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It’s all a bit much too take if you have even a whiff of understanding about free markets and wealth creation (as any good libertarian must). Earnest pols run confabs with policy wonks and leaders of industry to ‘do jobs’ (as the breathless DC insiders like to say), all gladhanding each other for the cameras and political satisfaction, but when you look at what they are actually doing it’s either tax breaks or grants of our cash to favored causes. Whether it’s ‘cash for clunkers’, or the prospective ‘cash for caulkers’, the politics of who gets what goodies is always colored by political calculations. Oh yeah, they’re doing all this with tax money they’ve confiscated from the private sector to begin with, which is money that might have otherwise gone to productive uses, so who really thinks the government can ‘create jobs’?
Let’s start with some basics. First, job creation is a not the objective of any entrepreneur, investor or corporate executive; wealth creation is. Jobs are created in order to realize the end state desired; i.e. to build and deliver a product that can be sold competitively so the owners can profit. Nobody starts a company saying, wow, let’s create some jobs.
Second, how is wealth created? What we’re really after is creating wealth, right? Jobs are created in order to support wealth creation, not the reverse, so perhaps looking at how this happens might be helpful? It’s very simple actually. For those of you who took economics, remember the concepts of comparative advantage and mutually beneficial exchanges? (for those who need a primer, click here ) Simply put, one person/company exchanges with another person/company based on the perceived value of their offerings.
Simple example. I’m an apple grower and I can grow apple’s cheaper than my neighbor who mows lawns. It turns out he can mow lawns faster and better than me because he has the equipment, technique and motivation to do so. So we exchange with each other, using money, and each of ends up with more than if we each tried to grow apples and mow lawns. Each party actually ends up with more in this exchange.
Our economy creates wealth via these exchanges all the time. That’s how we’ve become the wealthiest nation in the history of civilization, by creating a society where this happens freely and fairly (via contract laws, property rights, civil rights etc). It wasn’t through government programs or central planning – in fact it was because of the lack of all that claptrap that we’ve boomed the way we have. Simply put, the U.S. was the premier free market in the world with great protections for property and contracts, sound money and a society that valued individual initiative and innovation. The result was that our economy grew like no other.
Does anyone disagree with this line of thinking? I mean, it’s actually pretty simple to see. If you have even the faintest idea about economics, you already know this. If you don’t get this, I encourage you to go back to the link I inserted earlier and watch the educational videos. It’s all basic free markets stuff, but nobody in the mainstream media spends much time on it. But wait, there is more.
There is another aspect of freedom that we don’t often talk about because it’s not fun, but it goes on continuously in the U.S. economy and that is the freedom to fail. Millions of businesses start and fail each year. Only a small percentage make it to five years and a tiny fraction make it to become large corporations. The reality of this process is lots of failure for most endeavours. It’s very risky and the process of competition punishes the losers brutally with losses, and in some cases bankruptcy. Another way to put it is that most businesses fail, and yet it’s this very failure that, in a process not so different from Darwin’s natural selection, drives us forward. We abandon that which doesn’t work and try again with something better. Producers who don’t provide that ‘comparative advantage’ we discussed above get pushed out, ensuring that the best wealth creators survive. This is the process of creative destruction, and it’s been this ability to fail that allows us to succeed as a nation.
What’s critical to note is that there isn’t some referree out there declaring the winners and losers. No, the market does that very well on it’s own. So, if you really believe in free markets and wanted to see more jobs created, what would you do? Well, it seems to me that creating the best conditions for wealth creation and the free exchange of goods would be best. The government has never been able to pick the winners and losers in our economy well. In fact the businesses where we dominate have been largely free of government intervention (technology, life sciences, media/entertainment). It’s really crazy to think that the answer to creating jobs is some government tax credit or handout. All that will do is encourage a producer to do things that are uneconomic. In fact, to not let the market sort it out is to handicap that producer from receiving the inputs they need from the market to correct/improve their actions so that they can actually succeed in the market.
This ain’t brain surgery folks. As a libertarian, these facts are plain to see. With our current interventionist government, splashing capital all over the place, we are sure to see less wealth creation than we would normally see. These interventions provide an incentive for uneconomic behavior and inevitably hamper wealth creation, and hence job creation. Sadly, our current policy makers believe in the power of bureaucracy and think they can pick the winners and losers out, so I’m afraid we are in for a long haul of lower than possible wealth creation.
Very nice article, I’m glad to be a reader.
Long live Aaron Burr
Amen. The guy below is typical of a leftist grabbing at straws, full of detailed minutea thyat misses the point and nasty along the way. I mean, does he really think that economic growth in this country wasn’t caused in large part because of the personal freedoms we enjoy?
Your argument is long, but weak. Let me summarize it for you and reveal its flaws. Because Hamilton favored economic intervention by the federal government and economic growth occurred during his tenure, the economic principles of mutually beneficial exchange and comparative advantage aren’t how wealth is created. That’s how your argument comes across, and it really isn’t much of a criticism in the sense that Hamilton didn’t offer another theory of wealth creation in a free market economy. While I will grant that I perhaps make my point too simply and broadly, what I’m trying to do is get people to think about basic market economics.
