by Kalecki on wage-led growth One of the main features of the capitalist system is the fact that what is to the advantage of a single entrepreneur does not necessarily benefit all entrepreneurs as a class. If one entrepreneur reduces wages he is able ceteris paribus to expand production; but once all entrepreneurs do the same thing — the result will be entirely different. Let us assume that wages have been in fact generally reduced … and in consequence unemployment vanishes. Has depression thus been overcome? By no means, as the goods produced have still to be sold … A precondition for an equilibrium at this new higher level is that the part of production which is not consumed by workers or by civil servants should be acquired by capitalists for their
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Kalecki on wage-led growth
One of the main features of the capitalist system is the fact that what is to the advantage of a single entrepreneur does not necessarily benefit all entrepreneurs as a class. If one entrepreneur reduces wages he is able ceteris paribus to expand production; but once all entrepreneurs do the same thing — the result will be entirely different.
Let us assume that wages have been in fact generally reduced … and in consequence unemployment vanishes. Has depression thus been overcome? By no means, as the goods produced have still to be sold … A precondition for an equilibrium at this new higher level is that the part of production which is not consumed by workers or by civil servants should be acquired by capitalists for their increased profits; in other words, the capitalists must spend immediately all their additional profits on consumption or investment. It is however most unlikely that this should happen … It is true that increased profitability stimulates investment but this stimulus will not work right away since the entrepreneurs will temporise until they are convinced that higher profitability is going to last … A reduction of wages does not constitute a way out of depression, because the gains are not used immediately by the capitalists for purchase of investment goods.
