Von Aldo
Governments Don't Create Jobs, Private Sector People Do

Governments Don't Create Jobs, Private Sector People Do

obama.jpg CNNMoney.com reports this evening that Obama is planning on huddling with 130 business people, labor leaders and academics tomorrow to discuss ways to creating jobs. While I am glad that businessmen and small business owners are invited, the answer to job creation is fairly simple: Governments don't create jobs, private sector people do. Unemployment is at a 26-year high, true, but government spending merely takes money from the private economy and moves it to the favored industries of whomever happens to be holding the levers of power.

This 24-year old (but still relevant) article by Thomas J. DiLorenzo, an associate professor of economics at George Mason University and an adjunct scholar of the Cato Institute, is as good as description as you'll get about the role of government in job creation (the title of the paper is, "The Myth of Government Job Creation"). Obama and his administration should simply quit confiscating money from the private economy, trying to direct the economy from on high and let people invest where they think is best.

Here is an excerpt taken from the libertarian think tank The Cato Institute's website:

Despite the rhetoric of "government job creation," economic logic denies the possibility that jobs can, on net, be created by government. The economist's notion of "opportunity cost" is the key to understanding this phenomenon.

Every action has an opportunity cost, the subjective value of the most highly valued alternative course of action foregone. For example, the opportunity cost of reading this paper is the subjective value one places on whatever alternative activity one might otherwise engage in.

With respect to government jobs programs, what is important is that they are usually financed by taxation or borrowing by the federal government. In either case, resources are withdrawn from alternative, private sector uses. Higher taxes mean consumers have less to spend in the private sector, and reduced consumer demand leads to less production and employment. If the government borrows money to finance a jobs program, alternative uses of credit by private individuals and business firms are precluded. This, too, causes economic stagnation and higher unemployment in the private sector. The "cost" of government jobs programs, regardless of how they are financed, is therefore best viewed as the reduction of private sector production and the employment that production creates. Those who believe that government jobs programs can create jobs fail to realize or acknowledge that they also destroy jobs elsewhere in the economy. Government jobs programs alter the composition of jobs in the economy--more government employment, less private employment--but do not increase the number of jobs. Some may prefer a larger government sector relative to the private sector--and this is what government jobs programs give us--but it is misleading to pursue this objective under the guise of creating jobs. . . ."

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