Unemployment and Economics - Essay Example

Unemployment and Economics Unemployment is the problems which affects almost all countries in differing measure. While on the one hand some of the largest populated countries like China and India, the rates of unemployment are quite high, for a well developed nation like US too, the rates of unemployment stand at 4.7% as per the figures1 of September 2007. Unemployment or under-employment has existed around the globe in different forms for many centuries. Today a large number of well qualified youth are unable to find suitable jobs in US, UK etc. because of the newfound trend of outsourcing the jobs to countries like India, China, Philippines, Malaysia etc. These companies have been able to figure out equivalent quality standards at cheaper rates in these countries, as a result the employment levels are increasing in these countries. The proponents of Liberalization and globalization claim that globalization has opened up newer vistas of trade and business all around the globe. It is said that opening up of economies has now tilted the balance in favor of market forces, which is helping the consumer by way of providing quality at reasonable prices. As a result, the market forces have started dictating the policies with the role of respective governments becoming limited, generally in determining the nature of imports and exports. It is now the MNCs who are effectively dictating the policies to the governments. This is one reason that the governments are not being able to interfere effectively in tackling the growing unemployment in some of the developed countries. The international labor organization (ILO) has now started playing an active role in the employment of young people. The framework of the United Nations Secretary-General's Youth Employment Network and the 2002 United Nations General Assembly resolution on "Promoting youth employment" lays an emphasis on this very aspect. The United Nations has also come out with a set of Millennium Development Goals (MDG) with an aim to see all round development in the world. The MDG number 8 in particular has set an ambitious target for the development and implementation of strategies for decent and productive work for youth, in collaboration with developing countries. The level of unemployment is in fact directly related to the economic activities prevailing in the country. If the economy is doing well, more companies will be investing in expansion/diversification of their business venture. This will result is more job opportunities for the youth. Available resources will be used efficiently when they are devoted to their most important or productive uses2. Available labor is also a form of resource and increasing levels of unemployment results in leaving this resource as unused or underused. For this very reason economists term the unemployment issue as an economic problem, as it is an instance of a failure of the effective use of available resources. The two major views3 on unemployment are: The "Keynesian" view of Unemployment: It states that Unemployment is an excess supply of labor resulting from a failure of coordination in the market economy. The "Classical" view of Unemployment: It states that unemployment is job search for people engaged in the productive work of looking for a better match between worker and employer. Tracing the history of unemployment in Unites States since the early 20th century, it is found that the level of unemployment was negligible during the late 1920s, but the rates have been on the rise thereafter, owing to various circumstances. The unemployment rates have kept varying all these years owing to a number of circumstances. Some such circumstances are; i. The great depression of 1930s: United States of America could boast of a level playing field for all before 1929, because literally nobody was jobless. But events took a nasty turn after the infamous stock market crash of 1929. This depression is said to be the longest economic collapse in the history4 of the modern industrial world, lasting from the end of 1929 until the early 1940s. The depression had its beginning in USA but gradually spread to a number of other industrial countries as well. As a result of the depression, all spheres of economic activities like production and sales were affected. ii. The World War-II: War related activities in general prove costly for the nations involved, because it results in huge diversion of resources towards the war while many production and business related activities get disrupted. Imports and exports are badly affected, as relations between countries start deteriorating and all efforts are made by the warring nations to break the economic supply line of opposition, so that maximum damage could be done to the strength of the opposing side. The World War continued to take its toll during the period 1939-1945 and severely affected the economic activities. As a number of industrial activities were affected in a large part of the world, it was bound to have an adverse impact on the job market as well. Though the world started building up after the war, but it took quite a while for the county's involved, in controlling the damage. On an average the unemployment rates kept hovering around 6-7 percent in the aftermath of the Second World War. After the war, it took quite a while for the nations to mend the political bickering and allow each other's company's to operate in other country. But while we saw the rates of unemployment rising above 25% after the depression of 1930, this rate never went beyond 10% after the WW-II. This can be attributed to