Skip to content

Michal Kalecki’s legacy, an interview with Jan Toporowski

Download the WEA commentaries issue ›

Jan Toporowski has recently published Volume 1 of a biography of Michal Kalecki. He agreed to this interview with the WEA Newsletter.


Q1. What made you choose to write a biography of Michal Kalecki?

It was not a matter of choice. I discovered Kalecki when I was studying economics at Birkbeck College in the late 1970s. The macroeconomics taught at the time (and still today) was all about the general equilibrium that is supposed to be immanent in the economy. I was then working in the Stock Exchange Investments Department of the Church Commissioners for England (the Church of England’s pension fund) when the financial markets were in turmoil and collapse, while outside the economy was succumbing to mass unemployment and inflation. In the College Library I came across Kalecki’s Studies in the Theory of Business Cycle. This was a revelation to me, in explaining all the phenomena that I was witnessing in my work, but that seemed strangely absent from the curriculum that I was studying. After that I read everything that I could find by him.

In September 1989 I was invited to Budapest for a conference honouring Nicholas Kaldor. There I met for the first time prominent Post-Keynesians, including Geoff Harcourt. One afternoon he and Peter Kriesler invaded my hotel room and invited me to join Peter Kriesler and Bruce McFarlane in writing an intellectual biography of Kalecki. This joint effort did not come to anything, although we had some interesting discussions, did some basic research, and pulled together some interesting material. Although I was aware that I had unique advantages in writing this biography, because of my familiarity with Polish, I felt that I did not adequately understand his economics of capitalism, and I kept being distracted by my work in monetary and financial economics.

Kalecki returned dramatically to my agenda in 2002 when I lost my job at South Bank University. With few other prospects I applied for and was awarded a Leverhulme Fellowship to write an intellectual biography of Kalecki. The Fellowship was for one year. But it allowed me to get visiting positions at the University of Cambridge and at the School of Oriental and African Studies, University of London, and to do some of the archival research necessary for this. After this it was a matter of writing up my material.

So, in the end it was not so much a choice, as a way of saving my career and paying tribute to economists, like Kalecki, who have illuminated economics for me and those, like Geoff Harcourt, Victoria Chick, Charles Goodhart and my family who have supported me through a troubled career.


Q2. What do you see as his main contributions to economics?

Undoubtedly his theory of the business cycle, the most serious challenge to general equilibrium macroeconomics. This is an approach to economics wholly different to the standard general equilibrium theory that has prevailed since the end of the nineteenth century.  It is dynamic, accounts for economic change, and incorporates the most commonly observed phenomena about contemporary capitalism: the crucial factor of business investment as the driver of the business cycle, the inability to increase employment by lowering wages, and the inability of capitalism to secure the rational use of resources because of the blocking political, social and financial power of the capitalist class. All this is expounded in a carefully reasoned analysis rather than accusations of injustice and bad faith. He applied similar reasoning to the economic problems of developing countries and the centrally planned economies of the communist bloc.


Q3. Did his background influence the development of these ideas?

His childhood and adolescence in the Polish/Russian city of Lodz vividly impressed on him the crucial dependence of capitalism on the business decisions of capitalist firms (rather than abstracted ‘agents’ or households, as our textbooks teach our students). The 1905 Revolution in Lodz and the turbulence in that city right up into the 1920s brought home to him that capitalism is not just about the distribution of income and the allocation of resources. It also involves daily struggles to limit the power of capitalists in society, because their social and economic circumstances force them to make decisions that are irrational from the point of view of the efficient management of social resources, and lead to misery and waste. This inefficiency and waste is epitomised in the business cycle, in which full employment is only obtained, if at all, at the peak of the boom, and then only temporarily. Unemployment and excess capacity is the natural state of capitalist economies, along with poverty and the more or less blatant autocracy of business interests.


Q4. How did his work fit with that of Keynes?

Keynes and Kalecki had one fundamental idea in common. This is that a free market capitalist economy cannot be brought into an efficient, full employment, equilibrium by price and wage flexibility. What determines the equilibrium in such an economy is the level of investment. If investment is too low, then there will be involuntary unemployment. If investment is too high then there will be inflation and foreign trade difficulties. However, Keynes and Kalecki differed over the scope and significance of money and monetary policy. For Kalecki, money and monetary policy were endogenous to the business cycle. The circulation of money is determined by business investment, and not by credit policy. In their interest rate and credit policies, central bankers delude themselves that they control the business cycle, when it is the business cycle that controls central bankers. Inflation targeting or the Taylor Rule reveal the conditions that adapt central bank operations to the business cycle, rather than showing the mastery of central bankers over the business cycle.

By contrast, Keynes never properly put aside the idea, inherent in his earlier work, that the business cycle can be managed somehow by monetary policy. In part this was because Keynes needed to find a place in his macroeconomics for his highly original monetary analysis whereas Kalecki, having determined that money plays a largely passive role in the business cycle, was less interested in the financial circulation of money. Style also came into it: Keynes’s real purpose was to change economic policy and he wrote with the rhetorical aim of changing the minds of his readers. His starting point was therefore the ideas of the ‘classics’ that he felt needed to be changed, rather than a clear exposition of the fundamental relationships in a capitalist economy.

