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MichalKalecki,"PoliticalAspectsofFullEmployment"

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PoliticalAspectsofFullEmployment1
byMichalKalecki
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1.Asolidmajorityofeconomistsisnowoftheopinionthat,evenina
capitalistsystem,fullemploymentmaybesecuredbyagovernment
spendingprogramme,providedthereisinexistenceadequateplanto
employallexistinglabourpower,andprovidedadequatesuppliesof
necessaryforeignrawmaterialsmaybeobtainedinexchangeforexports.
Ifthegovernmentundertakespublicinvestment(e.g.buildsschools,
hospitals,andhighways)orsubsidizesmassconsumption(byfamily
allowances,reductionofindirecttaxation,orsubsidiestokeepdownthe
pricesofnecessities),andif,moreover,thisexpenditureisfinancedby
borrowingandnotbytaxation(whichcouldaffectadverselyprivate
investmentandconsumption),theeffectivedemandforgoodsand
servicesmaybeincreaseduptoapointwherefullemploymentis
achieved.Suchgovernmentexpenditureincreasesemployment,beit
noted,notonlydirectlybutindirectlyaswell,sincethehigherincomes
causedbyitresultinasecondaryincreaseindemandforconsumerand
investmentgoods.
2.Itmaybeaskedwherethepublicwillgetthemoneytolendtothe
governmentiftheydonotcurtailtheirinvestmentandconsumption.To
understandthisprocessitisbest,Ithink,toimagineforamomentthatthe
governmentpaysitssuppliersingovernmentsecurities.Thesuppliers
will,ingeneral,notretainthesesecuritiesbutputthemintocirculation
whilebuyingothergoodsandservices,andsoon,untilfinallythese
securitieswillreachpersonsorfirmswhichretainthemasinterestyielding
assets.Inanyperiodoftimethetotalincreaseingovernmentsecuritiesin
thepossession(transitoryorfinal)ofpersonsandfirmswillbeequaltothe
goodsandservicessoldtothegovernment.Thuswhattheeconomy
lendstothegovernmentaregoodsandserviceswhoseproductionis
'financed'bygovernmentsecurities.Inrealitythegovernmentpaysforthe
services,notinsecurities,butincash,butitsimultaneouslyissues
securitiesandsodrainsthecashoffandthisisequivalenttothe
imaginaryprocessdescribedabove.

THELASTPHASE
INTHE
TRANSFOR
MATIONOF
CAPITALISM
byMichalKalecki

THEORYOF
ECONOMIC
DYNAMICS
byMichalKalecki

Whathappens,however,ifthepublicisunwillingtoabsorballtheincrease
ingovernmentsecurities?Itwillofferthemfinallytobankstogetcash
MONOPOLY
(notesordeposits)inexchange.Ifthebanksaccepttheseoffers,therate
CAPITAL:An
ofinterestwillbemaintained.Ifnot,thepricesofsecuritieswillfall,which
Essayonthe
American
meansariseintherateofinterest,andthiswillencouragethepublicto
Economicand
holdmoresecuritiesinrelationtodeposits.Itfollowsthattherateof
SocialOrderby
interestdependsonbankingpolicy,inparticularonthatofthecentral
PaulA.Baranand
bank.Ifthispolicyaimsatmaintainingtherateofinterestatacertain
PaulM.Sweezy
level,thatmaybeeasilyachieved,howeverlargetheamountof

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MichalKalecki,"PoliticalAspectsofFullEmployment"

