Unemployment in Vietnam - the application of John Maynard Keynes theory
Introduction:
During the Great Depression in 1930s, the unemployment rate increased significantly that lead to many problems and changes in the world’s economy. John Maynard Keynes, a British economist, had come up with a solution which could reduce unemployment. He noticed that when people received a low amount of salaries, they spent less, fewer goods were produced and the economy would go down. Keynes suggested that the government should get involved to solve the problem. As of today, Vietnamese people are facing the high unemployment rate, especially the young generation. This paper will discuss the Keynes’ theory and how it can be applied to help one of the most important factors contributed to the economy of Vietnam – the labor.
Understanding:
At the beginning of the Great Depression, the biggest economic crisis of all time, many banks had to close and it also affected businesses because of the stock crash. People lost their houses, money, jobs and the whole economy fell down significantly. During this darkest time, millions of people were unemployed because companies could not pay them. They could not find any job so they travel from place to place, along the US. Many people had to suffer loss, homeless and even famine.
Seeing the situation was getting worse, many economists tried and planned many solutions to solve this problem. One of them is John Maynard Keynes, a British economist, suggested that all the companies should reduce wages so that they can have more money to pay the workers. Also, he came up with the idea that the government should get involved by spending deficits to cover the loss. At first, his idea received many disagreements because the others thought it would be more complicated and some people simply do not trust the government. This theory is opposite with Adam Smiths’ classical theory, which is “the invisible hand” pushing the market. However, the economy at that time could not recover itself. When people are unemployed, they
During the Great Depression in 1930s, the unemployment rate increased significantly that lead to many problems and changes in the world’s economy. John Maynard Keynes, a British economist, had come up with a solution which could reduce unemployment. He noticed that when people received a low amount of salaries, they spent less, fewer goods were produced and the economy would go down. Keynes suggested that the government should get involved to solve the problem. As of today, Vietnamese people are facing the high unemployment rate, especially the young generation. This paper will discuss the Keynes’ theory and how it can be applied to help one of the most important factors contributed to the economy of Vietnam – the labor.
Understanding:
At the beginning of the Great Depression, the biggest economic crisis of all time, many banks had to close and it also affected businesses because of the stock crash. People lost their houses, money, jobs and the whole economy fell down significantly. During this darkest time, millions of people were unemployed because companies could not pay them. They could not find any job so they travel from place to place, along the US. Many people had to suffer loss, homeless and even famine.
Seeing the situation was getting worse, many economists tried and planned many solutions to solve this problem. One of them is John Maynard Keynes, a British economist, suggested that all the companies should reduce wages so that they can have more money to pay the workers. Also, he came up with the idea that the government should get involved by spending deficits to cover the loss. At first, his idea received many disagreements because the others thought it would be more complicated and some people simply do not trust the government. This theory is opposite with Adam Smiths’ classical theory, which is “the invisible hand” pushing the market. However, the economy at that time could not recover itself. When people are unemployed, they
References: Lai Thin, 2013, ‘Young people facing high unemployment’, May 9th, The Voice Of Vietnam, viewed on 15th July 2013, < http://english.vov.vn/Society/Young-people-facing-high-unemployment/260124.vov>