Friday, 8 November 2013

Centrally planned economies and the Job Guarantee.

Centrally planned economies prior to the collapse of Communism in Russia and Eastern Europe did pretty well when it came to minimising unemployment. Unfortunately they did it in two ways that had results which were about as undesirable as unemployment itself.
The first was a combination of excess demand and fixed or controlled prices. That lead to a result which is wholly predictable and for reasons spelled out in introductory economics text books: shortages, queueing, etc.
Second, they made it difficult for employers to sack anyone. Unfortunately that meant some employees got stuck in (and indeed were quite happy with) relatively unproductive jobs. And that in turn made it difficult for employers with more productive jobs on offer to find the labour they needed.
A Russian economist called Popov suggested a solution, which was to let employers sack whoever they wanted, and then put the sacked workers onto relatively low paid public sector type work. The low pay, he claimed, would give the employees an incentive to seek the above mentioned more productive jobs.
Now what was Popov advocating? He was advocating JG!
I got the above information from an article in The Times, 20th Jan, 1981, entitled “The Russian who advocates unemployment” – not available online, far as I can see.

1 comment:

  1. Maybe it is more accurate to say Popov was arguing AGAINST unproductive JG and in favour of tough economic incentives to encourage/force workers to find more "profitable" work.
    Popov was dealing with a situation of excess demand and full employment, so the rationale for his scheme was the efficient use of scarce labour resources.

    In contrast to Popov, the JG schemes of MMT gurus address stuations of involuntary unemployment (not full employment). And they would reduce (instead of increase) the incentives for workers to be employed profitably.
    Popov focussed directly on the root causes of workers being unproductive. In contrast, JG does not directly address the root cause of general unemployment, namely deficient aggregate demand.


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