BUD BREWER
One Man's Opinion
How Jobs are Created
If you listen to the words that our President, the Congress and many in the Media use to describe their solution for getting the unemployed back to work, you hear the claim that we are not putting enough of the Taxpayer’s money into funding the development of industries to replace our dependence upon fossil fuel, grow the “green industry”, increase healthcare facilities, expand community police and fire departments, build new K-14 public school facilities, new highways, bridges, waterways etc. In other words, we need to increase public employment. Mr. O’s stimulus package was supposed to allocate $700 Billion to these objectives, thereby creating lots of job opportunities which would begin to get consumer spending back on a growth curve.
What is wrong with this picture? Well for one thing, the long term growth of an economy is not generated by increasing amounts of money allocated by a government to programs that it deems appropriate or worthwhile for the society it governs. Russia tried this for almost a century and while exploiting its natural and human resources to operate industries thought to be the genesis of a better life for its citizens, finally came to the point where its economy imploded.
No folks, there is no precedence for a society that has enjoyed a rising standard of living derived from central planning and government edict. The well being of a people comes from increased productivity of its work force. With the incremental benefit of technology, that steady rise in our ability to produce increasing value from our labor comes from the human brain analyzing, evaluating and solving problems and then having the freedom to benefit economically from organizing the production and distribution of that solution to another citizen or institution that considers it worthy and is willing to trade something of equal value for it.
How does this process create jobs you ask? It is the product of education and experience. We learn basic truths that enable us to activate our brain and our physical wellbeing constructively. It is called education. The enhancement of one’s knowledge not only about how the world works but how one might benefit from solving problems in such a way that will make it work a little better leads us to creating value that we can exchange for another need we have. The more knowledge we accumulate the more opportunity we have to produce a benefit and then be able to trade some of it for something we want or need. This process is called work. If one produces enough benefits to trade for benefits produced by others to meet his needs, he effectively has a job.
If President Obama and the Washington politicians want to do something that will cause increasing employment (their term would be “create jobs”), they must be very careful not to impede the individual or organizations thereof to want to work or organize an entity of workers to create products and services that have or will create enhanced value. The men and women who serve the public from government institutions primarily operating in Washington D.C. need to use their authority to assure the opportunities provided by work and the appropriate stimulation of all Americans to seek to build their capabilities to do it and do it as well as they can. Incentives should be placed in front of the capable to encourage them to do better. Mr. O’s attitude, for the most part, seems to be to the other way around
One Man’s Opinion– Bud Brewer
Great post Pop. Why don’t the dems get it. It’s the old story…give a man a fish he eats for a day…teach a man to fish and he eats for a lifetime. It’s so simple.
Sure, you can teach a man to fish, but it doesn’t do any good if there aren’t any fish. You can also teach a man to farm, but he’ll still go hungry if a decade of drought descends. Or you can teach someone how to run a manufacturing plant, but what good is it if there’s no large demand for his products? Thing is, you can find cheap proverbs anywhere, but they shouldn’t be used as substitutes for common sense.
Mr. Brewer has really told us nothing about how jobs are created, and in his fourth paragraph he shadowboxes with reason. He suggests that incentives should be used to encourage the “capable” to do better. However, people like Henry Ford and Andrew Carnegie, both of whom had just the bare minimum of education, would probably have laughed at that notion. Neither did Bill Gates nor Steve Jobs need an incentive when Microsoft and Apple were merely pipe dreams? No one had to goose them to do better. But look at the jobs that occurred as a result of the tech revolution: 16 million in the 1980s and 23 million more in the 1990s. Tax cuts had nothing to do with it.
Mind you, I don’t know how to create jobs any more than Mr. Brewer does, but isn’t employment dependent upon one kind of operation feeding another within a long chain of command in the business world? And isn’t the making of a buck (greed) the key operative at every turn? Without the textile mill, for example, no cloth is produced. Without cloth, hundreds of other industries have no basis upon which to produce certain products, such as dresses and sofas. And without those products, thousands of retail stores lose all or a portion of their merchandise, which in turn cuts their sales and eliminates their need for some or all of their employees. Not even a two-man lawn care operation can serve its customers if it doesn’t have the mowers and trimmers that were produced on an assembly line in some other city.
Generally, aren’t jobs created from the top down? That is, jobs flow downward, not upward. For example, look at all the businesses that are dependent upon the production of the automobile, the growing of crops, the tapping of nature’s resources. Take away those cornerstones and the whole structure collapses. While Mr. Brewer is probably right when he suggests that innovation is a critical component in the creation of many jobs, he may be stretching it way too far when he likewise suggests that it should be accompanied by an accumulation of knowledge. I daresay, some damn fool who, during his morning walk in the countryside, stumbles upon oil seeping from the ground is able to put two and two together. Sometimes, pure dumb luck can be as valuable as any education which has been acquired.
