SOAS Research Online

Abstract

The book puts together Kalecki’s published fragments on monetary theory and policy to show his distinctive approach to money and its circulation in the capitalist economy. In Kalecki’s theory money has both an industrial and financial circulation. Corporate finance takes its place at the centre of monetary considerations because it is the money of capitalists that is the autonomous determinant of expenditure in the economy. The theory has important implications for the rate of interest, which is not related to the rate of profit, nor to the kind of portfolio adjustments necessary to maintain portfolio equilibrium, but to the kind of financing that may prevail in any given phase of the business cycle. Fiscal policy then has the function of transferring money from financial circulation into circulation in the real economy, while monetary policy serves to maintain financial stability and ease government expenditure and debt management. The book offers a critical comparison of Kalecki’s monetary thinking with Keynesian and Post-Keynesian monetary theory, as well as recent central banking. Kalecki’s critique of the international monetary arrangements proposed by Keynes and White at Bretton Woods casts new light on the international monetary imbalances that have since disrupted the international economy. The greater importance of debt management revealed in Kalecki’s monetary analysis makes it particularly relevant to the policy dilemmas of developing countries and governments facing high levels of debt following the Covid-19 pandemic.