Kalecki and the Declining Rate of Profit

Abstract

In Kalecki's business cycle theory a fall in the rate of profit plays a key role in the onset of recession, causing a fall in investment. This paper shows how the falling rate of profit is an eventual corollary of the steady rate of capital accumulation, which Keynes saw as the key to securing full employment. The decline in the rate of profit may be avoided by a shift to increasingly capital-intensive techniques of production, or greater government indebtedness or foreign trade imbalances. It is suggested that these disequilibrating factors lie behind the success of rapidly growing capitalist economies in the second half of the 20th century.

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