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.
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.
ReplyDeletePopov 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.