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International Monetary Fund. External Relations Dept.
Published Date:
September 1976
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Foreshadowing Keynes

Feiwel, George R., The Intellectual Capital of Michael Kalecki, Knoxville, Term., U.S.A., The University of Tennessee Press, 1975, xxii + 583 pp., $22.50.

Michael Kalecki was born and educated in Poland, and had little or no formal training in economics. After studying engineering in Danzig, he gravitated to economic journalism, and then to a research job at the Polish Research Institute on Business Cycles, which he began in 1929. In 1933 he published a book, Essay on the Theory of Business Cycles, which, in its main lines, foreshadows the later contributions of Richard Kahn and John Maynard Keynes.

Kalecki went to England in 1936, first to Cambridge, then after a couple of years to Oxford, where he remained throughout the war and wrote numerous penetrating articles on war finance for the Oxford Institute of Statistics. At the same time he retained his interest in business cycles, publishing two books, Essays in the Theory of Economic Fluctuations and Studies in Economic Dynamics. In 1946, he went to New York to join the United Nations—publishing little. In 1955, he returned to Poland and resumed writing intensively, mostly on problems of economic management in socialist economies, but he became increasingly disillusioned both with the economic policies and the political climate of his country, and died, apparently a disappointed, if not a bitter, man.

This book brings out the full extent of Kalecki’s influence on Cambridge economic thought, particularly among those whose connection with Cambridge went back to the 1930s—Joan Robinson, Nicholas Kaldor, Piero Sraffa, and Maurice Dobb. The question of whether or not Kalecki anticipated Keynes is really one of historical interest now. The evidence from this book is clearly that he did. In his 1933 Essay, the concept of effective demand is clearly introduced and the national income multiplier is also plainly discernible. However, his work was in Polish and made little or no impact on English-speaking circles. More available was his 1935 £co/70/nef/7caarticle “Macro-Dynamic Theory of the Business Cycle.” This, however, was austerely mathematical, and its novelty and significance do not seem to have been generally realized until well after Keynes had made such ideas popular through the General Theory.

It is, of course, remarkable that a lone scholar such as Kalecki, largely self-taught and working without the stimulus of like-minded colleagues and a strong economic tradition, should have arrived independently at conclusions which it took Keynes, with all his advantages, a decade to reach. To me, this merely underlines a point frequently made by Joan Robinson: that when orthodoxy is wrong, it is far easier to recognize its error when one’s training and intellectual investment are not inextricably bound up in established modes of thought.

An interesting question which George Feiwel raises is whether, granted Kalecki’s prior authorship of the principal ideas of the General Theory, his development of them was better or worse than Keynes’. Feiwel hands the palm to Kalecki, but I am not so sure. Some of his ideas seem unduly mechanical to me, without the richness of understanding that comes through in Keynes. An identity is established, a particular variable is assumed to be controllable and, presto, a causal relationship is created that is not subsequently considered or challenged. The bipartite division of society into classes, so characteristic of Cambridge growth theory in the 1950s and 1960s, finds its first expression in Kalecki. He makes the familiar Robinson-Kaldor assumption that capitalists save and workers spend all their income, so that profits depend solely on investment.

Viewed from the banks of the Cam, therefore (where incidentally Feiwel met Kalecki in 1969 and got his inspiration for this book), Kalecki’s writings of the 1930s might well seem to be a step beyond Keynes. But for those who believe Cambridge capital theory to be a deviation from the main thread of the development of economic thought, Kalecki’s contribution is merely interesting. From the standpoint of now-dominant neoclassicism, it may even be hard to discern what Kalecki was about. (Though this, of course, may simply be another example of orthodoxy’s blinkered reaction to the heretic.) It would be wrong, however, to minimize Kalecki’s personal achievement, or his impact on a legion of disciples in all parts of the world.