Behind these discrepancies too were wholly different approaches to economic dynamics. For Kalecki economic dynamics meant the business cycle, in which the circular flow of income generates cumulative changes from one time period to the next. Keynes never threw off the partial equilibrium approach that he inherited from Alfred Marshall, in which various aspects of the economy is divided into logical ‘periods’ each with a determinate equilibrium that can then feed into the equilibria of the other periods.

Nevertheless, Keynes had huge respect for Kalecki and his technical abilities, and even tried to recruit Kalecki to mount a serious critique of Tinbergen’s econometric work on the business cycle. Kalecki wisely declined: He had a practical knowledge of statistics, rather than the firm grasp of statistical theory that would have been necessary for this.


Q5. Why has he been largely unrecognised for so long?

For many years Kalecki had a huge following in Cambridge and Oxford, thanks to the efforts of his friend Joan Robinson. But he was unsuccessful in America, in large part because of the anti-Communist fervour of late 1940s and early 1950s: He was denounced in the US Senate as a Communist sympathiser. Kalecki was not a Communist. But he hated capitalism for the misery that it created and he thought that socialism would avoid this. Politically, therefore, he has not been in tune with the rightward drift of political economy since the 1980s.

Moreover, unlike Keynes, and even his own friend the Polish Marxist Oskar Lange, Kalecki was not interested in any aspect of economics that did not have a bearing on the problem of how explain and model the business cycle. So he did not really engage with the ideas of other economists, or the history of economic thought, beyond what he could use for his own analysis. The collapse of Communism reduced interest in Kalecki’s work on the economics of socialism and his seminal contributions to development economics have fallen before the advance of banks and financial institutions in determining the policies of developing countries.


Q6. How might he be relevant today?

There are two ways in which his work addresses our current situation and concerns. First of all he stands out for his insistence that, in a capitalist economy, it is capitalist firms that determine the character and dynamics of the system, with lesser possibilities available to governments and households than is attributed to them by most current economic theory.  Today, economic theory is taught, and economic policy is conducted, as if firms did not exist, except as abstracted ‘wealth-creators’, continually frustrated by any remnants of progressive welfare or tax policies. Most contemporary economic theory tells us that the key economic decisions are made by households rather than firms and this is quite patently untrue. The kind of analysis of the firm that he gave us can give much improved insights into our current predicaments: the rise of unemployment and the decline in the quality of employment, the failure of Keynesianism and the economic instability that undermines security in all classes of society.

Secondly, Kalecki understood that business investment is the only effective way in which debt problems can be overcome in an indebted capitalist economy. The difficulty is that there is no mechanism in a capitalist economy to ensure that sufficient business investment is forthcoming to allow all the debts in an economy to be serviced (Minsky came to much the same conclusion in his analysis), just as there is no mechanism to ensure that there is sufficient business investment to generate full employment. The notion that price or wage flexibility can secure full employment is even less relevant in an indebted capitalist economy.


Q7. Is today’s university economics environment conducive to the approaches that he took?

There are a number of obstacles to the better understanding of Kalecki’s work in today’s university economics environment. First of all we are supposed to train economists who will work in business and government, where their supervisors have expectations that their new staff will be familiar with certain ideas and not challenge them with new ones. In this way we are forced to pander to the backwardness and ignorance of Keynes’s ‘practical men’. Secondly, most core teaching in economics is from textbooks that trivialise economics and serve up for our students stews into which bleeding chunks, hacked from the serious theoretical constructions of our great economists, have been thrown with little regard for consistency or significance. Academic economics is further rendered insubstantial by the undue pressure on academics to publish in particular journals favouring trivial technical solutions to puzzles of dubious significance.

In fact it was not so different in Kalecki’s time, although the pressure to publish sophisticated technical expositions of commonplace observations might have been somewhat less. I wonder if Kalecki would have been such a great economist if he had been at university. (It was only during the last thirteen years of his life that he worked in a university and even then this was on sufferance on the part of the university, since he had no university degree.) So much of his most original ideas came from thinking through the practical knowledge that he acquired as an engineer, as a business journalist, credit investigator, and an avid follower of business practices. Very few academics have that kind of background or experience. Moreover he knew that he was unusual among academics in this regard, and this gave him an unusually critical, even contemptuous, attitude towards academic research that dealt with abstract theory rather than practical problems. Following the crisis of 2008, academic economics is not short of critical, even contemptuous, attitudes among economists for those who do not adhere to their particular school of thought (whether heterodox or mainstream). But too little of these attitudes are informed by the kind of hard practical knowledge that Kalecki had. And if they were we might see those colleagues with whom we disagree as more naïve than contemptible.


[Editor’s note:  Jan Toporowski’s book is Michal Kalecki: An Intellectual Biography, Volume 1: Rendezvous in Cambridge 1899-1939, Palgrave Macmillan, July 2013.]


From: pp.6-8 of World Economics Association Newsletter 4(1), February 2014

Download WEA commentaries Volume 4, Issue No. 1, February 2014 ›

Respond to this article

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Please note that your email address will not be published.