governmentborrowing.Suchwasandisthepositioninthepresentwar.
Inspiteofastronomicalbudgetdeficits,therateofinteresthasshownno
risesincethebeginningof1940.
3.Itmaybeobjectedthatgovernmentexpenditurefinancedbyborrowing
willcauseinflation.Tothisitmayberepliedthattheeffectivedemand
createdbythegovernmentactslikeanyotherincreaseindemand.If
labour,plants,andforeignrawmaterialsareinamplesupply,theincrease
indemandismetbyanincreaseinproduction.Butifthepointoffull
employmentofresourcesisreachedandeffectivedemandcontinuesto
increase,priceswillrisesoastoequilibratethedemandforandthe
supplyofgoodsandservices.(Inthestateofoveremploymentof
resourcessuchaswewitnessatpresentinthewareconomy,an
inflationaryriseinpriceshasbeenavoidedonlytotheextenttowhich
effectivedemandforconsumergoodshasbeencurtailedbyrationingand
directtaxation.)Itfollowsthatifthegovernmentinterventionaimsat
achievingfullemploymentbutstopsshortofincreasingeffectivedemand
overthefullemploymentmark,thereisnoneedtobeafraidofinflation.2
II
2.Theaboveisaverycrudeandincompletestatementoftheeconomic
doctrineoffullemployment.Butitis,Ithink,sufficienttoacquaintthe
readerwiththeessenceofthedoctrineandsoenablehimtofollowthe
subsequentdiscussionofthepoliticalproblemsinvolvedinthe
achievementoffullemployment.
Inshouldbefirststatedthat,althoughmosteconomistsarenowagreed
thatfullemploymentmaybeachievedbygovernmentspending,thiswas
bynomeansthecaseevenintherecentpast.Amongtheopposersof
thisdoctrinetherewere(andstillare)prominentsocalled'economic
experts'closelyconnectedwithbankingandindustry.Thissuggeststhat
thereisapoliticalbackgroundintheoppositiontothefullemployment
doctrine,eventhoughtheargumentsadvancedareeconomic.Thatisnot
tosaythatpeoplewhoadvancethemdonotbelieveintheireconomics,
poorthoughthisis.Butobstinateignoranceisusuallyamanifestationof
underlyingpoliticalmotives.
Thereare,however,evenmoredirectindicationsthatafirstclasspolitical
issueisatstakehere.Inthegreatdepressioninthe1930s,bigbusiness
consistentlyopposedexperimentsforincreasingemploymentby
governmentspendinginallcountries,exceptNaziGermany.Thiswasto
beclearlyseenintheUSA(oppositiontotheNewDeal),inFrance(the
Blumexperiment),andinGermanybeforeHitler.Theattitudeisnoteasy
toexplain.Clearly,higheroutputandemploymentbenefitnotonly
workersbutentrepreneursaswell,becausethelatter'sprofitsrise.And
thepolicyoffullemploymentoutlinedabovedoesnotencroachupon
profitsbecauseitdoesnotinvolveanyadditionaltaxation.The
entrepreneursintheslumparelongingforaboomwhydotheynotgladly
acceptthesyntheticboomwhichthegovernmentisabletoofferthem?It
isthisdifficultandfascinatingquestionwithwhichweintendtodealinthis
article.
Thereasonsfortheoppositionofthe'industrialleaders'tofullemployment
achievedbygovernmentspendingmaybesubdividedintothree
categories:(i)dislikeofgovernmentinterferenceintheproblemof
employmentassuch(ii)dislikeofthedirectionofgovernmentspending
(publicinvestmentandsubsidizingconsumption)(iii)dislikeofthesocial
andpoliticalchangesresultingfromthemaintenanceoffullemployment.
Weshallexamineeachofthesethreecategoriesofobjectionstothe
http://mrzine.monthlyreview.org/2010/kalecki220510.html

TheTheoryof
Capitalist
Developmentby
PaulM.Sweezy

THEENDLESS
CRISIS:How
Monopoly
FinanceCapital
Produces
Stagnationand
Upheavalfromthe
USAtoChina
byJohnBellamy
FosterandRobert
W.McChesney