As for your proof point that the depression and panic of 1837 is evidence that Hamiltonian big government/big business/big banking were the source of economic growth and that Jackson’s policies caused that depression (and that Jackson’s policies are a proxy for my position), well, there are historians who see the central bank and state banks causing that depression by their previous loose/inflationary monetary practices. Essentially, it proves the correctness of the Austrian school’s definition of the business cycle, not that Hamilton’s policies were sound. Indeed, Jackson’s hatred of “rag money” and interventions hastened this process, but I don’t see how any of this proves that I’m wrong about how wealth is created via mutually beneficial exchanges and comparative advantage.
Also, why are you so nasty about this? While I will never censor any commentary that is critical of me, I think that the best debates focus on ideas, not people. I will say that your comment has encouraged me to think more about Hamilton and his policies. It’s a very interesting subject. Please do continue this debate if you wish to, but can you please refrain from the ad hominem attacks? Thanks.
Hey, buddy. I came here from one of your inane comments on bloggingheads; it’s really inspiring to see how how your inanity multiplies itself in the longer format. Here’s my favorite part:
“For those of you who took economics, remember the concepts of comparative advantage and mutually beneficial exchanges? (for those who need a primer, click here ) Simply put, one person/company exchanges with another person/company based on the perceived value of their offerings. [...] That’s how we’ve become the wealthiest nation in the history of civilization, by creating a society where this happens freely and fairly (via contract laws, property rights, civil rights etc). It wasn’t through government programs or central planning – in fact it was because of the lack of all that claptrap that we’ve boomed the way we have. [...] Does anyone disagree with this line of thinking? I mean, it’s actually pretty simple to see. If you have even the faintest idea about economics, you already know this.”
Speaking of not having the faintest idea: You don’t know a goddamned thing about your own country’s economic history. Nothing. Less than nothing. In fact you believe claims about American economic history which are not merely inaccurate, but are in fact the diametric opposite of the truth.
Let me put it to you in the dumbed-down Manichean style to which you, as a libertarian, are accustomed.
You know that blond, mack-daddy-lookin’ dude on the front of the ten dollar bill? That’s Alexander Hamilton. People say he’s on the ten because he was George Washington’s Treasury Secretary. He’s actually on the ten because he founded the entire U.S. economy. He was a genius. (Also a total badass, but that’s another story.) From 1789-1800, Hamilton was the second-most-powerful man in America. He was practically the co-President. Shit, you could argue that he was the first-most-powerful American during the Adams administration.
Hamilton’s formidable network of allies, even before it was officially the Federalist Party, controlled the Senate uninterrupted from 1789-1800 and the the House for most of that period. If Hamilton were around today, “Tea Party” types would be calling him the Development Czar.
Hamilton elaborated on his economic scheme in Reports to the Congress. Read them. Read the Report on Manufactures. I fucking dare you.
Hamilton: “There are still, nevertheless, respectable patrons of opinions unfriendly to the encouragement of manufactures. The following are, substantially, the arguments by which these opinions are defended:”
…and now it’s your line, libertarian:
“To endeavor, by the extraordinary patronage of government, to accelerate the growth of manufactures, is, in fact, to endeavor, by force and art, to transfer the natural current of industry from a more to a less beneficial channel. Whatever has such a tendency, must necessarily be unwise; indeed, it can hardly ever be wise in a government to attempt to give a direction to the industry of its citizens. This, under the quick-sighted guidance of private interest, will, if left to itself, infallibly find its own way to the most profitable employment; and it is by such employment, that the public prosperity will be most effectually promoted. To leave industry to itself, therefore, is, in almost every case, the soundest as well as the simplest policy.”
Hamilton again:
“This mode of reasoning is founded upon facts and principles which have certainly respectable pretensions. If it had governed the conduct of nations more generally than it has done, there is room to suppose that it might have carried them faster to prosperity and greatness than they have attained by the pursuit of maxims too widely opposite. Most general theories, however, admit of numerous exceptions, and there are few, if any, of the political kind, which do not blend a considerable portion of error with the truths they inculcate. In order to an accurate judgment how far that which has been just stated ought to be deemed liable to a similar imputation, it is necessary to advert carefully to the considerations which plead in favor of manufactures, and which appear to recommend the special and positive encouragement of them in certain cases and under certain reasonable limitations.”
Alexander Hamilton explicitly endorsed federal intervention in the economy to promote favored sectors (in this case, manufactured goods) at the expense of others (in this case, agriculture).
And later, he gives one of his reasons for thinking this is a good idea: “besides the persons regularly engaged in [factory work], [factories] afford occasional and extra employment to industrious individuals and families, who are willing to devote the leisure resulting from the intermissions of their ordinary pursuits to collateral labors, as a resource for multiplying their acquisitions or their enjoyments. The husbandman himself experiences a new source of profit and support from the increased industry of his wife and daughters, invited and stimulated by the demands of the neighboring manufactories.”
OH SNAP! The guy on the front of the sawbuck is down with the federal government creating jobs. In the Year of our Lord Seventeen-Hundred and Ninety-Fucking-One.
By the way, Hamilton’s proposals were accepted, were implemented, and worked wonders. Later administrations continued in the same vein – even Jefferson, who was greatly opposed to them on ideological grounds, couldn’t argue with success.
The first really pro-free-market President to come along was Andrew Jackson. He was a regular man of the people, who tirelessly campaigned against the Eastern industrial élites. He paid down a vast portion of the national debt. He shut down the evil central bankers, replacing them with good sound silver and gold. The U.S. economy promptly imploded and sank into a long, deep depression.