Class Conflict and the "Natural Rate of Unemployment"

Challenge, Nov, 1999 by Robert Pollin

There is a solution out of this trap suggested by Kalecki's analysis: that capitalists embrace the higher profits they will earn through higher levels of capacity utilization and a full employment economy, even if such a situation entails that they relinquish a degree of political and economic power. But until various political forces coalesce around the virtues of this approach, we will continue to live in a world framed by the limits of the natural rate/NAIRU analysis. This is because, despite the numerous and sometimes egregious failings of the model, it still captures--along with the Marx/Kalecki framework--basic truths about the nature of class conflict in our contemporary economy.

ROBERT POLLIN is a professor of economics and codirector of the Political Economy Research Institute at the University of Massachusetts-Amherst. He is coeditor of Globalization and Progressive Economic Policy (Cambridge University Press, 1998). This paper draws from sections of "The 'Reserve Army of Unemployed' and the 'Natural Rate of Unemployment': Can Marx, Kalecki, Friedman, and Wall Street All Be Wrong?" Review of Radical Political Economics (summer 1998), and "The 'Natural Rate of Unemployment': It's All About Class Conflict," Dollars and Sense (September/October 1998).

For Further Reading

Friedman, Milton. 1968. "The Role of Monetary Policy." American Economic Review 68, no. 1: 1-17.

Gordon, Robert J. 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy." Journal of Economic Perspectives 11, no. 1: 11-32.

Kalecki, Michal. 1971. "The Political Aspects of Full Employment." In Kalecki, ed., Selected Essays on the Dynamics of the Capitalist Economy. Cambridge, UK: Cambridge University Press, pp. 138-45.

Lown, Cara S., and Rich, Robert W. 1997. "Is There an Inflation Puzzle?" Federal Reserve Bank of New York Economic Policy Review (December): 51-69.

Marx, Karl. 1967. Capital, vol.1. New York: International Publishers.

Staiger, Douglas; Stock, James H.; and Watson, Mark W. 1997. "The NAIRU, Unemployment and Monetary Policy." Journal of Economic Perspectives 11, no.1:33-50.