Unemployment and Hewlett Johnson

Unemployment & Hewlett Johnson

I do not agreed with the first Johnson article "The Socialist Sixth of the World," but the piece "The Impact of Unemployment" has more merit. The article describing the Soviet Union as some sort of workers' utopia is riddled with faulty assumptions. The piece is written almost in analysis of a best case scenario version of Communist doctrine, a version that in practice has never materialized even on a small scale in this world. The assumption that there was no fear in the Soviet Union could not have been more false -- Stalin's purges were perhaps unknown at the time and when Johnson wrote that the West was several decades away from Solzhenitsyn's writing about the NKVD and the gulag system, but the notion of a USSR without fear would have been disparaged by any contemporary writer to have actually visited the Soviet Union. The notion of workers having control over their own destinies to pursue work that was meaningful was never a cornerstone of Soviet economic policy, despite what Johnson implies.

The economic principles behind the Socialist Sixth of the World were also fundamentally flawed. One key underlying assumption that Johnson would not challenge, but would ultimately be challenged in reality, was that of factor inputs and the lack thereof. Production was assumed to meet demand, when in practice the five-year plans of the U.S.S.R. did a poor job of forecasting demand and the country did not have unlimited access to resources. As soon as the U.S.S.R. began to bump up against physical constraints, the entire economic model began to fail.

The principles espoused in "The Impact of Unemployment" would eventually become to be known as Keynesian. Johnson argues that the best way to deal with a bout of high unemployment is for governments to spend on public works projects. Such projects, he argues, not only create direct employment but also indirect employment as well. These principles have long had merit. Government spending in the Manchester and Salford situation was to act as a substitute for non-existent business investment and private sector spending. The problem to be solved was not a shortage of goods, but rather a shortage of spending.

Some has dismissed these principles largely on the basis that governments cannot run deficits indefinitely or because in doing so they are sacrificing growth in later years, resulting in a trade-off that negates today's benefits with tomorrow's debt repayments. I do not inherently agree with such arguments, because the time value of money suggests that future repayments are perhaps not as onerous as they may seem today. Moreover, if we are to have anything of a welfare state, then deficit spending to create private sector employment will have a positive affect on GDP.

Juxtaposed against Johnson's portrayal of the Soviet economic model, it would stand that Johnson takes his views about creating employment in Manchester and Salford more from the idea that public employment can be sustained indefinitely, for the benefit of all. I do not believe this to be the case -- such measures can only be taken in the short-term and they are not sustainable over the long-term.