There Are Major Differences between Kalecki’s Theory of Employment and Keynes’s General Theory of Employment, Interest, and Money

Abstract

Michal Kalecki came to Cambridge as Keynes was completing his General Theory of Employment, Interest and Money. Joan Robinson noted that “without any contact either way, Michal Kalecki had found the same solution. … The interesting thing is that two thinkers, from completely different political and intellectual starting points, should come to the same conclusion” (Turner, 1989, p. 63). The question I would like to explore in this chapter is whether these two geniuses, Kalecki and Keynes, not only independently discovered the principle of effective demand but also came to the identical explanation of why there was no automatic market mechanism to assure full employment whenever a decline in investment spending occurred in an entrepreneurial economy. This is not merely an exercise in the history of economic thought. I believe that understanding the differences in Kalecki’s and Keynes’s underlying analysis of the principle of effective demand is essential to comprehending how recent events, such as the East Asian currency crisis and the Russian debt default, affect unemployment in the global economy. In the final pages of this chapter, I shall suggest how Keynes’s analysis points to a solution for today’s recurrent currency crises and high global unemployment rates.