UNEMPLOYMENT IN CAPITALIST, COMMUNIST AND POST-COMMUNIST ECONOMIES Also by J. L. Porket and from the same publishers WORK, EMPLOYMENT AND UNEMPLOYMENT IN THE SOVIET UNION Unemployment in Capitalist, Communist and Post-Communist Economies J. L. Porket M in association with St. Martin's Press PA LGRA VE MACMILLAN © J. L. Porket 1995 Softcover reprint of the hardcover 1st edition 1995 978-0-333-61218-7 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WIP 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published in Great Britain 1995 by MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world This book is published in the St Antony' s/Macmillan Series General Editor: Alex Pravda A catalogue record for this book is available from the British Library. ISBN 978-1-349-39232-2 ISBN 978-0-230-37422-5 (eBook) DOI 10.1057/9780230374225 10 9 8 7 6 5 4 3 2 I 04 03 02 01 00 99 98 97 96 95 First published in the United States of America 1995 by Scholarly and Reference Division, ST. MARTIN'S PRESS, INC., 175 Fifth Avenue, New York, N.Y. 10010 ISBN 978-1-349-39232-2 Library of Congress Cataloging-in-Publication Data Porket, J. L., 1926-- Unemployment in capitalist, communist, and post-communist economies I J. L. Porket. p. em. Includes bibliographical references and index. ISBN 978-0-312-12484-7 I. Unemployment. 2. Unemployment---Government policy. 3. Unemployment-Communist countries. 4. Unemployment---Government policy-Communist countries. 5. Unemployment-Europe, Eastern. 6. Unemployment---Government policy-Europe, Eastern. 7. Post -communism-Europe, Eastern. I. Title. HD5707.5.P67 1995 331.13'7-dc20 94-34872 CIP To my wife Contents List of Tables and Figures Xl Introduction XIV PART I UNEMPLOYMENT IN CAPITALIST AND COMMUNIST ECONOMIES 1 Theories of Open Unemployment 3 1.1 Market Capitalism 3 1.2 Command Socialism 7 Conclusion 9 2 Measurement and Rates of Open Unemployment 11 2.1 Measurement 11 2.2 Prewar Rates 13 2.3 Postwar Rates 14 2.4 The Natural Rate of Unemployment 17 Conclusion 19 3 Differences in Open Unemployment 21 3.1 Differences between Countries 21 3.2 Differences within Countries 24 3.3 Duration of Open Unemployment 25 Conclusion 28 4 Open Unemployment under Command Socialism 30 4.1 The Interwar Period 30 4.2 The Era of Command Socialism 32 4.3 Unemployment Compensation 35 Conclusion 36 5 Hidden Unemployment 38 5.1 Dimensions of Hidden Unemployment 38 5.2 Hidden Unemployment under Command Socialism 39 5.3 Estimates of Overmanning under Command Socialism 41 5.4 Overmanning under Market Capitalism 42 Conclusion 45 VII Vlll Contents 6 Economic Reforms under Command Socialism 48 6.1 Options 48 6.2 Outcome 50 6.3 Soviet Union 53 Conclusion 54 7 Relative Economic Performance 56 7.1 Measurement 56 7.2 Unemployment 57 7.3 Inflation 58 7.4 Economic Growth 59 7.5 Standard of Living 61 Conclusion 64 8 Unemployment in Yugoslavia and China 66 8.1 Yugoslavia 66 8.2 China 72 Conclusion 75 PART II UNEMPLOYMENT IN POST-COMMUNIST ECONOMIES 9 The Collapse of Communism 79 9.1 National Revolutions 79 9.2 Components of Economic Transformation 81 9.3 The Dynamics of Transformation 82 9.4 Preconditions and Consequences 84 Conclusion 85 10 Unemployment Compensation 87 10.1 The Social Safety Net 87 10.2 Unemployment Insurance and Unemployment Assistance 88 10.3 Former Eastern Europe 90 10.4 Soviet Union and Russia 95 10.5 Albania 96 Conclusion 97 11 Registered Unemployment 98 11.1 Rates of Registered Unemployment 98 11.2 Composition of the Unemployed 100 11.3 Duration of Registered Unemployment 101 11.4 Causes of Registered Unemployment 104 Contents IX 11.5 Employment Situation 106 11.6 Output 107 11.7 Government Revenue and Spending 109 Conclusion Ill 12 Eastern Germany 113 12.1 Unification 113 12.2 Privatization 115 12.3 Unemployment 116 12.4 The Costs of Unification 118 12.5 Trade Unions and Unemployment 120 Conclusion 122 13 Soviet Union and Russia 124 13.1 The End of the Soviet Union 124 13.2 Post-communist Russia 128 13.3 Unemployment 129 Conclusion 133 14 Open Unemployment and the Population 135 14.1 Forecasts 135 14.2 Western Experience 136 14.3 Unemployment 138 14.4 The Nanny State 140 14.5 The Visible versus the Invisible Hand 141 14.6 The Speed of Transformation 145 Conclusion 146 PART III SUMMARY, CONCLUSIONS, PROSPECTS 15 Economic Systems and Unemployment 151 15.1 Unemployment under Command Socialism 151 15.2 Unemployment under Market Capitalism 154 15.3 A Synopsis 155 15.4 The Third Way 157 Conclusion 159 16 Participation in Economic Activity 160 16.1 Work versus Employment 160 16.2 Two Concepts of the Labour Market 164 16.3 Full Employment 166 Conclusion 168