The Mythical versus the Real-World Golden Age of Capitalism: A Robinsonian Perspective

This paper compares and contrasts Joan Robinson’s theoretical – and “mythical”, in her words – Golden Age with the real-world Golden Age of Capitalism documented in Marglin and Schor (1990). The former provided the analytical backdrop for Robinson’s (1956, 1962) economic growth model based on a two-sided relationship between profits and investment, while the latter was a post-war empirical phenomenon in developed countries characterized by high and stable growth as well as low unemployment. In the mythical Golden Age, full-employment steady-state growth results from a highly stringent set of conditions that are satisfied only accidentally: Namely, the equality over time between the natural, the warranted, and the actual rate of growth of national income. In turn, the real-world Golden Age of Capitalism was born in the context of the welfare state, a robust trade union movement, the commitment to demand management, and international leadership by the USA, within which the macroeconomic structure, the international order, the system of production, and the rules of coordination operated. The paper then argues that Joan Robinson’s economic growth model, with suitable adjustments that preserve the two-way investment-profits relationship, also offers a sound basis for the understanding of the real-world Golden Age. These adjustments are provided by Bhaduri and Marglin (1990) and Marglin and Bhaduri (1990), who allow for idle capacity in the long period and a more realistic investment function. The Bhaduri-Marglin approach provides a coherent and innovative account of real-world Golden Age, while preserving the theoretical core of the Robinsonian growth model. Therefore, this comparison exercise highlights the explanatory power of Joan Robinson’s growth model: While originally designed to show the theoretical limits of economic growth and capital accumulation in a stylized capitalist economy, it also supplied the conceptual basis for an understanding of post-war capitalism in developed countries.