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Kalecki Again

Not very long ago, one of the main concerns of the U.S. labor movement and left-liberals was winning the passage of a full employment policy at the federal level.  In fact, this goal was attained in 1978 when Congress passed and President Carter signed the Humphrey-Hawkins Full Employment Act, which ostensibly committed the federal government to making sure that the unemployment rate would never climb above its “natural” 4 percent level through a number of mechanisms, including direct job creation if necessary.  But 1978 was not exactly the most auspicious time for such a classically Keynesian policy to be put into effect.  In 1980, Ronald Reagan took power, the Volcker shock on interest rates created a deep recession which drove unemployment over 10 percent, and neoliberalism came to displace the Keynesian paradigm that had dominated economic policymaking for three decades.  The act expired in 2000, and we have heard little about the desirability of a full employment program since.

In the latest issue of the excellent n+1, Benjamin Kunkel devotes considerable space to investigating the economic and political implications of full employment to figure out why this idea died along with the postwar Keynesian “golden age,” and whether or not it can serve once again as a focus of organization for the contemporary left.  As the unemployment rate continues to hover around 10 percent, and the Obama administration shows no indications that it has any desire to engage in a program of massive, direct job creation, it may not seem like the most auspicious time to be calling for the rehabilitation of full employment as a political goal.  But the big issue at stake here is whether or not Kunkel’s analysis of the end of the postwar order is correct.  If it is, then Keynesian welfare capitalism remains a viable strategy for the 21st century left.  If it’s not, then we on the left need to finally shed our residual attachments to the “golden age” and start anew.  While Kunkel makes some very important points about the economic viability of full employment, he emphasizes these arguments to the detriment of the political aspects of full employment, which as Michal Kalecki demonstrated in his seminal 1943 essay on the topic, make it more or less impossible to achieve within the coordinates of a capitalist system.  What makes this especially curious is the fact that Kunkel has clearly read Kalecki’s essay, but has seemingly ignored its fundamental lessons in order to burnish the credentials of his own arguments.

Kunkel is dissatisfied by what he calls (following the work of Robert Brenner), the Full Employment Profit Squeeze (FEPS) thesis concerning the death of postwar social democracy.  According to this thesis, the rising total wage bill of society engendered by the full (or near-full) employment economies of North America and Western Europe made it impossible to sustain the rates of growth and profitability required to keep the economy chugging along.  Following Brenner, Kunkel argues that it was increased competition between North America, Western Europe, and Japan, and the industrial overcapacity that this competition created, that brought down the postwar order, not rising wages.  If one accepts this argument, then like Kunkel one is inclined to accept the notion that “the era’s fatal flaw law lay not in excess compensation for workers and overfull employment, but in insufficient wage growth and not-full-enough employment.”  After all, even Kalecki recognized that profits could be even higher under a full employment regime because of the increased economic activity that such an arrangement would produce.

But this is where Kunkel’s analysis runs into trouble.  While it’s certainly true that full employment might not threaten the dominance of capital in strictly economic terms (though there seems to be some strong evidence on the side of the FEPS), as Kalecki demonstrated full employment creates a constellation of political conditions that could ultimately serve to undermine the long-term viability of capitalism itself.  Kalecki identified three main reasons why capital, within a system of representative democracy, would oppose a full employment policy achieved through government spending:

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

The first two reasons are fairly simple to understand.  As Kalecki notes, business tends to oppose most expansion of economic intervention by the government on the grounds that it undermines the “state of confidence” of entrepreneurs regarding the investment climate, and capitalist ideology is opposed to the subsidizing of consumption because one is supposed to gain income only through work, not through direct government transfers.  The third point of opposition, however, is the most crucial to assessing the viability of Kunkel’s argument.  As Kalecki argues, the biggest barriers to the maintenance of full employment are primarily political in nature, not economic:

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.  Strikes for wage increases and improvements in conditions of work would create political tension.  It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire, and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than increase prices, and thus adversely affects only the rentier interests.  But “discipline in the factories” and “political stability” are more appreciated than profits by business leaders.  Their 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.

Actual historical experience bears this argument out.  As David Harvey notes in A Brief History of Neoliberalism, the neoliberal order has not been very successful in restoring economic growth (growth over the last 30 or so years has tended to be slower than during the Keynesian era), but “it has succeeded remarkably well in restoring, or in some instances (as in Russia or China) creating, the power of an economic elite” threatened politically by rising worker militancy and the increasing radicalization of important sections of the main left parties.  Countries all across the advanced capitalist world and in some developing countries were rocked by major strike waves, and in places like Sweden, Italy, France, and Britain, socialist and communist parties advanced plans to encroach significantly on the political power of capital.  Even in the U.S., important sections of the Democratic Party and the labor movement were dedicated to a fairly strongly social democratic agenda.  This political crisis could have been resolved by either moving beyond the social democratic welfare state or by breaking radically toward neoliberalism.  As we are all painfully aware, the latter option won out.  The political and economic power of capital was restored, and the labor movement and left political formations were decimated.

Both Kalecki’s theoretical argument and the historical experience of the 1970s seem to demonstrate fairly clearly that full employment within capitalism is likely an impossibility, and that seeking to resurrect the postwar Keynesian order, and the commitment to full employment that was an integral part of it, is a theoretical and strategic dead end.  It’s strange that Kunkel would pick out a single line from a paragraph in Kalecki’s essay and use it as support for his argument while the rest of the paragraph fairly explicitly explains why his argument is probably untenable.

Now, while full employment may be impossible to attain short of a radical change in the way the political economy is structured, it may still be useful as a political demand.  After all, most people will accept the idea that everyone should be able to have a job if they want one, and if capitalism is unable to do this then such a failure is a significant mark against it.

But I would question the inherent desirability of full employment as a political and ethical goal.  The global economy is so fabulously wealthy and productive that we probably don’t all have to be working full-time, 35-to-40-hour-per-week jobs.  Granted, under capitalism technological advances tend to serve the interests of capital against those of workers, but if a left movement gains enough strength in the coming years to challenge the dominance of capital it should probably demand that advances in technology and productivity gains be used to take people’s labor off the market as much as possible.  Why make work for the sake of making work?  As Kalecki argued, a political economy run in the interest of workers should not apply a “fuller utilization of resources [to] unwanted public investment merely in order to provide work.”  Spend to support the work that absolutely needs to be done to ensure a comfortable standard of living, and the rest of it “should be used to subsidize consumption (through family allowances, old age pensions, reduction in indirect taxation, and subsidizing necessities).”  Perhaps even a basic income guarantee could be provided to all regardless of whether or not they perform any work in the labor market.

And why not?  All I know is that whenever I hear the words “full employment,” I reach for my beach chair.


Chris Maisano is a member of the Young Democratic Socialists New York City chapter.  He studied at Rutgers and Drexel University and currently works as a librarian at a large public library branch in Brooklyn.  This article was first published in The Activist on 26 May 2010 under a Creative Commons license.




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