The Legacy of Rosa Luxemburg, Oskar Lange and Micha? Kalecki

Volume 1 of Essays in Honour of Tadeusz Kowalik

R. Bellofiore, E. Karwowski, J. Toporowski, R. Bellofiore, E. Karwowski, J. Toporowski

• Publisher: Palgrave Macmillan
• Year: 2013
• ISBN:
  9781137335609
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

Rosa Luxemburg, Oskar Lange and Michal Kalecki made important contributions to twentieth century political economy that guided the thinking of their student Tadeusz Kowalik. These contributions are re-examined by renowned economists, highlighting the common themes in their political economy and the neglected aspects of their work.

1

Michał Kalecki and Rosa Luxemburg on Marx’s Schemes of Reproduction: Two Incisive Interpreters of Capitalism

G.C. Harcourt and Peter Kriesler

1.1 Introduction

In addition to his own contributions to economic thought, Tadeusz Kowalik has added substantially to our knowledge of three great Polish economists, Rosa Luxemburg, Oskar Lange and Michał Kalecki. He edited collections of their works and has contributed to our understanding of their contemporary relevance. He co-authored with Kalecki a sequel to the latter’s fundamental contribution to political economy, ‘Political aspects of full employment’ (Kalecki, 1943a), considering the question of whether a crucial reform had occurred in capitalist economies to allow full employment to be maintainable (Kalecki and Kowalik, 1971). Kowalik was joint editor of the Polish editions of the collected works of both Oskar Lange and (with Jerzy Osiatyński) Kalecki, as well as editing a new edition of Rosa Luxemburg’s The Accumulation of Capital. In addition, he has written extensively on the writings of Kalecki and Luxemburg, arguing that ‘Michał Kalecki’s theory is the best theoretical continuation and solution to the main problems that Rosa Luxemburg wanted to solve in her magnus opum’ [sic] (Kowalik, 2009: p. 102).

Because of his fine scholarship, we deemed it most appropriate for us to reconsider the contributions of Kalecki and Luxemburg to our understanding of modern capitalist economies.

In particular, it is appropriate to concentrate on Rosa Luxemburg’s The Accumulation of Capital (1913a), which is her magnum opus. Both Joan Robinson (1951) and Kowalik (2003) have written important introductions to its English translation. Kalecki wrote about its contributions and limitations in an analysis of how capitalism might be expected to develop, comparing her conjectures with those of Tugan-Baranowski (see Kalecki, 1967: pp. 451–458). Luxemburg’s book was an important milestone in Joan Robinson’s development of her own magnum opus of the same title, Joan Robinson (1951). As we have argued elsewhere (Harcourt and Kriesler, 2011; Harcourt and Kerr, 2009), Kalecki was the major influence on the structure of the analysis in her Accumulation of Capital.

1.2

The starting point for all these authors was their understanding of Marx’s schemes of production and reproduction in an analysis of the laws of motion of the capitalist mode of production. Kowalik gives an excellent summary of the analytical similarities of the two:

As far as theory is concerned, both R.L. and M.K. took from Marx the very notion of capital, and the conviction that the capitalist system polarized society by two antagonistic classes: the capitalists and the workers. Both were interested more in the dynamics of capitalism than in static theory of value and price [ ... ] both used the Marxian reproduction schemata to search for the limits of capitalist accumulation. Using more modern words, they treated capitalism as a system, limited by effective demand, sharply distinguishing the production of commodities from their realization. Of course, both rejected so-called Say’s law. Both treated rivalry and instability as permanent features of capitalism. (Kowalik, 2009: p. 111)

However, there also are important points of difference. Both Kalecki and Joan Robinson recognised, as Luxemburg and Tugan-Baranowski seem not to have, the true purpose of the schemes.¹ Luxemburg and Tugan-Baranowski made the same mistake as have many latter-day mainstream economists and many Marxist scholars,² in that they interpret the schemes as forerunners of steady-state growth models which nevertheless constitute descriptive analysis of the development of capitalism.³ Joan Robinson’s Golden Ages were never so intended; in contrast, Nicholas Kaldor’s growth models of the 1950s and 1960s were; see, for example, Kaldor (1955, 1959) and Kaldor and Mirrlees (1962). Robert Solow (1956) and Trevor Swan (1956) were providing their solutions to problems thrown up by Harrod’s seminal article (1939) and book (1948) in explicitly highly abstract theoretical contexts, but their many surrogates proceeded as if they had also provided descriptive analyses.

