Collective Conscious

Michal Kalecki, 1943 (empha­sis mine):

A solid major­ity of econ­o­mists is now of the opin­ion that, even in a cap­i­tal­ist sys­tem, full employ­ment may be secured by a gov­ern­ment spend­ing pro­gramme…

It may be objected that gov­ern­ment expen­di­ture financed by bor­row­ing will cause infla­tion. [But] if the gov­ern­ment inter­ven­tion aims at achiev­ing full employ­ment but stops short of increas­ing effec­tive demand over the full employ­ment mark, there is no need to be afraid of infla­tion.

The entre­pre­neurs in the slump are long­ing for a boom; why do they not gladly accept the syn­thetic boom which the gov­ern­ment is able to offer them? It is this dif­fi­cult and fas­ci­nat­ing ques­tion with which we intend to deal in this article.

The rea­sons for the oppo­si­tion of the ‘indus­trial lead­ers’ to full employ­ment achieved by gov­ern­ment spend­ing may be sub­di­vided into three categories:

• dis­like of gov­ern­ment inter­fer­ence in the prob­lem of employ­ment as such;
• dis­like of the direc­tion of gov­ern­ment spend­ing (pub­lic invest­ment and sub­si­diz­ing consumption);
• dis­like of the social and polit­i­cal changes result­ing from the main­te­nance of full employment.

Every widen­ing of state activ­ity is looked upon by busi­ness with sus­pi­cion, but the cre­ation of employ­ment by gov­ern­ment spend­ing has a spe­cial aspect which makes the oppo­si­tion par­tic­u­larly intense.

[The tra­di­tional impor­tance of busi­ness] gives the cap­i­tal­ists a pow­er­ful indi­rect con­trol over gov­ern­ment pol­icy: every­thing which may shake the state of con­fi­dence must be care­fully avoided because it would cause an eco­nomic cri­sis. But once the gov­ern­ment learns the trick of increas­ing employ­ment by its own pur­chases, this pow­er­ful con­trol­ling device loses its effec­tive­ness. Hence bud­get deficits nec­es­sary to carry out gov­ern­ment inter­ven­tion must be regarded as perilous.

[S]ubsidizing mass con­sump­tion is much more vio­lently opposed by these experts than pub­lic invest­ment. For here a moral prin­ci­ple of the high­est impor­tance is at stake. The fun­da­men­tals of cap­i­tal­ist ethics require that ‘you shall earn your bread in sweat’—unless you hap­pen to have pri­vate means.

But even if this oppo­si­tion were overcome—as it may well be under the pres­sure of the masses—the main­te­nance of full employ­ment would cause social and polit­i­cal changes which would give a new impe­tus to the oppo­si­tion of the busi­ness lead­ers. Indeed, under a regime of per­ma­nent full employ­ment, the ‘sack’ would cease to play its role as a dis­ci­pli­nary mea­sure. The social posi­tion of the boss would be under­mined, and the self-​​assurance and class-​​consciousness of the work­ing class would grow.

[Cap­i­tal­ists’] class instinct tells them that last­ing full employ­ment is unsound from their point of view, and that unem­ploy­ment is an inte­gral part of the ‘nor­mal’ cap­i­tal­ist system.

[…]

[Under fas­cism, the] dis­like of gov­ern­ment spend­ing, whether on pub­lic invest­ment or con­sump­tion, is over­come by con­cen­trat­ing gov­ern­ment expen­di­ture on arma­ments. Finally, ‘dis­ci­pline in the fac­to­ries’ and ‘polit­i­cal sta­bil­ity’ under full employ­ment are main­tained by the ‘new order’, which ranges from sup­pres­sion of the trade unions to the con­cen­tra­tion camp. Polit­i­cal pres­sure replaces the eco­nomic pres­sure of unemployment.

[…]

It may be shown, how­ever, that the stim­u­la­tion of pri­vate invest­ment does not pro­vide an ade­quate method for pre­vent­ing mass unem­ploy­ment … the rate of inter­est and income tax would have to be reduced continuously.

It looks at present as if busi­ness lead­ers and their experts (at least some of them) would tend to accept as a pis aller pub­lic invest­ment financed by bor­row­ing as a means of alle­vi­at­ing slumps. They seem, how­ever, still to be con­sis­tently opposed to cre­at­ing employ­ment by sub­si­diz­ing con­sump­tion and to main­tain­ing full employ­ment. This state of affairs is per­haps symp­to­matic of the future eco­nomic regime of cap­i­tal­ist democracies.

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.…

Should a pro­gres­sive be sat­is­fied with a regime of the polit­i­cal busi­ness cycle as described in the pre­ced­ing sec­tion? I think he should oppose it on two grounds: (i) that it does not assure last­ing full employ­ment; (ii) that gov­ern­ment inter­ven­tion is tied to pub­lic invest­ment and does not embrace sub­si­diz­ing con­sump­tion. What the masses now ask for is not the mit­i­ga­tion of slumps but their total abo­li­tion. Nor should the result­ing fuller uti­liza­tion of resources be applied to unwanted pub­lic invest­ment merely in order to pro­vide work. The gov­ern­ment spend­ing pro­gramme should be devoted to pub­lic invest­ment only to the extent to which such invest­ment is actu­ally needed. The rest of gov­ern­ment spend­ing nec­es­sary to main­tain full employ­ment should be used to sub­si­dize con­sump­tion (through fam­ily allowances, old-​​age pen­sions, reduc­tion in indi­rect tax­a­tion, and sub­si­diz­ing neces­si­ties). Oppo­nents of such gov­ern­ment spend­ing say that the gov­ern­ment will then have noth­ing to show for their money. The reply is that the coun­ter­part of this spend­ing will be the higher stan­dard of liv­ing of the masses. Is not this the pur­pose of all eco­nomic activity?

(Photo: Tony the Mis­fit)