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Chapter 14 - Should the Government (Public Sector) Intervene Directly and Become the Employer of Last Resort? Full Employment V

Jesus Felipe
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Summary

The Conservative belief that there is some law of nature which prevents men from being employed, that it is “rash” to employ men, and that it is financially “sound” to maintain a tenth of the population in idleness for an indefinite period, is crazily improbable—the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years. … Our main task, therefore, will be to confirm the reader's instinct that what seems sensible is sensible, and what seems nonsense is nonsense. We shall try to show that … to set unemployed men to work on useful tasks does what it appears to do, namely, increases the national wealth.

—John Maynard Keynes (1972, 90–92)

Given that it is very difficult for the market to achieve full employment due to the political and technical problems discussed in chapters 4, 6, and 13, and assuming national policies have shifted toward the achievement of full employment, one could ask if governments in developing countries could and should act as employers of last resort and contribute to this objective directly. Suppose, for example, that due to the use of efficiency wages (Stiglitz 1976), during downturns firms lay off the least skilled workers. What can society do? As noted in chapter 11, William Vickrey (1996) proposed a program of “savings-recycling public employment” to achieve full employment.

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Inclusive Growth, Full Employment, and Structural Change
Implications and Policies for Developing Asia
 , pp. 231 - 234
Publisher: Anthem Press
Print publication year: 2010

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