THEGREAT
FINANCIAL
CRISIS:Causes
and
Consequences

THELAWOF
WORLDWIDE
VALUEbySamir
Amin

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governmentexpansionpolicyindetail.
2.Weshalldealfirstwiththereluctanceofthe'captainsofindustry'to
acceptgovernmentinterventioninthematterofemployment.Every
wideningofstateactivityislookeduponbybusinesswithsuspicion,but
thecreationofemploymentbygovernmentspendinghasaspecialaspect
whichmakestheoppositionparticularlyintense.Underalaissezfaire
systemthelevelofemploymentdependstoagreatextentonthesocalled
stateofconfidence.Ifthisdeteriorates,privateinvestmentdeclines,which THEPOLITICAL
ECONOMYOF
resultsinafallofoutputandemployment(bothdirectlyandthroughthe
GROWTHbyPaul
secondaryeffectofthefallinincomesuponconsumptionand
A.Baran
investment).Thisgivesthecapitalistsapowerfulindirectcontrolover
governmentpolicy:everythingwhichmayshakethestateofconfidence
mustbecarefullyavoidedbecauseitwouldcauseaneconomiccrisis.But
oncethegovernmentlearnsthetrickofincreasingemploymentbyitsown
purchases,thispowerfulcontrollingdevicelosesitseffectiveness.Hence
budgetdeficitsnecessarytocarryoutgovernmentinterventionmustbe
regardedasperilous.Thesocialfunctionofthedoctrineof'soundfinance'
istomakethelevelofemploymentdependentonthestateofconfidence.
3.Thedislikeofbusinessleadersforagovernmentspendingpolicy
growsevenmoreacutewhentheycometoconsidertheobjectsonwhich
themoneywouldbespent:publicinvestmentandsubsidizingmass
consumption.
Theeconomicprinciplesofgovernmentinterventionrequirethatpublic
investmentshouldbeconfinedtoobjectswhichdonotcompetewiththe
equipmentofprivatebusiness(e.g.hospitals,schools,highways).
Otherwisetheprofitabilityofprivateinvestmentmightbeimpaired,andthe
positiveeffectofpublicinvestmentuponemploymentoffset,bythe
negativeeffectofthedeclineinprivateinvestment.Thisconceptionsuits
thebusinessmenverywell.Butthescopeforpublicinvestmentofthis
typeisrathernarrow,andthereisadangerthatthegovernment,in
pursuingthispolicy,mayeventuallybetemptedtonationalizetransportor
publicutilitiessoastogainanewsphereforinvestment.3
Onemightthereforeexpectbusinessleadersandtheirexpertstobemore
infavourofsubsidisingmassconsumption(bymeansoffamily
allowances,subsidiestokeepdownthepricesofnecessities,etc.)thanof
publicinvestmentforbysubsidizingconsumptionthegovernmentwould
notbeembarkingonanysortofenterprise.Inpractice,however,thisis
notthecase.Indeed,subsidizingmassconsumptionismuchmore
violentlyopposedbytheseexpertsthanpublicinvestment.Forherea
moralprincipleofthehighestimportanceisatstake.Thefundamentalsof
capitalistethicsrequirethat'youshallearnyourbreadinsweat'unless
youhappentohaveprivatemeans.

