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Profit Squeeze and Keynesian Theory

In: Nicholas Kaldor and Mainstream Economics

Author

Listed:
  • S. A. Marglin
  • A. Bhaduri

Abstract

This paper explores one aspect of the relationship between the system of production and the macroeconomic structure, namely the role of profitability in determining investment demand and the level of economic activity. Within the system of production, wages are a cost: the lower are profits per unit of production, the lower the stimulus to investment. In a Keynesian view of the macroeconomic structure, however, wages are a source of demand, hence a stimulus to profits and investment. In this view, aggregate demand provides the way out of the dilemma that high wages pose for the system of production. If demand is high enough, the level of capacity utilization will in turn be high enough to provide for the needs of both workers and capitalists. The rate of profit can be high even if the profit margin and the share of profit in output are low and the wage rate correspondingly high.

Suggested Citation

  • S. A. Marglin & A. Bhaduri, 1991. "Profit Squeeze and Keynesian Theory," Palgrave Macmillan Books, in: Edward J. Nell & Willi Semmler (ed.), Nicholas Kaldor and Mainstream Economics, chapter 8, pages 123-163, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-10947-0_8
    DOI: 10.1007/978-1-349-10947-0_8
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    Citations

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    Cited by:

    1. Bhaduri, Amit, 2020. "Reforming capitalist democracies: Which way?," IPE Working Papers 139/2020, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    2. Eckhard Hein & Lena Vogel, 2009. "Distribution and Growth in France and Germany: Single Equation Estimations and Model Simulations Based on the Bhaduri/Marglin Model," Review of Political Economy, Taylor & Francis Journals, vol. 21(2), pages 245-272.
    3. Capazario, Michele, 2022. "Developing an Income-Distribution- Sensitive Taylor Rule: An Application to South Africa," MPRA Paper 112740, University Library of Munich, Germany.
    4. Engelbert Stockhammer & Syed Mohib Ali, 2018. "Varieties of Capitalism and post-Keynesian economics on Euro crisis," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 44(3), pages 349-370.
    5. Stephen Thompson, 2018. "Profit Squeeze in the Duménil and Lévy Model," Review of Radical Political Economics, Union for Radical Political Economics, vol. 50(2), pages 297-316, June.
    6. Eckhard Hein & Lena Vogel, 2007. "Distribution and growth reconsidered - empirical results for Austria, France, Germany, the Netherlands, the UK and the USA," IMK Working Paper 03-2007, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    7. Hein, Eckhard & Ochsen, Carsten, 2000. "Monetary interest rates, income shares, and investment: Theory and empirical evidence for France, Germany, the UK, and the USA," Violette Reihe: Schriftenreihe des Promotionsschwerpunkts "Globalisierung und Beschäftigung" 11/2000, University of Hohenheim, Carl von Ossietzky University Oldenburg, Evangelisches Studienwerk.
    8. Köhler, Kasper, 2018. "The limits to profit-wage redistribution: Endogenous regime shifts in Kaleckian models of growth and distribution," IPE Working Papers 112/2018, Berlin School of Economics and Law, Institute for International Political Economy (IPE).

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