the growing maturity of economies around the world. Now under the globalisation regime, things appear to have stabilized little more. Globalisation has been in existence for quite a while. In the early ages it was essentially limited to business and trade. But with the beginning of the new form of market driven governments, globalisation has filtered down to almost all walks of life like, media, culture, and of course the trade and business practices, accordingly affecting the employment markets. iii. Economic Recessions: Though the major influence on economic activities have been the two world wars. But the economic activities around the world are also witness to a number of recessions. Such recessions result in adversely affecting industrial and production activities, hence affecting the job markets. Some notable recessions happened during 1948, 1958 and 1961, 1969, 1973, 1981, and 1990. Many of these recessions had a cascading effect, affecting the global markets as well. Such effects are more prominent with the spread of globalisation around the globe. Asia is a happening place as far as spread of globalization is concerned. It's a huge market with countries like China, India, Malaysia, Thailand etc. Strength of such markets also determine the economic activities of a country like USA, because the country can export a number of their produce to these markets or many of the US companies can carry out their business operations from these countries and then effectively assisting the economies back home. The Asian financial crisis of 1997, still presents haunting memories of the slowdown in economic activities. Some of the worst suffering economies, during this crisis, like Indonesia, Malaysia, Singapore, and Thailand were the one's that were successfully integrated into the world economy at that time. Therefore, a shift started taking place in economist's opinion on 'globalization' (Piasecki & Wolnicki, 2004). As a result of the crises, the traditional social protection systems of the countries in this region were severely affected. Almost all the countries were found wanting for social security provision for its citizens. Unemployment levels started rising, which started affecting the families of the unemployed (ILO, 1999). Since the banks were also in crises, the citizens found themselves in horrible conditions. Fortunately, for these countries IMF intervened and the crises did not last longer. Richter (2002) calls Confucianism as the cultural backbone and engine of East Asia, which has helped in pushing the region's miraculous growth and forging world-class companies like Japan's Toyota, South Korea's Samsung, and Hong Kong's Hutchison Whampoa. In fact if we trace the history of the two world wars, it would be amply clear that the basic reason behind the world wars was economic interest of the concerned parties. Therefore, it is kind of a interlinked and cyclic process. Though history is replete with many battles and wars. But the First World War was the kind of war which sharply polarized the world community. It was the first big war which saw the use of modern day warfare technology and strategies in a big way. Large scale use of machine guns, battle tanks, air force power, Gaseous material etc. resulted in millions of casualties in the war. As Britain had the biggest overseas territory under its influence, Germany desperately sought to wrest some territory for advancing its own economic and imperialistic interests. Mainly British, French and German companies had their trading interests in Africa and the Far East from the 1880s onwards, and they did generate considerable economic and political tensions which their home governments often found difficult to resolve. In the longer though such trading disputes were resolved before the outbreak of war, but these disputes had spilled over to many other areas of strategic importance, which resulted in making the atmosphere more inflammable and ultimately resulted in the war. Though as of now wars are being fought in Afghanistan and Iraq with the active involvement of many developed nations, but so far the war zone has been limited to these very countries. Part of the reason is the placement of economic interest above all other interests by the other nations. Though many countries have expressed their displeasure at the turn of events and expressed their unwillingness to be a part of the war, but nobody is ready to rise against the allied forces. Under the globalisation scheme of things, the economic activities have been flourishing in almost all parts of the world, though in different measures, their unemployed youth are getting the jobs and the figures of unemployment are under control. So it appears as of now, Afghanistan and Iraq will continue to be battling for themselves. References: 1. Department of Labor (2007). US Bureau of Labor statistics. Available online at http://www.bls.gov/ (Oct 14, 2007) 2. Encyclopedia. Available online at http://encarta.msn.com/encyclopedia_761584403/Great_Depression_in_the_United_States.html (Oct 14, 2007) 3. ILO (1999). "Social Aspects of the Follow-Up to the Asian Financial Crisis". International Labour Review, Vol. 138. 4. Piasecki, Ryszard and Wolnicki, Miron (2004). 'The evolution of development economics and globalization'. International Journal of Social Economics Vol. 31 No. 3, 2004 5. Richter, Frank-Jrgen (2002). Redesigning Asian Business: In the Aftermath of Crisis. Quorum Books. Westport, CT. Page Number: 57. 6. Unemployment as a Macroeconomic Problem. Available online at http://william-king.www.drexel.edu/top/Prin/txt/probs/Ch5_Uncom.html (Oct 14, 2007) Read More