Who (or What) Are the Real Job Creators
With all that's going on under the big top in Cleveland, the concept of "job creators" is back in vogue. And since his status as a business owner and "job creator" is you-know-who's most important qualification, I think it's worth looking at what contributes to job growth.
So, what makes jobs? Is it business owners? Entrepreneurs? Consumer demand? Government stimulus and subsidy? Let's find out.
Spoiler alert: there is no easy answer. It's a combination of all the above, and more, that causes job growth and decline.
In fact, wanting an easy answer is part of the problem. When you say "I'm a job creator, I create jobs," that sounds good. It makes for a great sound bite. But what does it mean? Does it mean anything?
People want to believe that one person is in control and that one person can fix things. Every four years, with a totally straight face, we ask presidential candidates the same bad question "what are you going to do to fix the economy?
It's as though the president (no matter who it is) were sitting with one hand on a big lever named "The Economy;" push it one way, boom, jobs. Pull it the other way, bam, no job for you.
The notion that the economy or the job market can be "fixed," like a kitchen faucet, is ridiculous. But it's convenient and satisfying to believe so we go on believing it.
The truth is that the American economy is more like a two-year-old. One minute it's fine, the next minute it's raging away in the middle of the cereal aisle at Ralph's.
Some of the time it cooperates, sometimes you can motivate it into doing what you want, and sometimes it will listen to reason. But other times there's no reasoning, bribing, or cajoling it into doing what you want. At the end of the day nobody tells baby what to do, because baby doesn't care if it drives us off the cliff.
Economic growth is driven at least as much by intangibles like speculation, fear, and confidence as it is by production, wages, and employment.
The economist Joseph Schumpeter, for instance, theorized that entrepreneurship drives growth in a process of creative destruction.
He observed the industrial revolution tear down the agrarian mode of production, and replace it with industrial manufacture. In our era, we have seen huge growth in the tech and service sectors at steep costs to heavy industry.
And it's not always true that growth in GDP or profits will lead to more jobs. Companies can make a lot of money just from moving some out of it around in a process of computational black magic we call capital gains.
Growth for a company doesn't always mean growth for employees. Likewise, just because national GDP is increasing doesn't mean the average person has any more money to spend.
"The commodities that fill the spaces of small and large businesses in the US are not going to be purchased if the average American is worried about paying rent, day-care bills or an upcoming visit to the doctor. Lower tax rates on the bottom 95 percent, higher wages, universal health care, overtime, paid parental leave and other Keynesian interventions are what drive economies dependent on the constant production and sale of goods."
(he's referencing John Maynard Keynes, a contemporary of Joseph Schumpeter and a highly influential economist)
Thus, in a very real sense, the biggest factor in job creation is jobs. No jobs, no income, no spending, no demand for goods, resulting in a decreased demand for labor. And this cycle has a habit of repeating itself.
It's slightly more correct, then, to say that consumer demand is what creates jobs, but even that comes with its caveats. For instance, there's not much consumer demand for a B-2 or a HARM missile, but where would the engineers and skilled laborers of Northrop and Raytheon be without them?
Or a better, less shooty example: think of the untold effect that government funding of NASA in the 60s and 70s had on our still-booming tech industries.
The advances made by NASA during the space race weren't only in aerospace engineering. They made strides in computing, digital photography, remote control, communication, radio and video broadcast... you get the picture.
As I hope you've noticed by now, the process of creating jobs is an inexact and finicky science.
FDR, for another example, instituted massive infrastructure projects as part of a stimulus package that was supposed to get us out of the great depression. But it didn't do much until WWII rolled around, giving us a huge boost in manufacturing and exports.
So even well intended stimulus projects put forth by one of the greatest American leaders, with the intellectual backing of our friend John Maynard Keynes, don't always turn out like we expect them to.
What I'm getting at here is this: to say "I create jobs" or "he's a job creator"
should be seen as the height of arrogance. Better yet, of ignorance.
It's akin to saying "I am the economy" or thinking that the president sits in the oval office with his/her lever and just doesn't care to fix the economy and brew us up some jobs.
But there's no room for ambiguity, tough questions, and tougher answers, in popular economic discourse. We like to think we're asking tough questions of economic policy makers, but what we really do is ask terrible questions in a tough manner.
"How are you going to fix the economy?" "What are you gonna do to create jobs?" "What are you doing right now that will protect jobs from being outsourced?" These all sound like tough, incisive questions but they're actually stupid questions with impossible answers.
Which is why politicians dance around them, because there's no honest answer they can give in one or two sentences. The person who is giving us sound bite responses to tough questions has proven he'll say anything, without regard to reality or decency.
Everything has to be polemic. Every two years there seems to be less and less room in the gray area between extremes. You're either a corporate-fascist-plutocrat or a collectivist-socialist-communist, and ne'er the twain shall meet.
Which is a shame because democracy lives in the gray areas, it happens in the discussion, the debate, all the boring stuff on C-SPAN. The only way we move forward as a country is by inches. We require unsatisfying compromises to move towards a better goal, or else we get stuck in gridlock. Which, not coincidentally, is where we've been for quite some time.
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