Wednesday, October 6, 2010

Can the Government Create Jobs? or Wealth?

This morning at Baseline, a guest blogger, Lawrence Glickman from the University of South Carolina, places a historical context around the state's role in promoting fair markets.

As he highlights, the disconnect between the conservative narrative of the state's minimal role in promoting economic activity and progress, and the historical reality that this role was actually huge and remains so, is of course convenient as a propaganda tool for those who have so far succeeded in claiming a greater share of the national wealth for themselves since anytime since the 1920's.

I completely agree with him, but would challenge him to go further. The minimalist state narrative, false and absurd as it is, actually gives far more credit to the government compared to the prevailing doctrine espoused by the faux-populist Tea Partiers and recast Republicans.

Last night on Lawrence O'Donnell's new MSNBC show, The Last Word, Michael Steele, a traitor to his race and a sycophantic cheerleader, while embarrassing himself by not knowing what the federal minimum wage was, stood by a previous statement he made that "Government has never created a single job."

While demonstrably false - the government created the internet for example, which I hear has created a few jobs - there is a deeper problem with this sort of anti-government rhetoric. In the original exchange, which dates to Jan 31 2009, Stephanopoulos admits he doesn't understand the distinction between a government and a private job. Steele, fool that he is, obviously doesn't either, because he basically claims private jobs last longer. Absurd. I will try to explain for Steele the argument he is unable to make, and then debunk it.

The underlying corollary to the idea that government can't create jobs is that socially organized economic models are incapable of creating wealth. No one would deny that government can spend money and put people to work. What Steele is really suggesting is that in any circumstance where this happens, it is a waste of money and a drain on the nations wealth/utility/happiness etc. Following from this, one must argue that police, firemen, teachers, garbage collectors and the whole host of services provided by the government actually destroy wealth, and generate less benefit for society than their cost.

To be clear, I firmly believe competitive markets, with the right structures and conditions, do a better job channeling labor and capital to achieve desired ends. But as noted in the previous post citing Kaletsky, "markets investors are often short-sighted, fail to reflect widely held social objectives and sometimes make catastrophic mistakes." In these instances, the desired outcome may simply not be independently achievable under current market structures, and an active role for government can certainly create wealth.

Now there are plenty of government programs that are wasting money, or are at best on the margin in terms of wealth creation, and these are in need of reform. However, if you believe that fundamentally the government cannot create wealth, then there is no case for reform, instead one must call for abolishing those enterprises, including the government itself. Maybe Steele believes so much in the power of the market that he thinks it would trump the anarchy which would result from following his assertion to its logical conclusion , but I sincerely doubt he is intelligent enough to realize the consequence of his position. I mean, he can't even make his own argument. He thinks the difference is that private sector jobs last longer and come back.

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