"We shall deal first with the reluctance of the “captains of industry” to accept government intervention in the matter of employment. Every widening of state activity is looked upon by business with suspicion, but the creation of employment by government spending has a special aspect which makes the opposition particularly intense. Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment). This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of “sound finance” is to make the level of employment dependent on the state of confidence."
-Michał Kalecki, 1943
The more things change...
via Paul Krugman and Robin Wells.
Well, if there was ever a clear inducement of two opposing views it would be this, 'employment based on the state level of confidence' vs 'employment based on market level of confidence'.
ReplyDeleteI think of the two opposing views in this manner: First, those who believe in and favor a mixed market. Second, the amalgam of those who favor one of your extremes or the other.
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