Kalecki's political business cycle

[Rakesh Bhandari]

Doug,  don't some post keynesians/kaleckians argue that the prop to
effective demand from debt financed fiscal expansion should be welcomed by
powerful enough sections of productive capital that are suffering from
excess capacity? In this way, why wouldn't it be possible to split the
bourgeoisie and have labor make alliance with productive capital against
rentier capitalists who are paranoid about inflationary consequences of
fiscal expansion? All the productive capitalists would need is some
assurance that the state and unions will keep wage demands within bounds,
and fiscally liberal politicians should receive enough backing in financial
form from productive capital and in electoral form by the mass of workers
to win election after election. Yet this scenario has not played out and
will not play out. Why not? Perhaps Mattick was correct about the deeper
reasons why the mixed economy would find its limits.
Yours, Rakesh


>If this keeps up it's going to make Alan Greenspan really really mad.
>Time for the periodic citation of Kalecki's "Political Aspects of
>Full Employment":
>
>>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.
>--
>
>Doug Henwood
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