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About this book

This volume of intellectual biography records the work of Michał Kalecki’s maturity: his work on monetary economics and the theory of profits; his work on the problems of socialism and developing countries; and the extension of his theory of capitalism to define his work in relation to Keynes and previous political economic principles. Kalecki had, by 1939, laid out the essential elements of his theory of the business cycle in capitalism. This book begins at Oxford where, at the Institute of Statistics, he worked on the economic planning and financing of World War Two, as well as extending and detailing the particulars of his theory and examining the conditions for full employment in the post-War international monetary and financial system. Kalecki would then work for the United Nations on full employment, inflation, and developing countries. He departed from the United Nations in 1955, and returned to Poland to extend two new directions of his ideas – on the economics of developing countries and his theory of growth in the socialist economy, alongside further work on business cycles.

This book is essential reading for all those who want to understand Kalecki’s lasting contribution to economic theory and policy.

Table of Contents

Frontmatter

1. Wages in ‘Free and Fair Competition’

Abstract
If we are to take journal citations as the measure of academic influence, then Michał Kalecki was not immediately recognised as one of the most important economists of his time. In his study of Ralph Hawtrey, Patrick Deutscher included a study of citations in the literature of macroeconomics and monetary theory in the inter-war period and during the Second World War. Obviously before 1936 the English-speaking world had no knowledge of the obscure Pole, since Kalecki had not published in English until 1936. Even after this, between 1936 and 1939, Kalecki’s work was not cited significantly. It was only during the Second World War that his work came to be more commonly referred to in the macroeconomics discussion. Deutscher has him ranked, by number of citations, as sixth after John Maynard Keynes, J.R. Hicks, Gottfried Haberler, Dennis Robertson, and Hawtrey. Kalecki appears in the ranking with the same number of citations as Keynes’s Austrian-American rival, Joseph Schumpeter, whose voluminous alternative explanation of the 1930s depression, Business Cycles was published in 1939. Much of Kalecki’s distinction was due to Keynes’s public acknowledgement that Kalecki’s wages theory was the one clearly implied in his General Theory.
Jan Toporowski

2. A Farewell to the 1930s

Abstract
The commission for Money and Real Wages was merely one expression of the interest in Poland in the new approach to economic theory and policy. At around the same time as the publication of Kalecki’s study, as he himself was getting down to his translation of Keynes’s General Theory, there appeared in Warsaw a Polish translation of Joan Robinson’s Introduction to the Theory of Employment. This had been originally published in 1937, in its author’s words, ‘to provide a simplified account of the main principles of the Theory of Employment for students who find that they require some help in assimilating Mr. Keynes’s General Theory of Employment, Interest and Money, and the literature that is growing around it… Besides the General Theory, I have drawn upon my own Essays in the Theory of Employment, Mr. Colin Clark’s National Income and Outlay and Mr. Michal Kalecki’s article “A Theory of the Business Cycle, in the Review of Economic Studies, February 1937.’
Jan Toporowski

3. Oxford

Abstract
In the end the choice of Oxford appears to have been dictated by circumstances as much as any choice on the part of Kalecki himself. There was research to be done, notably the commissioned study of the economic consequences of the German occupation of Poland, and the Oxford Institute of Statistics, which had been set up in 1935 with finance from the Rockefeller Foundation, was depleted of its researchers. Its Director was Jacob Marschak, whose starting point in Economics, in Rosa Luxemburg and the critique of Hilferding was the same as Kalecki’s. He had been active in finding employment for Kalecki, but had left for the United States in December 1938, on a Rockefeller travelling fellowship. His colleagues, Redvers Opie, Hubert Henderson, and Roy Harrod, had gone into government service, where economic planning and finance for the war against Germany were now major priorities.
Jan Toporowski

4. Among Friends Again?

Abstract
In 1936, Adela and Michał Kalecki had left Poland behind them. Adela Kalecka had made a brief visit to Poland in 1939, when she met Kalecki’s mother for the last time. But this was a fleeting contact. In 1940, the war brought Poland to the Kaleckis.
Jan Toporowski

5. Progress and Profit

Abstract
Kalecki’s statistical investigations did not distract him from his attempts to explain his theories more clearly after his set-backs in Cambridge. But in a profession which increasingly aspired to mathematical precision and took for granted the reliability of statistics, his method of bold approximations occasionally followed by consideration of complicating factors was ill attuned to readers who took received theory as the starting points for enriching, even occasionally modifying that theory, and who therefore had difficulty in placing themselves at the starting point of Kalecki’s analysis.
Jan Toporowski

