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Michał Kalecki, 1933 – Stimulating The World Business Upswing

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Michał Kalecki in “Stimulating the World Business Upswing,” in Collected Works of Michał Kalecki, vol. 1, Capitalism: Business Cycles and Full Employment, ed. Jerzy Osiatyński, trans. Chester Adam Kisel (Oxford: Clarendon, 1990), 156–64 (possibly ahead of John Maynard Keynes):We very often encounter the argument against building new factories while the old ones are still unemployed. This simple truism shares the fate of many of its fellows—it is false. In order for existing capital equipment to be fully employed, it must be continually expanded, since then accumulated profits are invested. If they are not invested, profits fall and, along with the fall in profits, there is a decline in the capacity utilization of existing factories.Let us assume, as often happens in the USA, that two

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Michał Kalecki in “Stimulating the World Business Upswing,” in Collected Works of Michał Kalecki, vol. 1, Capitalism: Business Cycles and Full Employment, ed. Jerzy Osiatyński, trans. Chester Adam Kisel (Oxford: Clarendon, 1990), 156–64 (possibly ahead of John Maynard Keynes):

We very often encounter the argument against building new factories while the old ones are still unemployed. This simple truism shares the fate of many of its fellows—it is false. In order for existing capital equipment to be fully employed, it must be continually expanded, since then accumulated profits are invested. If they are not invested, profits fall and, along with the fall in profits, there is a decline in the capacity utilization of existing factories.

Let us assume, as often happens in the USA, that two competing railway lines run between two cities. Traffic on both lines is weak. How does one deal with this? Paradoxically, one should build a third railway line, for then materials and people for construction of the third will be transported on the first two. What should be done when the third one is finished? Then one should build a fourth and a fifth one … This example, as we warned, is paradoxical, since unquestionably it would be better to undertake some other investment near the first two railway lines rather than build a third one; nevertheless, it perfectly illustrates the laws of development of the capitalist system as a whole.

Michał Kalecki, 1933 – Stimulating The World Business Upswing

Michał Kalecki, picture credit: PWN

quote h/t Jan Toporowski

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