The Political Aspects Of Full Employment

This is an old article by a Polish economist who argues that it is possible for governments to maintain full employment economies.  He and Keynes were both worried about the political consequences of high unemployment.  Keynes was primarily concerned about saving capitalism from socialism, while Kalecki was concerned about preventing fascism.  He was also critical about the form in which socialism developed in the Soviet Union.

Kalecki was a realist, however, and he understood why the concept of a full employment economy would be unpopular even if it were possible for government intervention into the economy to achieve a full employment economy.  He provides many of the political reasons that would stand in the way of attempts to engineer a full employment economy.  His analysis of the reasons for objecting to a full employment economy will sound pretty similar to the arguments made today by those who oppose the use of fiscal policy or aggressive monetary policy to reduce unemployment.

Jamie Galbraith summed up our current position today in which neo-liberal ideology has become the dominant force across much of the world.  We have accepted the goal of balanced budgets and central banks are unchallenged in the application of monetary policy.  This essentially removes macroeconomics out of the political sphere.  Many central banks are primarily devoted to fighting against inflation.  In the US there has been strong opposition against the Fed's use of monetary policy to reduce unemployment.  In the UK and in the eurozone price stability is the central objective the ECB and British central bank.  Moreover, in the eurozone governments are required to keep the debt to GDP ratio below 3%.  There are penalties associated with deficits above that target.

Paul Krugman posted a link to Kalecki's article to reinforce one of his arguments against those who claim that the economy would be fine if government took the necessary steps to restore business confidence.  Mark Thoma, who is supportive of Krugman, posted a link to Krugman's article but he omitted Krugman's reference to Kalecki in his summary of the article.  Kalecki may be out of bounds even for very liberal economists.