have the work-arounds of parliaments. We literally physically and mentally could not cope with all the mental processing to individually make the decisions our political representatives undertake ( assuming they do their jobs conscientiously ) and at the same time hold down a full-time job in our own communities. In other words we delegate power. What we fail in is having the right attitude. An attitude that believes in having mechanisms that prevent and quickly get rid of those who abuse power.

    As it’s been expressed another way :-

    “It’s one thing to aspire to benefit ourselves and society as a whole, quite another to aspire to benefit ourselves and our family at the expense of society in general.”

    We need to develop an Attitude of Intolerance that will get rid of Russian Doll economic and political systems where abusers seek to hide within structures and ideologies such as Communists and Neo-Conservatives.

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