Real Jobs Create Wealth
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Filed Under: Columns • Give Me a Break!
Tags: draft • employment • full employment • higgs • job losses • jobs • Keynes • make-work • productivity • public works • Roosevelt • stimulus • world war II • wwII
For a mere $787 billion, President Obama has pledged to “save or create” 3.5 million jobs. That’s only $224,857 and change per job! (If I still have my job next year, will he take credit for saving it?)
But wait. Only 3.5 million jobs? Why so few? It’s not like creating jobs is difficult.
Egypt built more than 100 pyramids beginning sometime in the third millennium B.C. to house the corpses of the pharaohs and their significant others. Think of all the jobs that project created. I’ll bet the unemployment rate was something any pharaoh could have proudly campaigned for reelection on—if he faced election, that is. Pyramid-building is one heck of a public-works project.
Pyramids, Earthquakes, Wars
Its economic significance was not lost on that great advocate of full employment through public works, John Maynard Keynes. The British economist, so in vogue today, famously wrote in The General Theory on Employment, Interest, and Money (1936), “Pyramid-building, earthquakes, even wars may serve to increase wealth.”
In fact, pyramids are even better than the usual government project. Keynes said: “Two pyramids . . . are twice as good as one; but not so two railways from London to York.”
Ancient Egypt’s success has many applications today. We could have full employment overnight if the government simply outlawed machines. Today’s 8 percent unemployment rate would vanish.
Again, we find an endorsement in Keynes’s General Theory: “‘To dig holes in the ground,’ paid for out of savings, will increase, not only employment, but the real national dividend of useful goods and services.”
Exhibit B is Franklin Delano Roosevelt. I don’t mean his public-works projects, like the Civilian Conservation Corps. I’m talking about his most serious job-creating operation: the draft.
If You Can’t Employ ‘Em, Draft ‘Em
In September 1940 Roosevelt signed the Selective Service Act, which ordered all males 21–35 to register for military service. “Of the 16 million persons who served in the armed forces at some time during the war, 10 million were conscripted, and many of those who volunteered did so only to avoid the draft. . . .” writes Robert Higgs in Depression, War and Cold War.
The draft marked the beginning of the end to the double-digit unemployment that had plagued America for a decade. Two years earlier, Roosevelt’s treasury secretary, Henry Morgenthau, lamented, “[A]fter eight years of this administration we have just as much unemployment as when we started.” The draft was the answer they had sought all that time.
So creating jobs is not difficult for government. What is difficult for government is creating jobs that produce wealth. Pyramids, holes in the ground and war do not produce wealth. They destroy wealth. They take valuable resources and convert them into something less valuable.
Instead of iPods, great art, cures for diseases and machines that replace back-breaking work, we get the equivalent of digging holes and filling them up.
Under President Obama’s “stimulus” plan, jobs will be created to weatherize buildings, construct schools and wind turbines, and repair roads and bridges. But outside the market process, there is no way to know whether those are better uses of scarce capital than whatever would have been produced had it been left in the private economy.
Since government services are paid for through the compulsion of taxes, they have no market price. But without market prices, we have no way of knowing the importance that free people would place on those services versus other things they want.
So although we’ll see the government putting people to work and even some new schools and bridges, we won’t be able to calculate how much wealth we’ve lost because scarce resources were misallocated by the politicians.
Nevertheless, we can be sure we will have lost. If the government’s projects were truly worthwhile, they would be undertaken by private efforts, and in their quest for profits, entrepreneurs would handle them more efficiently.
Remember this when President Obama begins to boast about how successful his stimulus plan is.
Comment by MOCKBADOC on 26 May 2009:
Well said, as always, Mr. Stossel. In a typically myopic fashion, the new administration has sought to fix a symptom, rather than the disease.
“Unemployed, you say? Well, then…give them a job!” It’s the 21st century equivalent of “Hungry? Let them eat cake!”.
Fortunately for liberals, the American populace is not as sensitive to hypocrisy as the 18th century French.
Comment by Weldon Morgan on 29 May 2009:
Currently, corporatism (as distinct from capitalism which has never existed and most likely never will) usually doesn\’t act in the community\’s interest in spite of romantic \"Ayn Randian\" notions.
While the community can benefit from private sector innovation (I personally do not think the development of the IPod as a useful innovation), what is always missing in discussions of this kind is the acknowledgment of the dependence of the private sector on the public. \"Commerce\" which means \"community interchange\" implies a symbiosis the recognition of which has been sorely lacking in these discussions for at least the last thirty years. To be rational, this dependence must be recognized.
It is with a sad irony that many advocating so called \"free trade\" were the first to line up recently at the public trough when the market turned against them. It is also the \"free marketers\" who will complain loudest when it is they who will have to pony up for infrastructure (roads, schools, military, fire departments, police departments, courts, judges, etc.) which they depend on for their profits.
Of course in the United States, the point has now become moot as the compulsion toward externalization of costs has effectively eaten the goose that lays the golden egg.
Comment by Ed Burley on 31 May 2009:
Mr. Morgan obviously has lived only in an apartment building next to a Walmart. Had he lived where I lived growing up, as well as where I live today, he would realize, as do those of us “free marketeers,” that free markets are alive and well, and always have been. Therefore, his claim that capitalism (the use of capital to create more capital) has “never existed” is beyond stupid, since no one could be that ignorant.
