underconsumption again--and Luxemburg

wpc at cs.strath.ac.uk wpc at cs.strath.ac.uk
Fri Jan 27 03:36:32 MST 1995

In understanding underconsumption the most
significant theoretician following on from
Luxemburg was M Kalaecki, whose formulations
are very influenced by Luxemburg.

In hise Essays in the Dynamics of the Capitalist
economy, which date from the 30s through the
60s, he gives a number of admirably clear and
simple formulations.

If I remember his basic equation is

Total expenditure =
   workers consumption +
   capitalist consumption +
   trade surplus +

Total income = wages + profits

since total income = total expenditure
and since he assumes that workers do not save,
he obtains

    total profits = capitalist consumption +
                    trade surplus +

Thus the income of the capitalist class is shown
to be largely dependent upon their own expenditure
on consumption or investment.
Since a trade surplus provides an additional
independent boost to profits, public policy in
capitalist countries tends to be oriented towards
the production of trade surpluses.


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