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This and the following article originally appeared in Irish Foreign Affairs, Vol 13, No 4, December 2020. They can be downloaded as a PDF here


I want to give an account of the post-war history of Europe, borrowing heavily from three articles by Joseph Halevi published last year by the New York based Institute for New Economic Thinking (INET) on 'The political economy of Europe since 1945'. (1) Halevi calls this a 'Kaleckian perspective' and perhaps I should start with some remarks on Halevi and on Michal Kalecki.

(1) Joseph Halevi: The Political Economy of Europe since 1945 - A Kaleckian perspective*, INET Working Paper No. 100, June 2019 (; idem: Europe 1957 to 1979: From the Common Market to the European Monetary System, INET Working Paper No. 101, June 2019 (; idem: From the EMS to the EMU and…to China, INET Working Paper No. 102, September, 2019 (

Halevi was born in Haifa in 1946. Although Jewish, he describes his earliest intellectual mentors as having been 'Tawfiq Toubi and Emile Habibi, whom I knew personally: both were leaders and MPs of the Communist Party of Israel and major intellectuals of the Palestinians in Israel.' In the late sixties, he moved to Italy where, on the recommendation of the Italian Communist Party, he worked for the General Confederation of Labour. It was only reluctantly that he became an economist but his reluctance turned to enthusiasm when he overcame his initial Communist-inspired prejudice against Keynes. His academic career was pursued in Italy (Rome and Turin), the US (New York), France (Grenoble) and Australia (Sydney). 

Asked if he was still a Communist, Halevi replied: 'Yes, I am. Although this requires rephrasing after all that has happened, but the idea of overcoming capitalism and establishing a system of socialised means of production are two important principles I still endorse.' He says of Kalecki that he 'is really what today's classical economics should be had it been allowed to develop freely, not in some niche tucked away God knows where. He brought together business cycles with the issue of effective demand, linked the latter to the issue of market power and conditions of production. He was an absolute genius. He also formulated the modern theory of socialist planning.' (2)

(2) Interview by Judie Cross. March 6, 2018,

Kalecki was Polish, born in 1899. At the age of thirty he worked for the Warsaw based Institute of Research on Business Cycles and Prices, and in 1933 he wrote 'An Attempt at the theory of the Business Cycle', offering a 'macroeconomic theory of effective demand' three years before Keynes's 'General Theory'. He resigned from the Institute in 1936, protesting against political interference. The same year, after reading Keynes's General Theory, he went to Cambridge, becoming particularly friends with Joan Robinson. Robinson believed that he had anticipated Keynes who, however, kept his distance. In his 1939 article 'Political aspects of full employment', he argued that Keynesian methods could achieve full employment but this would lead to a more assertive working class which in turn would lead alarmed business leaders to abandon the policy. This was part of his theory of the political - as opposed to merely technical economic - business cycle.

In 1955, after a spell in New York as Deputy Director in the Department of Economic Affairs of the UN Secretariat, he returned to Poland and in 1957 was appointed chairman of the Central Commission for Perspective Planning. His advice, however, largely directed against over ambitious targets, was disregarded. He resigned in 1968, shortly before his death in 1970, in despair because of the perceived persecution of Jewish colleagues in the anti-Zionist campaign that followed the Israeli victory of 1967. Kalecki was Jewish but hadn't himself been targeted. (3)

(3) See e.g. A. Asimakopulos: 'Kalecki and Robinson: An "Outsider's" Influence', Journal of Post Keynesian Economics, Vol. 11, No. 2 (Winter, 1988-1989), pp. 261-278 and Andrzej Brzeski: 'Kalecki and the Polish Economy' review of 'The Intellectual Capital of Michal Kalecki, A Study in Economic Theory and Policy' by George R. Feiwel, Soviet Studies, Vol. 28, No. 4 (Oct., 1976), pp. 616-620.

It's difficult for me as a non-economist - and most certainly non-mathematician - to give an account of why he was important but he seems to have had a more political, class struggle orientated vision than Keynes. He dealt with longer time frames and his theory of the 'political business cycle' took into account likely political developments, for example, as we have seen, the consequences of the increase in working class/trade union power that would result from Keynesian policies promoting full employment. 

Halevi introduces him to the discussion by referring to a paper he wrote in 1932 - 'The Influence of cartelisation on the business cycle.' The theory of 'cartelisation' had been developed within Marxism by Rudolf Hilferding in his book Das finanzkapital (1910). The advantage of the cartel is that it can determine its prices independent of considerations of competition. It can decide freely on what it wants by way of profit above expenses. Hilferding argued that this helped to stabilise a nationalist capitalist economy. Kalecki on the other hand argued that it was destabilising because it enabled the cartel to maintain a productive capacity beyond what a national economy could absorb. 'Cartels compete not through prices but via the building up of productive capacity so that during a boom they engage in an investment race leading to excess capacity, thus contributing to the demise of the boom itself.' (4) The cartel then reduces output and lays workers off and that hits the demand for consumer goods which are still being produced by industries subject to the rigours of competition. Thus Kalecki argued that, contrary to Hilferding's thesis, a heavily cartelised economy was less stable - more prone to booms and busts - than a more purely competitive system.

(4) Halevi: Europe since 1945, p.3 

Germany prior to the First World War had been a heavily cartelised economy and this was part of the problem after the war. Like the USA in the 1930s depression, a huge productive capacity faced a very limited market. As a result of the war Germany had lost much of its access to its Eastern hinterland, both as a market outlet and as a source of of raw materials. Although Halevi's articles concern the period after the Second World War I'd like to begin by discussing this earlier period - the period in which the body of thought we call 'Keynesian' was developed - beginning with some thoughts (mainly my own, not Halevi's) on the hyperinflation in Germany.

                                  To Part One - Germany before 1945