The Myth of Job Creation … The headlines from the last presidential debate focused on President Obama challenging Mitt Romney on issue after issue. There was a less noticed, but no less remarkable, moment when Mr. Obama agreed with Mr. Romney on something — and both were entirely wrong. – New York Times
Dominant Social Theme: Government is naturally the most dynamic part of any social entity.
Free-Market Analysis: Can government "create" jobs? Free-market types believe it is impossible for government to generate employment, though politicians claim various kinds of job creation all the time.
The New York Times thinks it can. Most of the time, analysis turns on government printing money and providing tax breaks. This is supposed to benefit the private sector in turn.
The Times's novel idea is that one can dispense with all this economic mumbo-jumbo. Government jobs, we are informed, are created by mandate. They are in front of our collective noses. Here's more from the article:
The exchange began with a question about the offshoring of American jobs. Part of Mr. Obama's answer was that federal investments in education, science and research would help to ensure that companies invest and hire in the United States. Mr. Romney interrupted. "Government does not create jobs," he said. "Government does not create jobs."
It was a decidedly crabbed response to a seemingly uncontroversial observation, and yet Mr. Obama took the bait. He said his political opponents had long harped on "this notion that I think government creates jobs, that that somehow is the answer. That's not what I believe." He went on to praise free enterprise and to say that government's role is to create the conditions for everyone to have a fair shot at success.
So, they agree. Government does not create jobs … Except that it does, millions of them — including teachers, police officers, firefighters, soldiers, sailors, astronauts, epidemiologists, antiterrorism agents, park rangers, diplomats, governors (Mr. Romney's old job) and congressmen (like Paul Ryan).
First, the basics. At last count, government at all levels — federal, state and local — employed 22 million Americans, with the largest segment working in public education. Is that too many? No. Since the late 1980s, the number of public-sector workers has averaged about 7.3 for every 100 people. With the loss of 569,000 government jobs since June 2009, that ratio now stands at about 7 per 100.
You see? "Teachers … police officers … firefighters … " these are all "job" holders. And yet … Perhaps it is time to define "job." Society cannot function without productive workers to grow food, transport goods and provide useful services. But the other part of a "job" is its capital-raising function.
In a private marketplace, a job pays for itself. If there is no one willing to pay, the "job" won't get done. But government jobs sever the link between utility and reality. Who is to say whether it is better to have more teachers … or even more firefighters?
The only real way to tell is to see who is willing to pay – voluntarily. This is key. If there is no demand, then the job obviously is one for which there is little or no need.
Of course, large private entities can create jobs for which there is no obvious need but that is a different matter altogether. These are market-responsive entities.
If management deems a job important for which there is no immediate need, so be it. That's a lot different than the public sector merely creating a job based on the desires of various pressure groups, unions, etc.
The article states that, "Public-sector job loss means trouble for everyone. Government jobs are crucial to education, public health and safety, environmental protection, defense, homeland security and myriad other functions that the private sector cannot fulfill."
Again, there is confusion here between utility and reality. Jobs such as those dealing with "environmental protection" actually act for the most part as a drag on the economy.
This is because various interest groups have self-interest in defining "environmental protection" in certain ways. Much of today's protection – and jobs – revolve around reducing the amount of carbon dioxide in the air.
But absent government funds, would people really be willing to pay for removal of carbon dioxide? If people were given a choice whether to pay willingly out of their own pockets, the chances are very slim that such jobs would be funded.
Many jobs in government are similarly questionable. The broadest perspective informs us that a power elite is driving the meme of government jobs. This is because the powers-that-be utilize mercantilism to control society and the more invasive and ubiquitous government is, the more control it offers.
It is true, of course, that cutting government jobs would be difficult during a time of economic trouble. But in a sense this is an illogical argument. There are plenty of things in life that seem difficult to do but that doesn't mean they ought not to be done.
Most government jobs would not exist – at least not in their current form – if exposed to the competition of the marketplace. The rest would probably be radically reshaped in terms of goals and outcomes if the discipline of the "Invisible Hand" were brought to bear.
Essentially, the argument that government cannot create jobs is a correct one. Government jobs exposed to the reality of the private sector would look far different than they do now. There would also be far fewer of them. Perhaps none at all.