ABSTRACT
In the 1930s, Michal Kalecki's understanding that export surpluses would create free cash was formulated at a time when US national production was carried out almost entirely by nationally headquartered firms and when multinational production was distinctly secondary to trade. The multinational context of modern trade requires that Kalecki's unidirectional understanding of free cash and trade balances be significantly modified. Multinational production and sales abroad substitute in large part for US exports, allowing world profits of US corporations to expand even if US exports falter or recede relative to imports. With foreign central banks supporting the dollar, US firms leveraged this advantage to buy investments and corresponding markets around the world. The growth of US direct investment in Europe was the main component shifting the relative growth of multinational capital from resource centers to the developed world of manufacturing and financial centers. McKinnon's expectations hypothesis no doubt harbors a good deal of truth.
