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The Kalecki-Steindl Theory of Financial Fragility

In: Michał Kalecki in the 21st Century

Author

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  • Jan Toporowski

Abstract

Kalecki and Steindl modelled the financial fragility of companies through a circular flow of income analysis, extending the treatment of inter-sectoral flows that Marx put forward in Volume II of Capital to include household saving as a leakage from firms’ revenues and firms saving representing the financial accumulation of capitalist firms. Household saving causes financial fragility by reducing that financial accumulation. In Kalecki, this relation was put forward as an element in the ‘trend’ of economic development. Steindl made it of more immediate macroeconomic concern because it induces ‘enforced’ indebtedness among companies. The chapter extends this analysis by showing how recent asset inflation may have reduced this source of financial fragility, albeit at the expense of the indebtedness of households.

Suggested Citation

  • Jan Toporowski, 2015. "The Kalecki-Steindl Theory of Financial Fragility," Palgrave Studies in the History of Economic Thought, in: Jan Toporowski & Łukasz Mamica (ed.), Michał Kalecki in the 21st Century, chapter 15, pages 252-264, Palgrave Macmillan.
    • Handle: RePEc:pal:pshchp:978-1-137-42828-8_16
    DOI: 10.1057/9781137428288_16
    as

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