Keynesian Employment Theory and Developing Economies
ABSTRACT
Classical employment theory and Keynesian employment theories have failed to remove
the problem of unemployment because both are one sided theory of employment, one is
supply sided and second demand sided theory of employment. According to classical
theory of employment, we should increase supply in order to increase employment and
income. Keynesian Employment Theory is dependent on demand. According to J.M.
Keynes, effective demand is the main factor for determination of employment and income.
We should increase the demand for employment and income. J.M. Keynes assumed that
supply is constant, he ignored the role of supply in determination of employment and
income, because there was great depression in the world, there was a problem of lack of
demand. So J.M. Keynes has given more importance to demand.
We need an appropriate theory for removal of unemployment and increase in employment
and income level and that theory will operate in all conditions (inflation and deflation) and
solve the problems of unemployment. We need a theory that will be dependent on both
factors demand and supply. So, we should consider on both demand and supply.
Keywords
Laissez faire police, Monetary policy, Inflation, Full Employment, Unemployment,
Aggregate Demand & Supply.
Introduction
There are ended police state and established welfare state in the whole world, so
government’s expenditure rapid increased and the laissez faire policy of classical
economists has failed. There are very important roles of the government in determining
employment levels and income levels. Government is increasing the level of employment
and income through increasing public expenditure. Government has launched many
programs and plans for increase in employment and income, such as Jabahar Rojgar Yojna,
Rojgar Ashvasan Yojna, MANREGA, etc for work for labour and to create income. India’s
public expenditure was 160 crore rupees in 1951-57, that is increased 3750978 crore
rupees in 2007-12. But there have not been sufficient increases in employment and
income. The 1.6% Employment growth rate was in the primary sector in 1983-94, that is
decreased to -4.34% in 1994-2000. The 2.90% employment growth rate was in the
secondary sector in 1983-94, that is increased to 3.14% in 1994-2000. The 3.53%
employment growth rate was in the tertiary sector in 1983-94, that is decreased to 2.42% in
1994-2000 and total employment growth rate was 2.04% in 1983-94 that is decreased to
, 0.98% In 1994-2000, So, we can say one side increased in public expenditure and the other
side decreased in employment and income level and problems of employment are present
in the Indian economy,
Unemployment growth rate was 3.2% in 1961, that is increased to 9.4% in 2011. Rural
unemployment 7.2%, urban unemployment 7.7%, secondary educated nural
unemployment 12.5%, urban unemployment 18.3% and total unemployment 14.8% were
in 1999-2000 in India. The same problems of unemployment in Bangladesh. 7.3%
unemployment rate was in 2010 in Bangladesh that is increased to 14.5% in 2012.
We can say, the alternative employment theory, classical and Keynesian employment
theory have failed to remove the problem of unemployment in India and other developing
countries and other side populations of India’s is rising rapidly
Classical employment theory and Keynesian employment theory have failed to remove the
problem of unemployment because both are one sided theory of employment, one is
supply sided and second demand sided theory of employment. According to classical
theory of employment, we should increase supply in order to increase employment and
income.
According to J.B. Say, “Supply creates its own demand.” But it is wrong, because only
supply cannot determine the employment and income level. Supply and demand are
determination factors for Employment and income level in the economy.
Keynesian Employment Theory is dependent on demand. According to J.M. Keynes,
effective demand is the main factor for determination of employment and income. We
should increase the demand for employment and income. 1.M. Keynes assumed that
supply is constant, he ignored the role of supply in determination of employment and
income, because there was great depression in the world, there was a problem of lack of
demand. So JM. Keynes has given more importance to demand. According to Shumpiter,
“Keynesian economics is the economics of depression.” In current time, there are no
problems of lack of demand, problems of lack of supply in India. So, Keynesian
Employment Theory is not appropriate for removal for unemployment in current time. We
need an appropriate theory for removal of unemployment and increase in employment and
income level and that theory will operate in all conditions (inflation and deflation) and solve
the problems of unemployment. We need a theory that will be dependent on both factors
demand and supply. So, we should consider both demand and supply. We need an
increase in both aggregate demand and aggregate supply for balanced growth in the
economy, if there is an increase in supply only then problems of over production will create
and will increase in demond only then problems of inflation will create in the economy. So,
ABSTRACT
Classical employment theory and Keynesian employment theories have failed to remove
the problem of unemployment because both are one sided theory of employment, one is
supply sided and second demand sided theory of employment. According to classical
theory of employment, we should increase supply in order to increase employment and
income. Keynesian Employment Theory is dependent on demand. According to J.M.
