Government and Job Creation

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We have been hearing a lot of talk from politicians about job creation. From tax incentives to new government programs, candidates offer a wide of assortment of proposals to “create” jobs. But such proposals are all doomed to failure for one simple reason: government does not create jobs.

Job creation is driven by the production of values. A job is created when an employer needs to expand his production. By its very nature, government is not a producer, but rather, a consumer.

When government attempts to create a job, the money must necessarily be extracted from the private sector. As Henry Hazlitt pointed out nearly seventy years ago, for every job created by government a private job has been destroyed somewhere else.

Government’s only proper role in job creation is to protect individual rights, including property rights. Rather than rob Facebook to pay Solydra, government should protect the rights of individuals to use their property as they judge best.

Any candidate who is serious about creating jobs will call for greater economic freedom. Any candidate who wants to stimulate the economy will call for the repeal of all laws that restrict, control, and regulate voluntary economic exchanges.

Free the Employers

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Recent budget crises in Wisconsin, Indiana, and other states have unleashed a renewed debate over the power of unions and “right to work” laws. Unfortunately, both sides of the debate are guilty of numerous equivocations, misrepresentations, and errors. And, at the end of the day, both advocate the use of government coercion to intervene in the employer/employee relationship.

Unions have attacked the “right to work” movement as an assault on collective bargaining rights, correctly arguing that such a law “brings government interference to private enterprise…. In effect, government limits the right of employers to set the terms and conditions of employment by telling companies and their workers what they can and can’t bargain over.” What the unions don’t tell us is, an employer is guilty of “unfair labor practices” if he refuses “to bargain collectively with the representatives of his employees.” Federal legislation prohibits employers and employees from individually negotiating terms of employment if the employee is represented by a union, thereby “telling companies and their workers what they can and can’t bargain over.” In response to this interference, the proponents of “right to work” laws propose further intervention.

For their part, the advocates of “right to work” state that a “Right to Work law guarantees that no person can be compelled, as a condition of employment, to join or not to join, nor to pay dues to a labor union.” While this is true, it is also disingenuous. “To be compelled” means to act under force or the threat of force. It means that one must act contrary to his own judgment, hence the need for compulsion. As an example, if you go into the grocery store, you can buy steak or chicken. The choice is yours and you can act as you judge best. However, if the butcher threatens to beat you up if you buy chicken, the threat of force prevents you from acting on your own judgment. You are compelled to act contrary to your judgment, unless you want to receive a beating.

Every employer establishes conditions of employment, such as education, skills, experience, work hours, performance standards, and more. An employer should be free to establish any conditions he chooses, including those that are irrational and irrelevant to the job, such as hair color, height, or favorite football team. If an employee finds those conditions unacceptable, he is free to find another job. Just as the employer is free to act on his judgment—to establish conditions of employment—the employee is equally free to accept or reject those conditions.

If an employer believes that unionized employees are beneficial to his business, and he wants to make union membership a condition of employment, he should be free to act on his judgment. At the same time, if he decides that he does not want to negotiate with union leaders, he should also be free to do so. In other words, government should not be involved in the employee/employer relationship, except to enforce contracts that are freely entered.

Right to work laws prohibit employers from acting on their judgment. For example, the website for the Attorney General of Texas states that employees “may not be required to join or pay dues to a union as a condition of employment.” Employers who act on their own judgment in defiance of the dictates of the state are subject to prosecution.

The solution to the power of labor unions is not more controls on employers. The solution is to repeal legislation that forces employers to negotiate with union leaders. The solution is for government to recognize and protect the rights of employees and employers to freely negotiate the terms of employment.

“Creating” jobs kills jobs

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President Obama has long told us that “green” energy would create thousands of jobs. His administration has “invested” billions of tax dollars in a myriad of “green” industries. Predictably, the results have been the opposite of what we were promised. As one example, a story in the Houston Chronicle tells us:

A123 Systems, a battery maker that received $380  million in government support, said recently that declining orders had forced layoffs. Instead of up to 3,000 new Michigan jobs as Obama and the company had predicted, it now has 690 employees.

A123 Systems is hardly alone:

Johnson Controls, which received a $299 million stimulus grant, opted to build one factory instead of two because of lower-than-projected demand…

California electric car maker Aptera announced it was shutting its doors because of problems raising capital. And General Motors – whose moderately priced Volt was supposed to drive Obama’s push for 1 million alternative vehicles by 2015 – revealed last week that it would fall roughly 38 percent shy of its goal of selling 10,000 Volts this year.

In other words, despite Obama’s promises, tax payers have been forced to pour billions of dollars down the sewer. But these boondoggles are only a part of the story.

While the President is making unfulfilled promises about he creating jobs, his policies are actually killing jobs. Obama is paying for these “investments” by taking money from productive individuals and businesses. He is seizing the wealth of those who know how to produce and giving handouts to his political cronies.

Of course, “green” energy isn’t the President’s only solution for creating jobs. He has also repeatedly told us that “investing” in infrastructure will create jobs:

So investing in our infrastructure is something that members of both political parties have always supported.  It’s something that groups ranging from the Chamber of Commerce to the AFL-CIO support today.  And by making these investments across the country, we won’t just make our economy run better over the long haul — we will create good, middle-class jobs right now.

Henry Hazlitt long ago pointed out the fallacy underlying such claims.

There is no more persistent and influential faith in the world today than the faith in government spending. Everywhere government spending is presented as a panacea for all of our economic ills.

Hazlitt went on to explain that government spending must eventually be paid for through taxes, inflation, or both. And the money taken from taxpayers, including business owners and corporations, is money that they would have spent on other items—items of their own choosing, rather than those mandated by politicians. Hazlitt concluded

Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else.

Of course, the temporary jobs that Obama “creates” through his various interventions are highly visible. Both Obama and the media make certain that we hear about all of the jobs that will result. What we don’t see or hear are the jobs that are destroyed in the process. We don’t hear about the small business owner who can’t expand because of his tax burden. We don’t hear about the manufacturing company that must close its doors because it can’t compete against companies receiving massive government subsidies.
The fact is, government cannot create productive jobs. The fact is, if alternative energy sources were commercially viable, greedy capitalists would be investing in them in the hope of becoming stinking rich. John Rockefeller didn’t need government subsidies to become the richest man in the world. All he needed was the freedom to act on his own judgment.
When a businessman makes a poor decision, only he and those who voluntarily invested with him suffer. When a government official makes a bad business decision, all of us pay. As A123 Systems, Solyndra, Range Fuels, Johnson Controls, and countless other examples demonstrate, government officials frequently make bad decisions. And, when they do, they can simply waddle over to the public trough, seize more money from you and me, and make another series of promises.
Contrary to what the President has said, this isn’t about picking winners and losers. The government simply shouldn’t be involved in the economy. The government’s only proper and moral purpose is the protection of individual rights, including property rights. When individuals are free to act on their own judgment, they produce the values that we all need and desire. Productive individuals do more than create the values we want; they also create the jobs that Presidents promise, but never deliver.