This review should not finish without noting Kalecki’s contributions to the theory of war finance, and to economic management in a socialist economy. As Feiwel’s bibliography shows, he wrote extensively on these subjects, and it can hardly be doubted that his work had an important impact on policy. It is a disappointment, however, that the Poland of Gomulka was such infertile ground for a man of Kalecki’s temperament and intellect. As earlier in his life, his practical impact fell short of its potential, partly because of his own shortcomings as a persuader, but more importantly because the time and place were not right for the man.

Andrew Crockett

Seminar on world economics

Shonfield, Andrew (ed.). International Economic Relations of the Western World: 1959-1971. Vol. 1: Politics and Trade, Oxford, England, Oxford University Press, 1976, xii + 459 pp., £11.50, $28.75.

The first of the two volumes of this large-scale survey undertaken in Chatham House (the Royal Institute of International Affairs) provides a review and an interpretation of world economic relationships between 1959 and about 1971 or 1972. Five authors have contributed to this volume—Andrew Shonfield, Gerard and Victoria Curzon, T.K. Warley, and George Ray, and numerous authorities were asked to comment on the discussion papers and drafts which preceded the final texts.

The result is a plum pudding with many plums, but of a somewhat uneven consistency; the narrative is good, but not comprehensive, and the style ranges from the journalistic to the academic, slightly undermining the reader’s willingness to believe. (Neologisms like “hege-monial” spoil the English of the first essay, which, indeed, lapses here and there into Atlanticese.) Despite such weaknesses, the surveys provided are useful and deeply interesting.

These studies recall the confusing paradoxes that bedeviled discussions of international trade and economic relationships in the decade after 1959. Monetary affairs receive a full treatment, as well as trade in manufactured and agricultural goods. From time to time the long-term stances of the participating nations are described, based as they are on nationalistic emotion and (real or supposed) self-interest. For example, it is pointed out that the U.S. enthusiasm for a liberal trading regime in agricultural goods is highly selective, applying mainly to those products in which the United States has a comparative advantage, while in regard to agricultural commodities in which it is un-competitive, or needs imports, its policies are at least as protective as those of Western Europe.

Insights such as this are among the plums, and the history laid out here is also highly digestible. Mr. Ray’s piece about statistics is illuminating, but somewhat out of place.

Ian Bowen

Drama of the 1960s

Strange, Susan, International Economic Relations of the Western World, 1959-1971, Volume 2: International Monetary Relations, London, England, Oxford University Press, 1976, xi + 416 pp., £11.50, $28.75.

The second volume of International Economic Relations of the Western World treats the monetary side of the relations between Belgium-Luxembourg, Canada, France, the Federal Republic of Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States—countries Susan Strange calls the “affluent alliance.” The period covered—from the establishment of the convertibility of Western European currencies in December 1958 to the signing of the Smithsonian agreement in December 1971, that is, roughly the decade of the 1960s—proves to be signally appropriate. At several points Strange makes it clear that the sequence of events that shook and transformed the international monetary system later in the decade were largely not anticipated in 1960; the contrast between 1960 and 1970 makes for dramatic reading.

The purpose of the volume, as explained in Chapter 1, is to “supply the missing economic dimension to much conventional international political history.” Although by Strange’s own admission, this is an ambitious undertaking, it comes off quite well. There are very good explanations of the responses of national central banks, particularly of the European ones, to a number of monetary crises. For example, there are excellent descriptions of the organization of the Gold Pool in 1961, the institution established in the same year as the Basle Agreement to support sterling, the negotiations leading to the General Arrangements to Borrow by the International Monetary Fund, the difficulties of sterling from the middle of 1964 to the end of 1968, the efforts of European countries to conduct “multilateral surveillance,” the debates and negotiations concerning international liquidity, and the attempts to bolster the dollar from 1965 to 1969. The explanations of the events of the early part of the decade are especially full and revealing. The book also describes well the mushrooming of international money markets. Indeed, one of the most enjoyable chapters is the relatively short one on the Eurocurrency market, a chapter which fills a lacuna in the literature on international monetary affairs.