6. Profits and Money

Abstract
After leaving Cambridge, Kalecki took up the challenge of Keynes’s monetary theory. This is perhaps the least understood, and least researched, aspect of Kalecki’s work. In large part this was because much of his monetary theory was not labelled as such, but tended to be tacked on to papers on more general topics. He himself does not seem to have thought sufficiently highly of much of his monetary analysis to revise and republish it in his successive volumes of essays. A good example is his discussion of the money market in his 1933 paper on the business cycle, labelled an ‘application’ of his theory of the business cycle, which he excluded when he republished that paper in 1969 so that it languished unpublished until after Kalecki’s death. There, as in his later work on monetary theory, the theory of profits is at the heart of his analysis: it ensures that money spent in an economy on fixed investment does not disappear from that economy, to be replaced by plant and equipment, but, as with a trade surplus, or a fiscal stimulus, accrues as bank deposits in the accounts of firms or capitalists.
Jan Toporowski

7. The Political Economy of Full Employment

Abstract
On 22 June 1941, the German army invaded the Soviet Union. The invasion transformed the political atmosphere in the community of Polish émigrés in Britain. The Soviet Union had been regarded by the Polish Government-in-Exile as a co-perpetrator, on equal terms with Germany, of the downfall of Poland in 1939. This had contributed to the isolation of Polish politicians (but not Sikorski, who was close to Churchill) in London, where Churchill from 1940 was planning for Soviet entry into the anti-German alliance. Within the Polish community it further isolated the few socialists in exile, who were torn between the official decision of the Polish Socialist Party to forego political activity until after pre-war Poland had been reconstituted, and their left-wing who argued that the war must be about more than just the restoration of the status quo of 1939. The resumption of diplomatic relations with the Soviet Union under the Sikorski-Mayski Agreement of July 1941 did little to reduce the suspicion among the émigré politicians of Soviet intentions and the role of the Polish left in those intentions.
Jan Toporowski

8. Planning for Peace

Abstract
The prospect of peace brought back into the political discussion and Kalecki’s research agenda the question of the consequences of full employment for international trade and payments. Kalecki had earlier expressed his critical view on the possibilities of achieving full employment without international co-operation. In his articles for Przegląd Socjalistyczny in 1932, he had alluded to the difficulties of trying to achieve and maintain full employment in an open economy. On a unilateral basis, if one government alone attempts to reflate its economy, it risks difficulties in balancing its foreign trade, as domestic demand rises faster than demand among its trading partners. These difficulties could be overcome on a multilateral basis if reflation is coordinated with other governments, in order to ensure that all imported more so that all exported more. But this would be prone to imperialist rivalry, undermining international co-operation.
Jan Toporowski

9. The Transition Period

Abstract
Kalecki’s last article for the Bulletin of the Oxford Institute of Statistics was published on 4 December 1944, and was on ‘Employment in the United Kingdom during and after the Transition Period.’ The ‘transition’ in its title was the one from war to peace, a period marked on previous occasions, after the Napoleonic Wars, or the First World War, by sharp falls in production and increases in unemployment. The Beveridge Report had been followed in May 1944 by a White Paper (an official statement to inform Parliament of government policy) on employment policy. The paper had identified as key policy objectives in the transition period avoiding inflation, which would be done by maintaining war-time controls and rationing until supply improved; the prevention by controls on industrial location of the emergence of depressed areas of high unemployment; while the outflow of labour from the armed forces and support services would be offered retraining with pay set above the benefits paid to the unemployed. The White Paper also laid down the principles of the counter-cyclical policy to maintain high levels of output and employment in peace-time. In the pages of the Bulletin of the Oxford Institute, Kalecki had hailed the White Paper: ‘For the first time an official document acknowledges the responsibility of the Government for preventing large fluctuations in output and employment. This represents a great advance upon the creed that slumps are natural and even salutary, but it does not amount to a complete programme for full employment.’
Jan Toporowski

10. At the United Nations

Abstract
In Washington, Lange combined his position of Polish Ambassador to the United States with that of the official Polish delegate to the United Nations where he was active in developing the work and the staff of the international organisation. On 7 November 1946, David Owen, who had just been appointed to the position of Assistant Secretary-General of the United Nations, wrote to Edward Phelan, the Acting Director of the International Labour Organization. ‘I have been approached by the Polish government with the suggestion that Dr. Michael Kalecki, now a member of staff of the ILO, should be considered as candidate for a senior post in the Department of Economic Affairs. I have known Dr. Kalecki for some time and I have a high respect for his qualities as an economic theoretician. I am, for this reason, prepared to consider him for a senior post as an economic adviser somewhat detached from general administration and political work of my Department.’ Owen had seen Kalecki that day and told him that ‘I could not enter into any formal discussion with him concerning his candidature before you [i.e., the ILO] had informed me that you were prepared to release him. If you are prepared to consider releasing Dr. Kalecki, I should be happy to meet you in any way with regard to the date of his release.’ In the event, the ILO was co-operative. With Adela, Kalecki moved to New York, and, on 30 December 1946, he commenced work as Assistant Director of the Economic Stability and Development Division in the Department of Economic Affairs of the UN Secretariat.
Jan Toporowski