Here in Northern Michigan, where I dwell, capitalism is alive and well whenever an individual knocks on someone’s door and proposes to that person the chance to have him or her shovel their snow, or mow their lawns, or perform any minor maintenance. A price is agreed upon, and the work is done. This is free market economics in its most basic and beautiful forms. No government regulation informing the homeowner or the entrepreneur the size of shovel, or lawn mower, or other tool, that must be used, or how many breaks are, or must be, allowed during the execution of the agreed upon duty for the agreed upon price.
As usual, socialists like Mr. Morgan make claims that they hope the ignorant, public-schooled masses don’t ponder, but instead simply take as gospel-truth. For whenever individuals actually examine the idiotic claims of socialistic pinheads like Mr. Morgan, they find the claims to be half-truths, if not outright lies.
Oh, and the other thing I’d like to address, please list the names of those entrepreneurs who are taking part in the stimulus. I’d like to know.
Ed Burley MA LLPC
Comment by Weldon Morgan on 1 June 2009:
Aguing from ignorance is a logical fallacy. It is ignorance to state I am a socialist. Further, it is ignorance to suggest I was talking about capitalism, when in the first sentence, I made the distinction between capitalism and corporatism. You indulge in fallacy sir.
Here is the definition of fallacy from Wikipedia:
A fallacy is an argument which provides poor reasoning in support of its conclusion. Fallacies differ from other bad arguments in that many people find them psychologically persuasive. That is, people will mistakenly take a fallacious argument to provide good reasons to believe its conclusion. An argument can be fallacious whether or not its conclusion is true.
(http://en.wikipedia.org/wiki/Fallacy)
You have not persuaded me with your argument for it addresses something I was not even talking about.
It is true that pockets of capitalism exist in smaller communities, however to infer that this small notion of capitalism can be extended to big business, and that these businesses practice capitalism, is simply to deny the facts. Frankly, I accept we would be better off if we had capitalism, but to call what we have capitalism is a mistake my critique addresses. But it is also true if you had shoveled someone’s snow and they failed to pay you as agreed, you would be the first to seek redress in small claims court. Small claims court is part of public infrastructure that makes these small instances of capitalism possible. Without a public infrastructure, you would be dependent on your personal resources to enforce your claim.
Of course being from northern Michigan, you most likely would shoot the perpetrator yourself, and it sounds like you would!
Comment by rk on 2 June 2009:
Morgan:
1. Capitalism certainly acts in the community\\\’s interest because the community directs the course of business.
2. The private sector might be dependent on the public sector for rule of law, but for little else.
3. As an entrepreneur of any kind, when the market turns against you it is instinctual to wish for the fantasy of a bail out. To indulge this fantasy is not capitalism, or even mature adult behavior. It is ironic that some market participants want the best of both worlds, but that doesn\\\’t mean the system indulges them or should even consider doing so.
4. In the USA we are constitutionally bound to pay for \\"basic\\" public infrastructure, but it is unclear to me whether or not those public services could not be supplied privately in an orderly fashion. Besides, most conservative, pro-market Americans wouldn\\\’t mind simply returning to the principles of the constitution. That would be a tremendous leap in favor of liberty anyway.
Comment by Steven Hankin on 6 June 2009:
Mr. Morgan, your notion that Ipods are not a useful innovation shows a Statist mind set. I take you at your word that you don\’t find Ipods to be useful, and I also accept that they are in fact not useful for you. Yet, you clearly infer that there is some societal norm from which it can and should be that decided whether something is or is not of value to the society, at large. You infer that you possess the ability to determine what is or is not a useful innovation for the society at large.
I submit to you that the value of something is the value of something to each individual. The fact that so many people have purchased this product demonstrates unequivocally that each purchaser valued this product more than the money he gave up to acquire it. Or, to say this in your words, each purchaser felt that this was a sufficiently useful technological innovation to warrant the money he gave up to acquire the Ipod.
Hence, the free market is quite reliable in deciding the collective worth of an Ipod (by incorporating all the individual demands for this product against the price it was offered for sale at), but I suppose you would prefer that the decision of the usefulness of Ipods be left to some central planner; someone like yourself-who not only knows what is useful for himself, but apparently knows what is useful for each and every American. The irony, here, is the production of Ipods is indeed the product of capitalism, and if you want some government bureaucrat sharing power with a business in order to decide what products warrant being produced from your societal point of view, then you Sir are the one who is advocating Corporatism.
Comment by John Anello on 7 June 2009:
Excellent article as usual Mr. Stossel. What does the government know about creating wealth? Absolutely nothing. The government cannot even produce wealth for itself let alone for others. All that government can do is protect individual liberty from those that would like to infringe upon it (and they usually can’t even do that right).
Of course this type of thinking is a thought crime in today’s world. After all President Obama and Tim Geithner bring to the government a wealth of experience from the private sector…..oh wait….and they spent how many millions of taxpayer’s money?
Comment by Mr. H on 9 June 2009:
I think Mr. Morgan needs a lesson in the Rule of Law and should read I Pencil
Comment by Weldon Morgan on 13 June 2009:
I appreciate the points made by rk, and am in agreement with most of them.
I will avoid commenting further on comments made by Burley and Hankin who seem determined in painting a portrait of me as some kind of neo- stalinist. I follow the maxim that the only thing worse than arguing from ignorance is arguing with someone who obviously is.