Egmont Kakarot-Handtke — The final implosion of MMT

Comment on Senexx on ‘Budget surpluses are not national saving’

AXEC: New Foundations of Economics

The final implosion of MMT
Egmont Kakarot-Handtke

Economist Michal Kalecki's amazingly correct prediction

Most people know Polish economist Michal Kalecki for his "profit equation," which looks like this:

This simply stated that business profits were equal to the sum of capitalist consumption, investment, government deficits and net exports, minus worker savings.

Kalecki was a contemporary of Keynes and a supporter of his economic views, particulary, that government has the power to establish and maintain full employment via deficit spending.

But Kalecki believed that full employment would never be achieved and he gave his reason why in an article he published entitled, "Political Aspects of Full Employment." Basically, Kalecki said that the full employment delivered by Keynesian policy would eventually lead to a more assertive working class and weakening of the social position of business leaders, causing the elite to use their political power to force the displacement of the Keynesian policy even though profits would be higher than under a laissez faire system: The erosion of social prestige and political power would be unacceptable to the elites despite higher profits.

Boy, was he right!!!

Chris Dillow does Kalecki

The bottom line here is simple. Both capitalists and workers have cause for complaint. Capitalists have lost pricing power - the degree of monopoly has fallen - which has tended to depress the profit share. But this has not benefited workers because instead the "wedges" of other incomes and higher imports have depressed their share.

******* 

You might object that imports are not a cost for capitalists to the extent that they comprise consumer goods. You'd be wrong. If workers buy domestic consumer goods, their wages are not a cost to capitalists in aggregate. This is because what they lose through the back door in higher wage costs is recouped through the front in higher spending. If, however, workers spend their incomes overseas, then wages are a net cost. In this sense, all imports are a cost to UK capitalists, either directly (imported materials) or indirectly.

Read it at Stumbling and Mumbling
The wage & profit squeeze
by chris dillow

The cost of a persistent CAD.