As in her past books, Strange is at her best in explaining the political considerations that may have governed, or at least influenced, actions in the international economic and monetary arena. Such considerations are not easy to trace and often have to be the subject of conjecture. Nevertheless, the considerations advanced seem plausible and have been well-researched and documented, primarily from a wide range of already published sources. At the same time, Strange is completely at home with economic and monetary phenomena and, while the significance and consequence of the economic questions dealt with are not discussed in any depth, the basic economic issues at stake are certainly clearly brought out.

There is also an interesting introduction by Andrew Shonfield, Director of the Royal Institute of International Affairs, giving his view of the trends of this period and their implications for developments after 1971. There is a longish essay at the end of the book by Christopher Prout on the relations between the countries of the “affluent alliance” and the developing countries, describing relatively briefly the aid given on an official basis to developing countries, lending on a commercial basis, and debt rescheduling.

All in all this is a well-written volume covering a period so rich in international economic and monetary history as to warrant many treatments. Strange’s book is worthwhile for all those interested in international economic and monetary problems or for those making policy in these fields. Unfortunately books these days are very expensive. One can only hope that the high price of this volume will not unduly limit its readership.

Margaret Garritsen de Vries

Developing communications

Sommerlad, E. Lloyd, National Communication Systems: Some Policy Issues and Options, New York, N. Y., U.S.A., Unipub, 1975,36 pp., $2 (paperback).

Add another volume to the host of papers, articles, and books dealing with communication systems which have flooded the market in recent years. This slim report prepared for UNESCO by E. Lloyd Sommerlad will be welcomed by those policymakers who have the desire but not the time to read a comprehensive analysis of what constitutes a national communication system, and how it can be put to the best use.

Probably one of the significant contributions of this book is its assertion that communication systems should become an integral part of economic planning and development policies. Mr. Sommerlad, who has long been a keen observer of communication systems in developing countries, has geared the report toward their administrators.

One of the paradoxes of the modern world is that in spite of the growth of communication systems in the world in general, and in the less developed countries (LDCs) in particular, well-researched and useful information on their nature, scope, and uses has been lacking. A shortage of personnel with training and experience in fields such as radio, television, films, journalism, and computer and space sciences may be partly responsible for the emergence of the relatively few and somewhat subjective analyses of the communication systems in the LDCs. Government apathy or active discouragement of research into sensitive communication policies may be another reason.

This report gives a concise overview of the structure of the system, highlighting among others the converging trend of communications and computer technology. This trend, says the author, “will have the most profound effect on the communication system and on the future of the society itself,” and the growing interest in the media may partly be due to its emergence. One of the questions here is: who will control this amalgamated “supertool,” which could reach and affect millions of people with electric speed?

Listing policy questions that arise from each situation as he covers the whole gamut of communication systems from the mass media through extension officers to libraries and advertising, the author faces a seemingly impossible task. Yet he manages to present a clear picture of all the policies and alternatives which are available to planners and administrators. The author’s constantly repeated theme is that modern communication is of central importance to society. He links the choice of a political to the choice of a communication system. Having done that, he makes his analysis and recommendations, dividing the world into the socialist and nonsocialist political categories.

Mr. Sommerlad advocates an interdisciplinary approach toward the formulation of communication systems, and stresses the need for a feedback mechanism within the system. However, he does not cover the area of misuse by shortsighted leaders and planners. One could draw some inferences from his work of the problems that could result from abuse, but the gap is there.

Who are the people who are drawn to and remain in the communication system? The author says that a system is as good as the people in it. Therefore, he stresses the need for training and research facilities and the need to give communication specialists an equal status to that of other persons engaged in the development and administrative processes. This last recommendation will find sympathy among many people in the LDCs. Alas, most of them may not be either in the government or in the planning cells.

Shuja Nawaz

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