Mr. Brewer argues that “the more knowledge we accumulate the more opportunity we have to produce a benefit and then be able to trade some of it for something we want or need.” This process is called work. If one produces enough benefits to trade for benefits produced by others to meet his needs, he effectively has a job.
But the preceding amounts to mere idle talk. The question remains, How are jobs created? Can government “seed” the top echelon of the marketplace, much like a farmer sows corn, or must we wait until business gets a whiff of profit and relentlessly pursues it, thus creating jobs in the process? Are there historical trends that will provide some clues and thereby lead us closer to the answer which seems so elusive? For example, in the years when job creation was high, what trends were occurring and can they be repeated because we wish them to be? Are there periods when low innovation has equaled high unemployment, and are we in one of those times right now? Is this ebb and flow of jobs more of a natural phenomenon that we can’t control, or can we in fact take deliberate steps, much like the Fed adjusts the interest rates?
What causes an employer to add a new position to his workforce is logic puzzle that I have not been able to solve. And from everything I’ve read, no one else has either.
Howard: Thanks for you comments. I suspect the differences we have regarding the creation of jobs is based on our respective views relative to which is better for allocating capital, a command society or a market based one. I disagree with your contention that Henry Ford and Andrew Carnegie were not educated or at least had little of it. They attended the school of Reason and Curiosity, two learning processes that produced many of our most successful industrialists. Bill Gates and Steve Jobs may have been fascinated with the early creations they produced but if there had been no financial benefit or incentive to motivate their dedicated effort to pursue greater goals, I can assure you the personal computer industry would still be in the Stone Age. Tax cuts are incentivizing only relatively to the alternative, but if they are perceived by the individual or corporate tax payer to be of sufficient magnitude to justify increasing their work effort or motivate expansion, they will stimulate growth of jobs… The individual makes decisions to work longer and harder to become more productive and enjoy the benefits resulting there from. The businessman seeks to exploit the higher after tax margins to generate higher business earnings, after tax income and the opportunity to expand. Lower tax rates cause profit and retained profit is capital to use for investment opportunity and job creation.
The capitalist has learned that the path to financial success may rely on little more than that old phrase, finding a need and fill it. The need may be the result of excess demand for a limited product or service or it may be the potential demand that may exist for creating a competitive product or service that is more effective or can be produced more efficiently. The problem with a business plan that seeks to take market share rather than expand the market is that it rarely produces net jobs. The entrepreneur seeks to employ their capital by investing in plant equipment and personnel. They do need seed money to begin and in the market based economic system, they may have personal or family resources or they may organize around the formation of a partnership or corporation and offer interest to other investors for a share of the company and its profits. With sufficient equity the company may be able to justify bank or investor loans to achieve a larger capital base for operations.
You are correct that the desire to own, rent or use a product or service is at the core of a free market economic system. My father was a business man who ran a retail store in Southern California. I remember his saying more than once, “happiness is buying something for 50 cents and selling it for a dollar.” He did not care if the buyer of that product took it and combined it with a half dozen of other different products purchased for a $1 and then sold it to somebody else for $15 or $$20 or whatever. If you have never been a participant in the American economy as an operator or a manager of a business, that statement may be difficult to understand. But even the employed or unemployed worker gets up each morning and enters a position where he is selling his skill to an employer for a specified and agreed amount, sometimes as a part of a team assembling a product that is the result of material, design and labor all of which combined cost less than half the amount the owner of the company sells it for. You referred to this end price as greed and apparently think of the word in a negative way. Sometimes the amount one receives for a product exceeds the perceived real value of it but usually is caused by government price control creating imbalances in demand and supply.
In the command society, or virtual command society, most property is owned or controlled by a structured government and it creates jobs by investing the system’s public resources into beauracratic management groups that operate under an egalitarian system attempting to provide necessary services for its citizens’ wellbeing. Unfortunately, in every command society, consumption of goods and services is normally higher than production, so the system will eventually fail when all or most of its resources are consumed. If you take a look at ancient and recent history you will find societies that had a cyclical life. Some cycles are 2-3 centuries in duration, others are 20 -30 centuries in duration, and some more but it seems that they all have a cyclical period of life.
Based on much of what you have written, it is not surprising that you don’t know what causes an employer to add a new position to his workforce. The logic is not puzzling to those who understand and appreciate how free market economies work. “Find a need and fill it!”
One Man’s Opinion -Bud Brewer
It looks like Bud had to take Howard to the wood shed to school him on economics. It’s OK Howard, take a couple of asprin and you will feel better in a few days. I would add that Howard doesn’t seem to understand the connection between tax cuts and small business. Most small businesses, whether held as a sole proprietorship, S corp or LLC,(which is how most small businesses are held), benefit from tax cuts because of the manner in which these entities are taxed.Therefore, individual tax cuts provide small businesses with more capital. When a businessman has more capital, he will use that money to improve, expand and upgrade his business. This invariably results in job creation. Anyone who operates a small busines knows this, unlike our current administration. Beyond this small addition, Bud pretty well nails it.