A Macroeconomic Structure of Employment: Rural-Urban Conflict in a Kaleckian Framework

Abstract

Faced with the phenomenon of “jobless growth” and to contain the vast “surplus population” the governments of the developing world have taken up measures to manage poverty and social security outside the sphere of accumulation-led growth in the “urban-modern” sector especially through “rural” employment generation. Many researchers criticize such policies, as government expenditure supporting accumulation and growth of the urban sector is thought to be competitive with government financed rural employment creation. However, my assertion is that there is no demand-driven trade-off between these urban and rural employment generations. In fact, I propose a supply-side trade-off. The generic “food-supply-constraint” creates this rural-urban conflict. To investigate this phenomenon, first a Kaleckian macroeconomic framework is constructed, with which I examine the role of the government and that of the “food sector” in supporting accumulation in the modern sector and thereby generating urban employment. Subsequently, the issue of rural employment creation with the help of food surplus and through direct government intervention is considered. Finally, we arrive at the issue of the rural-urban conflict: the conflict between the effects of government involvement in accumulation-led urban employment generation and of direct government intervention through “development management” administrating rural employment. However, I also propose a policy that could minimize such a contradiction.

JEL classifications: O11, O18, O20, Q18