Keynes, effective demand is the main factor for determination of employment and income.
We should increase the demand for employment and income. J.M. Keynes assumed that
supply is constant, he ignored the role of supply in determination of employment and
income, because there was great depression in the world, there was a problem of lack of
demand. So J.M. Keynes has given more importance to demand.
We need an appropriate theory for removal of unemployment and increase in employment
and income level and that theory will operate in all conditions (inflation and deflation) and
solve the problems of unemployment. We need a theory that will be dependent on both
factors demand and supply. So, we should consider on both demand and supply.
Keywords
Laissez faire police, Monetary policy, Inflation, Full Employment, Unemployment,
Aggregate Demand & Supply.
Introduction
There are ended police state and established welfare state in the whole world, so
government’s expenditure rapid increased and the laissez faire policy of classical
economists has failed. There are very important roles of the government in determining
employment levels and income levels. Government is increasing the level of employment
and income through increasing public expenditure. Government has launched many
programs and plans for increase in employment and income, such as Jabahar Rojgar Yojna,
Rojgar Ashvasan Yojna, MANREGA, etc for work for labour and to create income. India’s
public expenditure was 160 crore rupees in 1951-57, that is increased 3750978 crore
rupees in 2007-12. But there have not been sufficient increases in employment and
income. The 1.6% Employment growth rate was in the primary sector in 1983-94, that is
decreased to -4.34% in 1994-2000. The 2.90% employment growth rate was in the
secondary sector in 1983-94, that is increased to 3.14% in 1994-2000. The 3.53%
employment growth rate was in the tertiary sector in 1983-94, that is decreased to 2.42% in
1994-2000 and total employment growth rate was 2.04% in 1983-94 that is decreased to
, 0.98% In 1994-2000, So, we can say one side increased in public expenditure and the other
side decreased in employment and income level and problems of employment are present
in the Indian economy,
Unemployment growth rate was 3.2% in 1961, that is increased to 9.4% in 2011. Rural
unemployment 7.2%, urban unemployment 7.7%, secondary educated nural
unemployment 12.5%, urban unemployment 18.3% and total unemployment 14.8% were
in 1999-2000 in India. The same problems of unemployment in Bangladesh. 7.3%
unemployment rate was in 2010 in Bangladesh that is increased to 14.5% in 2012.
We can say, the alternative employment theory, classical and Keynesian employment
theory have failed to remove the problem of unemployment in India and other developing
countries and other side populations of India’s is rising rapidly
Classical employment theory and Keynesian employment theory have failed to remove the
problem of unemployment because both are one sided theory of employment, one is
supply sided and second demand sided theory of employment. According to classical
theory of employment, we should increase supply in order to increase employment and
income.
According to J.B. Say, “Supply creates its own demand.” But it is wrong, because only
supply cannot determine the employment and income level. Supply and demand are
determination factors for Employment and income level in the economy.
Keynesian Employment Theory is dependent on demand. According to J.M. Keynes,
effective demand is the main factor for determination of employment and income. We
should increase the demand for employment and income. 1.M. Keynes assumed that
supply is constant, he ignored the role of supply in determination of employment and
income, because there was great depression in the world, there was a problem of lack of
demand. So JM. Keynes has given more importance to demand. According to Shumpiter,
“Keynesian economics is the economics of depression.” In current time, there are no
problems of lack of demand, problems of lack of supply in India. So, Keynesian
Employment Theory is not appropriate for removal for unemployment in current time. We
need an appropriate theory for removal of unemployment and increase in employment and
income level and that theory will operate in all conditions (inflation and deflation) and solve
the problems of unemployment. We need a theory that will be dependent on both factors
demand and supply. So, we should consider both demand and supply. We need an
increase in both aggregate demand and aggregate supply for balanced growth in the
economy, if there is an increase in supply only then problems of over production will create
and will increase in demond only then problems of inflation will create in the economy. So,
