Thursday, November 3, 2011

The myth of job creation

You've been hearing it non-stop for the entire past election cycle (and, really, much before that), but now that the top-earning 1% in our country are coming under serious fire by the Occupy Movement, it's been trotted out more than ever: the claim that the rich create jobs, so for us to spur the economy, we must pretty much just let them do whatever they please.

Besides the fact that that is a ridiculously fatalistic view of economics, it's also an extremely twisted statement spiked with a logical fallacy. Yes, the rich do give us jobs. Without the companies that the rich own and operate, very few of us would have jobs indeed. Whether that is inherently fair or not is a different discussion completely, but it's just how our system works, so that much of the statement is true. However, the kind of talk that we're hearing now is a convolution of this fact. Rich people do not just create jobs because they are rich and run those companies who employ us. The fact that they are rich has nothing to do with the actual creation of jobs; they are simply the tools, not the catalyst. The catalyst that creates jobs is a basic principle of economics, one that has somehow been ignored as this argument has come to a boil.

It's called supply and demand.

Just because you have a boatload of money and a company that is doing well does not more jobs create. You've got the ability to hire more people, sure, but you're not going to do so unless the demand for your product or service is also growing. Herman Cain, the one who has reverted to this empty buzz-phrase the most, should understand this concept the best. He was the CEO of a major American pizza chain, Godfather's Pizza. Now, we don't have Godfather's Pizza in Pittsburgh, but we do have another local chain called Vocelli Pizza that I can reference as an analogous example.

There are, within the immediate city limits, three Vocelli locations, as well as numerous others out in the suburbs. The three city locations are in Lawrenceville, Oakland and Downtown, and have served the community for many years. If Mr. Vocelli wished to, with his power as a very rich man, he could "create jobs" by building a fourth location, say in Shadyside. But without the demand, what is the point of creating more supply? It would be a foolish move for him to open another location in the city, because the three locations that exist already supply plenty of pizza to fit the demand. Pumping all that money into another location when the consumer could simply drive five more minutes to the already existing Oakland location? That's a terrible business plan, one destined for failure. So he can't just create jobs out of thin air. If he did what the Republican candidates are claiming the rich business owners can do, there would be a Vocelli Pizza on every corner in Pittsburgh, and they'd all go out of business within months because they wouldn't each be selling enough pizza to stay afloat.

The fact that there isn't a floundering Godfather's Pizza in every single two-horse town in America goes to show that, no matter what he says on television, Herman Cain does understand this. There just isn't enough demand to drive that kind of growth and job creation--and the ultimate irony is that the 99% are not paid enough to create that demand. Maybe not in terms of pizza, but in the purchasing of many other goods and services. The less we are paid and more we are taxed (while the inverse is true for the richest Americans), the less we are able to buy. The rich can only create jobs if the rest of us are clamoring for the things that those jobs produce. And right now, we can't afford to do so.

The only way for jobs to be "created" outside of this system is for the government to do so, as Franklin Delano Roosevelt did with the Civilian Conservation Corps and many of the other New Deal initiatives. In the public sector, demand can be eschewed, the supply being not economic but a sense of greater good. Development of infrastructure, of highways and railways and parks, investing in our future rather than the immediate profits of now. That is the kind of job creation we should be rallying behind as we continue to see unemployment rise. We cannot depend upon corporations to look out for our best interests, and why should they?

Businesses are about making money, not about taking care of people. It doesn't necessarily make them evil, but it is a fact that we need to understand before we put them on a pedestal and worship their almighty power to provide for us. That's some 19th century, pre-union, company town crazy talk, but it's found its way into our national zeitgeist once more. And this time we're cheering it on! Have we really forgotten how hard we've worked to get away from selling our soul to the company store, as we now cheerlead for these companies and lay ourselves out on the altar, praying they toss us some bread? It is we that provide for them, not the other way around.

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