ABSTRACT
In the century since the birth of Michal Kalecki political economy has been dominated by three schools of thought: the Austrians and neo-classical marginalists, who saw in the market the perfect form of economic coordination and were therefore inclined to idealize capitalism; the Marxists, who saw capitalism as prone to crisis because of inconsistencies arising out of the process of production, rather than market exchange, and who argued for political action to bring about a new form of economy, socialism, which would avoid these inconsistencies; and the Keynesians. Because of the variety of the latter, it is necessary to distinguish the neo-classical Keynesians who were most influential in the capitalist countries during the quarter-century after World War II and who merely believed in fiscal activism to overcome market imperfections (a view which would have been quite acceptable to Keynes’ old opponent Pigou) from Keynes himself and his more fundamentalist, post-Keynesian, followers. Broadly, the Keynes of the General Theory (as opposed to the Keynes of the Treatise on Money and before) saw neoclassical and Marxist political economy as being based on stylized ‘Ricardian’ economies producing and exchanging commodities, whereas the signal feature of capitalism in the twentieth century is its monetary character. This gives rise to its most fundamental flaws in the system of finance, which are responsible for the instability of capitalism and its propensity towards underinvestment. Keynes therefore recommended not only fiscal activism to stabilize capitalism, but also the reduction of the influence of finance (the ‘euthanasia of the rentier’). Furthermore, Keynes was critical of socialism. He considered the concentration of power arising from state ownership of the means of production to be incompatible with political freedom and pluralist democracy, a view amply borne out by the Eastern European experience of socialism.