As Sardoni shows conclusively, and as Joan Robinson and Kalecki had recognised, this was not Marx’s purpose. Rather, he was attempting to set out the conditions that had to be satisfied in order that, as we would say now, aggregate demand and aggregate supply and their compositions as created in the three Departments would all match up, that is, be purchased. Marx’s purpose was to show how unlikely it was that individual capitalist decision makers left to themselves could collectively bring about these two sets of matches; and if they did not, the sources of instability and crisis in capitalist dynamics would have been revealed. This was also the substance of Joan Robinson’s criticism of Harrod, that he had rediscovered Marx vol II without knowing it, a criticism which he gallantly took on board (Robinson, 1953: p. 263). Similarly, Kalecki argued that the ‘basic formula of the Harrod-Domar theory ... [and] ... In fact, many of the contemporary theories of growth are simply variations on the theme of Marxian schemes of expanded reproduction’ (Kalecki, 1968a: p. 63). Moreover, as Sardoni argues, even if both sets of conditions were to be satisfied in any one period, this does not imply steady-state growth from period to period. According to Kalecki, equilibrium would require very specific – and unlikely – investment behaviour:

As regards Marx’s schemata, his system can be in equilibrium only when automatic expanded reproduction is assumed, i.e. when there is a complete reinvestment of accumulation. ... From the spirit of Marx’s analysis, it follows that this reinvestment does not always take place, and hence there is a deviation from his schemata. This deviation, which Marx did not systematically investigate is more consistently emphasised by Rosa Luxemburg. The supply nature of Marx’s schemata lies in his assumption of total reinvestment of accumulation. However, from this it follows that the schemata represent a certain ideal equilibrium, which is in contradiction with the fundamental and often-quoted statement of Marx on the incommensurable development of the forces of production and the expansion of purchasing power. Long-run instability appears in the schemata as soon as the automatic reinvestment of accumulation is no longer assumed. (Kalecki, 1965a: p. 559)

1.3

Kalecki points out that Tugan-Baranowski and Luxemburg are poles apart in their discussions of how the market operates in the Marxian schemes of reproduction. Tugan-Baranowski in effect is a Say’s Law person, denying the possibility of a general glut, arguing that what is produced in all Departments will always be purchased, either internally or by the other Departments, so that the only constraint on capitalist development is how fast productive capacity increases in these circumstances.

Luxemburg, in contrast, argues that there is always insufficient aggregate demand in a closed economy, so that to continue to develop, capitalist economies must export to the (non-capitalist) rest of the world, usually through imperialistic conquests, in order to ensure there are markets and supplies of raw material abroad.

The Accumulation of Capital represents one of the earliest statements of the stagnationist thesis which was popularised by Kalecki, Steindl, Baran and Sweezy. Underlying this thesis is the argument that ‘under monopoly capitalism the laws of capitalist accumulation have been fundamentally changed’ (Halevi and Kriesler, 1998: p. 194). Luxemburg demonstrated via Marx’s reproduction schemas that capitalism had problems in the long run maintaining sufficient effective demand to avoid stagnation. Ever expanding accumulation requires ever expanding demand, and it is unclear where this demand comes from, as a result of ‘the deep and fundamental antagonism between the capacity to consume and the capacity to produce in a capitalist society, a conflict resulting from the very accumulation of capital which periodically bursts out in crises and spurs capital on to a continual extension of the market’ (Luxemburg, 1913a: p. 347).

Her solution: external markets – ‘buyers outside capitalist society’ (Luxemburg, 1913a: p. 350) – that is external to the global capitalist system, and/or armaments expenditures. Kalecki (and Kowalik) clearly understood that this was her important contribution:

For her, the basic contradiction of capitalism is not disproportion of development of individual branches of industry but the separation between production and market. In her analysis of the divergence between the development of forces of production and relations of production, the main problem is that of realization of the accumulated surplus. (Kalecki and Kowalik, 1971: pp. 469–470)

Kalecki finds it ‘most interesting that both authors commit important errors [yet] their theories have a correct picture of some essentials of [the] capitalist economy’ (Kalecki, 1967: p. 451). Tugan-Baranowski rightly sees that satisfaction of consumer demand is not the driving force of capitalism, which is characterised by him as ‘antagonistic in nature’, with the making of profits and the accumulation of capital the ultimate driving forces of capitalist development. So for Tugan-Baranowski (and Kalecki), what has become the central mainstream notion, that it is the consumer queen trying to maximise her expected lifetime utility through consumption and saving that is the driving force, is not in fact to be found in the actual workings of capitalist markets and economies.

Kalecki accepts that Luxemburg’s ‘external markets’, while not the sole driver of capitalist development, are nevertheless an ‘important part’. He finds ‘a point of intersection’ for the two poles apart theories in present day (read 1960s/1970s) capitalism, especially the USA, where the market created by government for production of armaments plays a decisive role (Kalecki, 1967: p. 451).

The error in Tugan-Baranowski’s analysis, Kalecki argues, is that he confuses what is possible in development with what must always actually happen. Kalecki’s argument has some resemblance to an analysis of the conditions needed for Harrod’s warranted rate of growth (g_w) to coincide with Harrod’s natural rate of growth (g_n) and to Harrod’s argument as to why, if actual growth (g_a) is not equal to g_w, the economy will give out signals that, under plausible conditions, leads g_a to depart further and further from g_w. So, even if g_a were momentarily to coincide with g_n, this would not be a sustainable position. Kalecki argues that accumulation associated with embodying innovations that result from technical progress may produce growth, though not necessarily at such a rate as to eliminate deficient effective demand. This possibility, which is not necessarily a result of ‘external markets’, provides the starting point for Kalecki’s discussion of Luxemburg’s analysis.

