Question

Discuss the following statement: “Workers spend what they get, capitalists get whey they spend.” You should provide its meaning and implications with regard to the distribution of income and the allocation of resources.

Answer 1

The profit equation of Kalecki widely shows realized gross profit, before its distribution to many parts (retained earnings, interest, rent, etc.), as a function of aggregate demand. In a demonstrate model of closed economy with workers and capitalists only, where the workers do not save in aggregate, it expose that capital is the sum of private investment and capitalist consumption. This claims that this is a gripping relationship. The capitalist expenduture continue to the capitalist class as whole, whereas the wages spent by workers on consumption items return to the capitalists wholly. This has been concluded as “Workers spend what they get and capitalists get what they spend.”


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