Bhaduri-Marglin profit squeeze hypothesis: A critique

This article is critique of classic Bhaduri-Marglin (B&M) (1990) paper. In their paper, B&M show that one way of increasing investment in an economy is by reducing the wages paid to workers, since wages are a cost to the capitalists. In the long run, capitalists will increase their investment, invest more and hence employ more workers and therefore making it a win-win situation for both workers and capitalists. This paper is a critique of B&M model and presents a post-keynesian solution to the problem. “The reason that capitalism still survives is not because of its inherent stability but because of its unregulated access to periphery.”