1.4

He first points out that she argues as if the capitalist class as a whole decide collectively how much investment to do. And if the class perceives that there is not a sufficient market for the surplus of goods corresponding to accumulation, it is led to the query: ‘So why invest?’ (Kalecki, 1967: p. 455). Kalecki’s knock-down blow follows immediately: ‘Now capitalists do many things as a class, but they certainly do not invest as a class’ (Kalecki, 1967: p. 455). If they did, he notes, they may well do so in such a way as to vindicate Tugan-Baranowski’s Say’s Law analysis.

Because Luxemburg regards exports from the capitalist system as the mainspring of development, she has a pessimistic view of the future of capitalism. As the capitalist system cumulatively creates the rest of the world (including the non-capitalist sectors of its own society) in its own image, it at the same time eliminates the possibility of future development. Allied with her basic view there is, according to Kalecki, a serious over-estimate of the role of ‘external markets’, in that she identifies the market for the surplus created with total exports; whereas, Kalecki argues, it is only net exports (induced by the export of capital) that perform this role.

Kalecki points out that Luxemburg did have a role for expenditure on armaments in the process of staving off the decline of capitalism. But, again, she overplayed her hand, in that she did not ask how the expenditure would be financed. Kalecki points out that if taxation is the source of finance, its incidence ultimately falls on wage-earners and their consumption expenditure, so largely offsetting the expansionary effects of expenditure on armaments and its role in absorbing the surplus of goods associated with the process of accumulation – a balanced budget multiplier type of argument. Only if armaments are purchased from the proceeds of the issue of government bonds (or by writing cheques on the central bank) will their greatest potential impact be realised.

Kalecki also argued that Luxemburg missed an important extension of her armaments argument, which was applicable to government expenditure in general. Government expenditure is an ‘external market’ with respect to the capitalist production.⁴ However, as with armaments, it is only government expenditure which is not offset by taxes (particularly on the working class), so it is either ‘financed’ by the central bank or by the sale of government securities to the private sector. As ‘capital is here being “exported” to the “foreign market” created by the government’ (Kalecki, 1967: p. 457) so government expenditure acts as an ‘internal export ... It is internal to the closed economy, but it is external to the capitalist area’ (Bellofiore, 2009b: p. 60, emphasis in original). In addition, Kalecki extends the analysis of ‘external’ factors which can explain accumulation to include ‘semi-autonomous’ influences such as innovation (Kalecki, 1968a; see also Steindl, 1981: p. 148).

Kalecki concludes that although there are serious errors in the theories of both Tugan-Baranowski and Luxemburg, both showed ‘a striking perspicacity’ in their evaluation of certain basic elements of late stage capitalism, so contributing to ‘the understanding of the perverse world in which we are living’ (Kalecki, 1967: p. 458). This view is reinforced by Darity’s argument that, given the political limits to the attainment of full employment discussed in Kalecki (1943), imperialism and external markets may prove an expedient politically acceptable strategy for dealing ‘with crises of effective demand’ (Darity, 1979–1980: p. 229).

1.5

Kalecki published his article on Tugan-Baranowski and Luxemburg in 1967. In 1968 he followed it up with an article, ‘The Marxian equations of reproduction and modern economics’, Kalecki (1968a), in which he drew on the arguments of his preceding article and related his take on modern steady-state growth theory emanating from Harrod’s and Domar’s seminal contributions to discussions of Marxian schemes of reproduction.

On his interpretation, (the then) modern growth theory often did a Tugan-Baranowski, that is to say, argued that there was no problem of effective demand to be faced in the long-run development of capitalism. (Suc...

Table of contents

• Cover
• Title
• Introduction: Tadeusz Kowalik and the Political Economy of the 20th Century
• 1 Michał Kalecki and Rosa Luxemburg on Marx’s Schemes of Reproduction: Two Incisive Interpreters of Capitalism
• 2 The Realisation Problem: A Reappraisal of the Kalecki and Luxemburg Discussion on the Schemes of Reproduction
• 3 Luxemburg as an Economist: The Unique Challenge to Marx among Marxists
• 4 Marxist Political Economy without Hegel: Contrasting Marx and Luxemburg with Plekhanov and Lenin
• 5 Luxemburg and Kalecki: The Actuality of Tadeusz Kowalik’s Reading of the Accumulation of Capital
• 6 Polish Marxian Political Economy and US Monopoly Capital Theory: The Influence of Luxemburg, Kalecki and Lange on Baran and Sweezy and Monthly Review
• 7 When Science Meets Revolution: The Influence of Rosa Luxemburg on Oskar Lange’s Early Project (1931–1945)
• 8 Lange and Keynes
• 9 The Walrasian Socialism of Oskar Lange
• 10 Between Memory and Historical Enquiry: Kalecki and the Warsaw Centre of Research on Underdeveloped Economies in 1962–1968
• 11 The Price Mechanism and the Distribution of Income in Kalecki’s Economics and Post-Kaleckian Economics
• 12 Financial Fragility and the Kalecki Principle under Expanded Reproduction
• References
• Bibliography of Published Works by Tadeusz Kowalik
• Index