AN
INTRODUCTION
TOTHETHREE
VOLUMESOF
KARLMARX'S
CAPITALby
MichaelHeinrich

THEROSA
LUXEMBURG
READERedited
byPeterHudis
andKevinB.
Anderson

4.Wehaveconsideredthepoliticalreasonsfortheoppositiontothe
policyofcreatingemploymentbygovernmentspending.Butevenifthis
oppositionwereovercomeasitmaywellbeunderthepressureofthe
WHATEVERY
ENVIRONMEN
massesthemaintenanceoffullemploymentwouldcausesocialand
TALISTNEEDS
politicalchangeswhichwouldgiveanewimpetustotheoppositionofthe
businessleaders.Indeed,underaregimeofpermanentfullemployment, TOKNOWABOUT
CAPITALISMby
the'sack'wouldceasetoplayitsroleasa'disciplinarymeasure.The
FredMagdoffand
socialpositionofthebosswouldbeundermined,andtheselfassurance
JohnBellamy
Foster
andclassconsciousnessoftheworkingclasswouldgrow.Strikesfor
wageincreasesandimprovementsinconditionsofworkwouldcreate
politicaltension.Itistruethatprofitswouldbehigherunderaregimeof
fullemploymentthantheyareontheaverageunderlaissezfaire,and
eventheriseinwageratesresultingfromthestrongerbargainingpowerof
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theworkersislesslikelytoreduceprofitsthantoincreaseprices,andthus
adverselyaffectsonlytherentierinterests.But'disciplineinthefactories'
and'politicalstability'aremoreappreciatedthanprofitsbybusiness
leaders.Theirclassinstincttellsthemthatlastingfullemploymentis
unsoundfromtheirpointofview,andthatunemploymentisanintegral
partofthe'normal'capitalistsystem.
III
1.Oneoftheimportantfunctionsoffascism,astypifiedbytheNazi
system,wastoremovecapitalistobjectionstofullemployment.
Thedislikeofgovernmentspendingpolicyassuchisovercomeunder
fascismbythefactthatthestatemachineryisunderthedirectcontrolofa
partnershipofbigbusinesswithfascism.Thenecessityforthemythof
'soundfinance',whichservedtopreventthegovernmentfromoffsettinga
confidencecrisisbyspending,isremoved.Inademocracy,onedoesnot
knowwhatthenextgovernmentwillbelike.Underfascismthereisno
nextgovernment.
Thedislikeofgovernmentspending,whetheronpublicinvestmentor
consumption,isovercomebyconcentratinggovernmentexpenditureon
armaments.Finally,'disciplineinthefactories'and'politicalstability'under
fullemploymentaremaintainedbythe'neworder',whichrangesfrom
suppressionofthetradeunionstotheconcentrationcamp.Political
pressurereplacestheeconomicpressureofunemployment.

THE
ECOLOGICAL
RIFT:
Capitalism'sWar
ontheEarth
byJohnBellamy
Foster,Brett
Clark,and
RichardYork

MARX'S
ECOLOGY:
Materialismand
NaturebyJohn
BellamyFoster

2.Thefactthatarmamentsarethebackboneofthepolicyoffascistfull
employmenthasaprofoundinfluenceuponthatpolicy'seconomic
character.Largescalearmamentsareinseparablefromtheexpansionof
thearmedforcesandthepreparationofplansforawarofconquest.They
alsoinducecompetitiverearmamentofothercountries.Thiscausesthe
mainaimofspendingtoshiftgraduallyfromfullemploymenttosecuring
themaximumeffectofrearmament.Asaresult,employmentbecomes
'overfull'.Notonlyisunemploymentabolished,butanacutescarcityof
labourprevails.Bottlenecksariseineverysphere,andthesemustbe
dealtwithbythecreationofanumberofcontrols.Suchaneconomyhas
manyfeaturesofaplannedeconomy,andissometimescompared,rather THEPOLITICSOF
ignorantly,withsocialism.However,thistypeofplanningisboundto
IMMIGRATION
Questionsand
appearwheneveraneconomysetsitselfacertainhightargetof
AnswersbyJane
productioninaparticularsphere,whenitbecomesatargeteconomyof
GuskinandDavid
whichthearmamenteconomyisaspecialcase.Anarmamenteconomy
Wilson
involvesinparticularthecurtailmentofconsumptionascomparedwith
thatwhichitcouldhavebeenunderfullemployment.
Thefascistsystemstartsfromtheovercomingofunemployment,develops
intoanarmamenteconomyofscarcity,andendsinevitablyinwar.
IV
1.Whatwillbethepracticaloutcomeoftheoppositiontoapolicyoffull
employmentbygovernmentspendinginacapitalistdemocracy?Weshall
trytoanswerthisquestiononthebasisoftheanalysisofthereasonsfor
thisoppositiongiveninsectionII.Wearguedtherethatwemayexpect
theoppositionoftheleadersofindustryonthreeplanes:(i)oppositionon
principletogovernmentspendingbasedonabudgetdeficit(ii)opposition
tothisspendingbeingdirectedeithertowardspublicinvestmentwhich
mayforeshadowtheintrusionofthestateintothenewspheresof
economicactivityortowardssubsidizingmassconsumption(iii)
oppositiontomaintainingfullemploymentandnotmerelypreventingdeep
http://mrzine.monthlyreview.org/2010/kalecki220510.html

OPENVEINSOF
LATINAMERICA:
FiveCenturiesof
thePillageofa
Continent
byEduardo
Galeano

