The Rate of Profit in Kalecki’s Theory

In his various accounts of the working of capitalism, Kalecki seldom mentions the general, or ‘normal’, rate of profit, nor does he ever try to present a theory of what determines it. By contrast, he devotes a great deal of attention to the determinants — and consequences — of the realisation of current profits. Of course, an average rate of profits can be found by dividing currently realised profits, over some period, by the value of the capital stock during that period, but the result need not bear any relationship to the normal rate of profit. This latter is the rate of profit that can be expected when the output of normal capacity operation is sold at normal prices, reflecting the established degree of competition. Currently realised profits are those obtained when current output is sold at current market prices. But current output may reflect abnormal operating or labour market conditions, and may be sold under abnormal market conditions, hence the disjunction of the two concepts. The missing element is a determination of the profitability of capital when operating under ‘normal’ conditions; this is the potential profit to be realised. For profits cannot be realised unless they can be produced, and Kalecki presents no account of the profit potential of capital.