Academic journal article Review of Social Economy

Full Employment: Gift Horse or Trojan Horse? (1)

Academic journal article Review of Social Economy

Full Employment: Gift Horse or Trojan Horse? (1)

Article excerpt

Abstract Kalecki's 1943 essay Political Aspects of Full Employment (PAFE) is widely recognised as a seminal essay in the theory of the political business cycle. The paper argues that PAFE may also be interpreted as an early recognition by Kalecki of the phenomenon of rent seeking. Kalecki's discussion of the rent-seeking behavior of businessmen is shown to have anticipated Olson's subsequent theory of distributional coalitions. A Kalecki-Olson analysis provides an explanation for the movement in income shares in the UK since 1975.

Keywords: Kalecki, Olson, Political business cycles, Income shares

INTRODUCTION

Kalecki's paper Political Aspects of Full Employment (1943) is held in high esteem in the literature on political business cycles--"a brilliant essay" (Boddy and Crotty 1975), "a classic article" (Henley 1988), "a brilliant and perceptive piece" (Feiwel 1974). Nordhaus (1975) acknowledges that the "only serious [early] theory [of the political causes of the business cycle] is that of M. Kalecki". Henley (1988) notes that PAFE is still extensively cited in the economics, political science and sociology literatures and reports that the Social Science Citation Index recorded over 50 citings between 1980 and 1988. But, despite this acclaim, PAFE is essentially incomplete.

Mitchell, for example, while confirming Kalecki's originality as the progenitor of political business cycle analysis, argues that PAFE is deficient in at least one key respect.

According to Kalecki, inflation and unemployment are not simply manifestations of capitalism but tools of control for the manipulation of workers. But Kalecki went far beyond traditional Marxism; Kalecki was, in fact, the originator of the political business cycle analysis. In his theory, however, business interests prevail over the political institutions; it is not so much the politicians who initiate and manipulate the electoral cycle as it is the capitalist class which manipulates the economy and politicians. Unemployment is the major means of disciplining the workers. Kalecki was not entirely wrong; unemployment does place a powerful constraint on union demands. Unfortunately, Kalecki, like most Marxists, never spelled out the political mechanism by which capitalists are able to implement their economic policies. But they did not need to do so in a society with a small political sector; they could act directly over the economy by their own investment decisions (Mitchell 1988: 94).

Similarly, Sawyer (1999: 487-488) has two principal criticisms of PAFE. The essence of PAFE is Kalecki's thesis that the conflict of interest between capitalists and workers will prevent the attainment and maintenance of full employment. Like Mitchell, Sawyer observes that what Kalecki did not identify was the actual transmission mechanism between the interests of these two classes on the one hand and the political and institutional systems of parliamentary democracies on the other. However, as Mitchell has argued above, in the context in which Kalecki was writing, which was of pre-war democratic economies with relatively small public sectors and economically impotent politicians, there was no need for him to do so. But this is not convincing because in PAFE Kalecki was anticipating a situation in which governments would have learned the 'trick' of achieving full employment by their own spending decisions. It, therefore, behoved him to be more explicit about the transmission mechanisms through which businessm en would register their opposition to full employment in a democratic society.

Sawyer's second reservation is that in a democratic society with intervals of 4 to 5 years (or perhaps less) between elections, there is insufficient time for the feedbacks between capitalists and workers over the political and social tensions of full employment to work themselves through. This suggests that Kalecki's concept of a 'political business cycle' should more properly be thought of as a 'political trend'. …

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