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andprolongedslumps.
Nowitmustberecognizedthatthestageatwhich'businessleaders'could
affordtobeopposedtoanykindofgovernmentinterventiontoalleviatea
slumpismoreorlesspast.Threefactorshavecontributedtothis:(i)very
fullemploymentduringthepresentwar(ii)developmentoftheeconomic
doctrineoffullemployment(iii)partlyasaresultofthesetwofactors,the
slogan'Unemploymentneveragain'isnowdeeplyrootedinthe

DAYSAND
consciousnessofthemasses.Thispositionisreflectedintherecent
NIGHTSOFLOVE
pronouncementsofthe'captainsofindustry'andtheirexperts.The
ANDWARby
necessitythat'somethingmustbedoneintheslump'isagreedbutthe
EduardoGaleano
fightcontinues,firstly,astowhatshouldbedoneintheslump(i.e.what
shouldbethedirectionofgovernmentintervention)andsecondly,thatit
shouldbedoneonlyintheslump(i.e.merelytoalleviateslumpsrather
thantosecurepermanentfullemployment).
2.Incurrentdiscussionsoftheseproblemsthereemergestimeandagain
theconceptionofcounteractingtheslumpbystimulatingprivate
investment.Thismaybedonebyloweringtherateofinterest,bythe
reductionofincometax,orbysubsidizingprivateinvestmentdirectlyin
thisoranotherform.Thatsuchaschemeshouldbeattractivetobusiness
isnotsurprising.Theentrepreneurremainsthemediumthroughwhich
theinterventionisconducted.Ifhedoesnotfeelconfidenceinthepolitical
situation,hewillnotbebribedintoinvestment.Andtheinterventiondoes
notinvolvethegovernmenteitherin'playingwith'(public)investmentor
'wastingmoney'onsubsidizingconsumption.

FROM
SOLIDARITYTO
SELLOUT:The
Restorationof
Capitalismin
Polandby
TadeuszKowalik

Itmaybeshown,however,thatthestimulationofprivateinvestmentdoes
notprovideanadequatemethodforpreventingmassunemployment.
Therearetwoalternativestobeconsideredhere.(i)Therateofinterest
orincometax(orboth)isreducedsharplyintheslumpandincreasedin
theboom.Inthiscase,boththeperiodandtheamplitudeofthebusiness
cyclewillbereduced,butemploymentnotonlyintheslumpbutevenin
theboommaybefarfromfull,i.e.theaverageunemploymentmaybe
considerable,althoughitsfluctuationswillbelessmarked.(ii)Therateof
interestorincometaxisreducedinaslumpbutnotincreasedinthe
PARAMILITARISM
subsequentboom.Inthiscasetheboomwilllastlonger,butitmustend
ANDTHE
ASSAULTON
inanewslump:onereductionintherateofinterestorincometaxdoes
DEMOCRACYIN
not,ofcourse,eliminatetheforceswhichcausecyclicalfluctuationsina
HAITIbyJeb
capitalisteconomy.Inthenewslumpitwillbenecessarytoreducethe
Sprague
rateofinterestorincometaxagainandsoon.Thusinthenottooremote
future,therateofinterestwouldhavetobenegativeandincometax
wouldhavetobereplacedbyanincomesubsidy.Thesamewouldariseif
itwereattemptedtomaintainfullemploymentbystimulatingprivate
investment:therateofinterestandincometaxwouldhavetobereduced
continuously.4
Inadditiontothisfundamentalweaknessofcombatingunemploymentby
stimulatingprivateinvestment,thereisapracticaldifficulty.Thereaction
oftheentrepreneurstothemeasuresdescribedisuncertain.Ifthe
downswingissharp,theymaytakeaverypessimisticviewofthefuture,
andthereductionoftherateofinterestorincometaxmaythenforalong
timehavelittleornoeffectuponinvestment,andthusuponthelevelof
outputandemployment.
3.Eventhosewhoadvocatestimulatingprivateinvestmenttocounteract
theslumpfrequentlydonotrelyonitexclusively,butenvisagethatit
shouldbeassociatedwithpublicinvestment.Itlooksatpresentasif
businessleadersandtheirexperts(atleastsomeofthem)wouldtendto
acceptasapisallerpublicinvestmentfinancedbyborrowingasameans
http://mrzine.monthlyreview.org/2010/kalecki220510.html

