Abstract
Nicholas Kaldor and Kazimierz Łaski have been two very prominent exponents of Keynesian thinking. They both contributed to the debate on European economic integration, one (Nicholas Kaldor) in the early 1970s, when there were fierce debates about the United Kingdom's entry to the European Communities, and the other (Kazimierz Łaski) in the wake of the financial and economic crisis of 2008–2012, when the European Union and its Economic and Monetary Union were seriously challenged by potential disintegration. Both exponents provided deep and complementary inputs into an understanding of the centrifugal forces at work when a region with a rudimentary federal structure (but an extremely weak ‘central state’) embarks on tight economic integration with an inadequate macroeconomic policy framework in place.
Highlights
Nicholas Kaldor (1908–1986) and Kazimierz Łaski (1921–2015) were major representatives of Keynesian analysis, Kaldor a central figure of the Cambridge Keynesian school, and Łaski one of the main proponents developing Michał Kalecki’s work.1 Nicholas Kaldor wrote in the early 1970s, critically, about issues of European economic integration, while Kazimierz Łaski wrote in the wake of the financial crisis of 2008–2012 – that is, 40 years later – on the failures of the policy framework of the European Economic and Monetary Union (EMU), their analyses were largely consistent with each other and complementary.Nicholas Kaldor made his contributions to the analysis of European economic integration in the course of the debates about the United Kingdom’s decision to join the European Communities (EC, as it was at the time)
Kaldor’s approach to analysing the pitfalls of European integration followed from his own analytical background that was grounded in the analysis of economic growth which at that time had moved towards multi-sectoral analysis
Kaldor – in a further foresightful passage, predicting something along the lines of the fiscal rules guiding the Stability and Growth Pact (SGP) – goes further in describing how an emerging fiscal framework of that type would contribute to such a vicious circle: The Community will control each member country’s fiscal balance – i.e. it will ensure that each country will raise enough in taxation to prevent it from getting into imbalance with other members on account of its fiscal deficit
Summary
Nicholas Kaldor (1908–1986) and Kazimierz Łaski (1921–2015) were major representatives of Keynesian analysis, Kaldor a central figure of the Cambridge Keynesian school ( prominent in the 1950s up to the 1970s), and Łaski one of the main proponents developing Michał Kalecki’s work.. Nicholas Kaldor, on the other hand, focused on the inherent imbalances that are likely to emerge along with a high degree of trade integration amongst economies that are structurally (and, one might add, institutionally) heterogeneous and where differences in sectoral composition got accentuated through the process of integration itself These differences in sectoral composition, in turn, affected relative productivity and unit labour cost developments and this caused a misalignment of real exchange rates in a monetary union, giving rise to what he termed ‘structural external imbalances’. We advocate giving due attention to a ‘positive political economy’ approach when considering the formulation of reforms that would be feasible in the current political-economic context of European integration In our view, this has not been given enough attention so far in the current discussions amongst economists and in the valuable contributions made by Nicholas Kaldor and Kazimierz Łaski.
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