11. The Disenchantment at the United Nations

Abstract
While he was in Mexico, the first proofs arrived in New York of Kalecki’s new book, Theory of Economic Dynamics. The book arose from an enquiry in May 1948 by Kalecki to his publisher, George Allen and Unwin as to ‘whether there is any chance of your reprinting ESSAYS IN THE THEORY OF ECONOMIC FLUCTUATIONS and STUDIES IN ECONOMIC DYNAMICS in the near future. As a matter of fact I have had many enquiries on the subject. If your paper quota does not permit it, perhaps it would be possible to make an arrangement with another firm. (As far as I recall a book of Mrs. Robinson published initially by Macmillan has been now reprinted by Blackwell.)’ Allen and Unwin eventually wrote back to say that they might consider a reprint, but that the small number of orders made it difficult to give priority to the book of essays, and would Kalecki consider perhaps an entirely new book, and not essays, which are difficult to sell, but ‘a single connected whole.’ Kalecki wrote back on 2 August 1948, ‘I have no intention to replace my Essays in Economic Fluctuations by an entirely new book.’ He asked Allen and Unwin to consider ‘my negotiating the reprint of my books with another British firm and possibly with an American firm with regard to the U.S. market.’ This evoked a response from the publisher to the effect that new orders had been received, and supply conditions had improved (‘due to the general falling off in the sale of books.’) By the end of October 1948, Kalecki had started work ‘on the preparation of corrections for the new edition of my Essays in Economic Fluctuations, and I shall send them to you as soon as I have them ready. In the main the corrections amount to replacing the statistical data not so much by bringing them up to date as by using new estimates that have been made available since 1939.’
Jan Toporowski

12. The Possibilities of Real Existing Socialism

Abstract
Following their departure from New York, on 20 January 1955, Michał and Adela Kalecki stopped in Britain on their way back to Poland. In Britain he visited Oxford and Cambridge, where he gave a lecture on hyper-inflation, perhaps an unwanted intervention into the arguments around monetary theory and policy raging among Cambridge economists at the time. Those economists were divided into the partisans, led by Richard Kahn, of Keynes’s ‘liquidity preference’ theory of interest and money, in which the rate of interest is the compensation for holding an illiquid asset, and the supporters of Dennis Robertson’s ‘loanable funds’ theory of money, in which the rate of interest is the price that brings the supply and demand for ‘loanable funds,’ that is, money capital or credit, into equilibrium.
Jan Toporowski

13. Academic Freedom

Abstract
With the coming of the 1960s, Kalecki’s relations with the government soured, and he turned more and more towards academic work. Much of the deterioration in his government work was due to differences over the nature and purpose of the government’s direction of the economy. For him, the purpose of economic planning under socialism was the improvement in consumption, and consumption standards, of the broad mass of the population. This approach, however, did not survive the fetishisation of industrialisation and the rate of growth of the economy as a whole that emerged from the highly politicised method of plan construction in the Soviet bloc. In that process mass consumption was reduced to a haphazard totemic outcome of successive construction campaigns. With an insecure hold on the loyalty of the masses, the Polish Government was prone to inflate projects, often at the behest of industrial lobbies with large concentrations of workers: in the Polish case, the coal-mining districts and the steel industry. The Six-Year Plan of 1950–1955 had over-extended project commitments and failed as a result. The more modest first Five-Year Plan of 1956–1960, drawn up by the chastened planners, assisted by détente with the Western powers, was overfulfilled, thanks to its concentration on completing projects left over from the Six-Year Plan. Even so, the decentralisation of economic decision-making, following the turn to reforms in economic administration, had to be reined in in 1959, when it became apparent that enterprise managers were prone to over-investing.
Jan Toporowski

14. The Last Disappointment

Abstract
The recovery from his heart attack took over three months. He resumed work in March and, in May 1966, received the honour of election to full membership of the Polish Academy of Sciences. He now had a new collaborator, Tadeusz Kowalik, a political economist and historian of economic thought who had studied under Lange, but taking a great interest in the work of Kalecki, and had been responsible for the biographies of Lange and Kalecki in the festschrift volumes honouring the two luminaries.
Jan Toporowski

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