THEECONOMIC
WARAGAINST
CUBA:A
Historicaland
LegalPerspective
ontheU.S.
Blockadeby
SalimLamrani

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ofalleviatingslumps.Theyseem,however,stilltobeconsistently
opposedtocreatingemploymentbysubsidizingconsumptionandto
maintainingfullemployment.
Thisstateofaffairsisperhapssymptomaticofthefutureeconomicregime
ofcapitalistdemocracies.Intheslump,eitherunderthepressureofthe
masses,orevenwithoutit,publicinvestmentfinancedbyborrowingwillbe
undertakentopreventlargescaleunemployment.Butifattemptsare
madetoapplythismethodinordertomaintainthehighlevelof
employmentreachedinthesubsequentboom,strongoppositionby
businessleadersislikelytobeencountered.Ashasalreadybeenargued,
lastingfullemploymentisnotatalltotheirliking.Theworkerswould'get
outofhand'andthe'captainsofindustry'wouldbeanxiousto'teachthem
alesson.Moreover,thepriceincreaseintheupswingistothe
disadvantageofsmallandbigrentiers,andmakesthem'boomtired.'
Inthissituationapowerfulallianceislikelytobeformedbetweenbig
businessandrentierinterests,andtheywouldprobablyfindmorethan
oneeconomisttodeclarethatthesituationwasmanifestlyunsound.The
pressureofalltheseforces,andinparticularofbigbusinessasarule
influentialingovernmentdepartmentswouldmostprobablyinducethe
governmenttoreturntotheorthodoxpolicyofcuttingdownthebudget
deficit.Aslumpwouldfollowinwhichgovernmentspendingpolicywould
againcomeintoitsown.
Thispatternofapoliticalbusinesscycleisnotentirelyconjectural
somethingverysimilarhappenedintheUSAin19378.Thebreakdown
oftheboominthesecondhalfof1937wasactuallyduetothedrastic
reductionofthebudgetdeficit.Ontheotherhand,intheacuteslumpthat
followedthegovernmentpromptlyrevertedtoaspendingpolicy.

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ANDTHE
CATASTROPHIC
FAILUREIN
LIBYAbyHorace
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Alternativesby
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Landsberg

Theregimeofthepoliticalbusinesscyclewouldbeanartificialrestoration
ofthepositionasitexistedinnineteenthcenturycapitalism.Full
employmentwouldbereachedonlyatthetopoftheboom,butslumps
wouldberelativelymildandshortlived.
V
AFREEDOM

BUDGETFOR
1.Shouldaprogressivebesatisfiedwitharegimeofthepoliticalbusiness
ALLAMERICANS:
cycleasdescribedintheprecedingsection?Ithinkheshouldopposeit
Recapturingthe
ontwogrounds:(i)thatitdoesnotassurelastingfullemployment(ii)that
Promiseofthe
governmentinterventionistiedtopublicinvestmentanddoesnotembrace
CivilRights
subsidizingconsumption.Whatthemassesnowaskforisnotthe
Movementinthe
Strugglefor
mitigationofslumpsbuttheirtotalabolition.Norshouldtheresultingfuller
utilizationofresourcesbeappliedtounwantedpublicinvestmentmerelyin EconomicJustice
TodaybyPaulLe
ordertoprovidework.Thegovernmentspendingprogrammeshouldbe
Blancand
devotedtopublicinvestmentonlytotheextenttowhichsuchinvestment
MichaelD.Yates
isactuallyneeded.Therestofgovernmentspendingnecessaryto
maintainfullemploymentshouldbeusedtosubsidizeconsumption
(throughfamilyallowances,oldagepensions,reductioninindirect
taxation,andsubsidizingnecessities).Opponentsofsuchgovernment
spendingsaythatthegovernmentwillthenhavenothingtoshowfortheir
money.Thereplyisthatthecounterpartofthisspendingwillbethe
higherstandardoflivingofthemasses.Isnotthisthepurposeofall
economicactivity?

