Washington Post columnist Robert Samuelson says everyone seems to understand that the private sector creates jobs. Everyone, that is, except the New York Times. Samuelson calls the Times’ decree of government job creation “simplistic” and that it has a “flat-earth quality”.
He explains that if the government adds jobs – expands government – it comes at taxpayer expense.
But if the people whose money is taken via taxation or borrowing had kept the money, they would have spent most or all of it on something — and that spending would have boosted employment.
Job creation in the private sector is mostly a spontaneous and circular process. People buy things they need and want. Or businesses and private investors take risks by investing in new products, technologies and factories. All this spending, driven by self-interest and the profit motive, supports more jobs. In a smoothly functioning market economy, the process feeds on itself. By contrast, public-sector employment grows only when government claims some private-sector income to pay its workers. Government is not creating jobs. It’s substituting public-sector workers for private-sector workers.
With knowledge of how the developing world struggles to create jobs, Juan José Daboub, former Managing Director of the World Bank, concurs:
Governments cannot create jobs, and if they do, they are for a very short period of time. Sustainable jobs, jobs that are good, that you can climb, that you can produce, that you can be successful, can only be created by the private sector.
As Samuelson points out,
Understanding job creation has policy implications. If the private sector is the main source of jobs, then the incentives, disincentives and the general climate for firms to expand do matter. In its editorial, the Times opposed government “austerity” because the economy remains weak. That’s a legitimately debatable policy…but it doesn’t make government a permanent job creator.
It’s time to recognize that, just like the earth is round, the private sector creates jobs, and we need policies that clear the way for the private sector to do just that.
Read Robert Samuelson’s “Flat-Earth Economics” here.