In Kalecki's general model of the business cycle, gross profits fall in recessions just as De Long would expect them to, because investment and hence total demand declines. The effect on profit and wage shares depends on how much total output and employment fluctuates alongside it, and in fact, on how much labour businesses keep (under)employed - exactly the reason de Long gives for the worldview he maintained before 3rd-quarter 2009 data came along and shattered it.
In "Distribution of National Income" (1956) Kalecki writes that the wage share excluding salaries "does not seem to show marked cyclical fluctuations". [p. 66 in his 1971 'Selected Essays' book] But once salaries are included, "the 'real' wage and salary bill... can be expected to fluctuate less during the course of the cycle than the 'real' gross income of the private sector." [pp. 75-76] Therefore, the wage+salary share increases in a recession. He gives theoretical reasons - mainly that salaried workers' employment and pay does not vary so much with output - and runs a regression on US data 1929-41 to back it up. This is exactly the opposite of de Long's representation.
Kalecki does not use the Marxian value terminology, so de Long's use of 'relative surplus value' is odd.
De Long seems to be vaguely remembering and mashing into Kalecki's business cycle theory his infamous 1943 essay "Political aspects of full employment", in which Kalecki clearly states that less-than-full employment is bad for profits: "It is true that profits would be higher under a regime of full employment than they are on 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..." [p. 141]
But full employment was likely to meet political opposition from 'business leaders' and 'captains of industry' (he also never says 'capital' or 'the ruling class') because of (i) ideological prejudice against Government deficit spending and (ii) any expansion of public investment "which may foreshadow the intrusion of the state into the new spheres of economic activity" [p. 142], and (iii) dislike of the social and political consequences of greater working class confidence that comes with full employment. 'Rentiers' would have an additional reason: the erosion of their wealth from more rapid inflation. Kalecki thus predicted a political alliance between rentiers and the intellectual representatives of big industry, "and they would probably find more than one economist to declare that the situation was manifestly unsound." [p. 144]
De Long's account of Kalecki's views is thus completely misleading. And anyway, what kind of economist ditches thirty years of experience on the basis of a single quarterly piece of data?
Cheers, Mike scandalum.wordpress.com
On Fri, Nov 6, 2009 at 4:36 AM, Doug Henwood <dhenwood at panix.com> wrote:
> <http://delong.typepad.com/sdj/2009/11/zomfg-wtf-95-third-quarter-productivity-growth-number.html>
>
> ZOMFG WTF!!!!! 9.5% THIRD QUARTER PRODUCTIVITY GROWTH NUMBER!!!!
>
> I WAS EXPECTING A 6% PRODUCTIVITY GROWTH QUARTER, BUT THIS IS RIDICULOUS!!!
>
> Productivity increased 9.5 percent in the nonfarm business sector during the
> third quarter of 2009 as unit labor costs fell 5.2 percent (seasonally
> adjusted annual rates). In manufacturing, productivity increased 13.6
> percent while unit labor costs fell 7.1 percent...
>
> Back in the 1930s there was a Polish Marxist economist, Michel Kalecki, who
> argued that recessions were functional for the ruling class and for
> capitalism because they created excess supply of labor, forced workers to
> work harder to keep their jobs, and so produced a rise in the rate of
> relative surplus-value.
>
> For thirty years, ever since I got into this business, I have been mocking
> Michel Kalecki. I have been pointing out that recessions see a much sharper
> fall in profits than in wages. I have been saying that the pace of work
> slows in recessions--that employers are more concerned with keeping valuable
> employees in their value chains than using a temporary high level of
> unemployment to squeeze greater work effort out of their workers.
>
> I don't think that I can mock Michel Kalecki any more, ever again.
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