Sunday, December 01, 2013

Job Creators

A favorite notion of the rich (and their Republican mouthpieces) is that the rich are job creators. That that notion is almost entirely fantasy is demonstrated by the fact that three decades of reducing taxes on the rich has failed to produce many or many good jobs. It also doesn't make sense logically. Whatever the cleverness of a new product or invention, it won't create jobs unless there are people who can afford to buy it. This old article by Nick Hanauer makes the point in some detail:

In a November 2011 op-ed for Bloomberg View, I argued that rich people in general -- and business-people in particular -- are not job creators. When the economy is understood in 21st-century terms, as an ecosystem, it becomes obvious that jobs don't squirt out of business-people like jelly from doughnuts. Rather, jobs are the consequence of the feedback loop between customers and businesses. For this reason, it is middle-class consumers and the demand they create that are our true job creators, not rich business-people.

Given this, it is counter-productive to build a tax system that asymmetrically benefits the people at the very top. We all are better off -- business-people and consumers, rich and poor -- if the burden of taxes is placed at the top and not the middle, enabling middle class citizens to consume, and starting the positive feedback loop of job creation again.

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The crony capitalism that we have allowed to infect the U.S. economic system shares weaknesses with communism. A tax system that amplifies compounding advantages for business-people and corporations the higher up the food chain they go and compounds disadvantages for people at the bottom is bad for business. It slows the rate at which ideas are generated and problems are solved. The healthiest ecosystem or economy is one with the most diverse, able competitors, not one overrun with one or two dominant species.

This is another way of saying that the economy has a demand side problem.

In a related vein, Paul Krugman has a chart on the rather dramatic decline of real wages of retail workers over the past five decades.