2.'Fullemploymentcapitalism'will,ofcourse,havetodevelopnewsocial
andpoliticalinstitutionswhichwillreflecttheincreasedpowerofthe
workingclass.Ifcapitalismcanadjustitselftofullemployment,a
fundamentalreformwillhavebeenincorporatedinit.Ifnot,itwillshow
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ARYDOCTORS:
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itselfanoutmodedsystemwhichmustbescrapped.
Butperhapsthefightforfullemploymentmayleadtofascism?Perhaps
capitalismwilladjustitselftofullemploymentinthisway?Thisseems
extremelyunlikely.FascismsprangupinGermanyagainstabackground
oftremendousunemployment,andmaintaineditselfinpowerthrough
securingfullemploymentwhilecapitalistdemocracyfailedtodoso.The
fightoftheprogressiveforcesforallemploymentisatthesametimea
wayofpreventingtherecurrenceoffascism.

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Conceptionof
HealthCareby
SteveBrouwer

1ThisarticlecorrespondsroughlytoalecturegiventotheMarshall
SocietyinCambridgeinthespringof1942.

UNDERSTAND
INGTHE
VENEZUELAN
REVOLUTION:
HugoChavez
TalkstoMarta
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MartaHarnecker

2Anotherproblemofamoretechnicalnatureisthatofthenationaldebt.
Iffullemploymentismaintainedbygovernmentspendingfinancedby
borrowing,thenationaldebtwillcontinuouslyincrease.Thisneednot,
however,involveanydisturbancesinoutputandemployment,ifinterest
onthedebtisfinancedbyanannualcapitaltax.Thecurrentincome,after
paymentofcapitaltax,ofsomecapitalistswillbelowerandofsome
higherthanifthenationaldebthadnotincreased,buttheiraggregate
incomewillremainunalteredandtheiraggregateconsumptionwillnotbe
likelytochangesignificantly.Further,theinducementtoinvestinfixed
capitalisnotaffectedbyacapitaltaxbecauseitispaidonanytypeof
wealth.Whetheranamountisheldincashorgovernmentsecuritiesor
investedinbuildingafactory,thesamecapitaltaxispaidonitandthus
thecomparativeadvantageisunchanged.Andifinvestmentisfinanced
byloansitisclearlynotaffectedbyacapitaltaxbecauseifdoesnotmean
anincreaseinwealthoftheinvestingentrepreneur.Thusneithercapitalist THECONTRADIC
consumptionnorinvestmentisaffectedbytheriseinthenationaldebtif
TIONSOF"REAL
SOCIALISM":The
interestonitisfinancedbyanannualcapitaltax.[See'ATheoryof
Conductorand
Commodity,Income,andCapitalTaxation']
3Itshouldbenotedherethatinvestmentinanationalizedindustrycan
contributetothesolutionoftheproblemofunemploymentonlyifitis
undertakenonprinciplesdifferentreturnthanprivateenterprise,oritmust
deliberatelytimeitsinvestmentsoastomitigatefromthoseofprivate
enterprise.Thegovernmentmustbesatisfiedwithalowernetrateof
slumps.

theConductedby
MichaelA.
Lebowitz

4Arigorousdemonstrationofthisisgiveninmyarticletobepublishedin
OxfordEconomicPapers.[See'FullEmploymentbyStimulating
PrivateInvestment?']
MichalKalecki(22June189918April1970)wasaPolishMarxist
economist.ThisessaywasfirstpublishedinPoliticalQuarterlyin1943it
isreproducedherefornonprofiteducationalpurposes.Ashorter
versionofthisessaywaspublishedinTheLastPhaseinthe
TransformationofCapitalism(MonthlyReviewPress,1972).

THESOCIALIST
ALTERNATIVEby
MichaelA.
Lebowitz

Comments(6)

BUILDITNOW:
Socialismforthe
TwentyFirst
Centuryby
MichaelA.
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Lebowitz

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SARTRE:Search
forFreedomand
theChallengeof
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STRUCTUREAND
FORMSOF
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NESSbyIstvn
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