The Limits of the Wage-led Growth Strategy and the Iron Law of Capitalism: A Theoretical Appraisal

Abstract

The purpose of this paper is twofold. It identifies the recent development of a profound critique of Kaleckian models of growth and distribution that enables the possibility of endogenous regimes. I also present and discuss a theoretical model in which the IS curve is non-linear and demand regimes are unstable. Different theoretical and policy approaches can be fitted in this model, although it is recognized that under the capitalist system, a sort of iron law arises. Thus, it is not possible to permanently pursue the so-called wage-led growth strategy since the regime changes according to the distribution of income.