What Drives The Economy?

We have heard a lot about the “job creators”.  Turn them loose and just watch the results.  Give them tax breaks and free them from regulatory constraints and jobs will grow on trees, or so it is said.

To be sure sensible tax policy and the right level of regulations are important but neither should be expected to impact jobs if the playing field is level.  Job creators are business people first and creators of jobs as a consequence.  If anyone can make money without employees, they will.  Each employee they don’t have too hire represent one less headache.

And here is some more sobering news.

If Job Creators are left to themselves, they will hire employees at the lowest possible wage.  They will discard employees regardless of seniority when ever it seems favorable to creating more gross profit.  Job creators will also try to maximize the fraction of any gross profit that they can take as their personal gain.  These are capitalists.

When job creators are successful, the amount of wealth concentrating at the top, in a smaller and smaller percent of Americans, steadily gets larger.  We should expect to see the average worker’s wage stagnating and the distance between the rich and the rest becoming greater.  And indeed that is what has been taking place for the past 40 years.

Are these job creators really that bad?

The answer, in my opinion, is that job creators for the most part are neither good nor bad.  They are job creators practicing the art of capitalism.  They practice this art for a variety of reasons but tops among them is making money.

In the process of operating their businesses, job creators produce and provide goods and services the rest of us desire in our daily living.  The risk job creators run is that if they produce a poor mouse trap, we the consumers will go some place else and buy a better one.  The job creator is left with unsold inventory and low profits.  Sort of self correcting.  That’s the beauty of capitalism, the job creator learns he must build a better mouse trap.

The lessons which are not as easy for the job creator to learn involve the deleterious impact their operations might have on the environment, or the stifling of competition, or the social damage the increased separation between the rich and the rest causes.  From the job creators vantage point, all’s fair.

It is left to government to create rules, such as progressive taxes, labor laws, environmental protection rules, and competition regulations to ensure there is a level playing field for “everyone”.

Everyone includes other job creators as well as other citizens.  If government acts wisely, the broad middle class gains more buying power and can add its desires to overall demand, which in turn will set the stage for more opportunity for job creators.

Human nature, however, prompts the job creators to seek a special advantage.  An advantage that benefits them uniquely.  In order to facilitate this, job creators singularly or in bands, join together and become “special interests”.    With money, they seek to put in place legislation favorable to their cause.  And the chase goes on.

The two great issue of this Presidential election have been labeled “jobs and the economy”.  The GOP has called for freeing the hands of job creators. All will turn out for the better, the GOP claims.

This is patently misguided.  To the contrary, the economy will correct itself (slowly to be sure).  Putting in place a business environment that reflects the 21st century global realities is a much more nuanced endeavor.

Even more powerful is returning the US sovereign debt to a manageable level (it will take time) while increasing the middle class buying power.  These must be front and center.

If debt management and middle class strength are the goals, all boats (including those of job creators) will rise.

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One Comment on “What Drives The Economy?”


  1. […] What Drives The Economy? (zukunftsaugen.wordpress.com) […]


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