Adam Davidson is a queer bird.  He’s apparently an economic observer that understands the underlying fallacy of the views of most political economists, and offers his observations on Planet Money, which is a routine feature of NPR’s Morning Edition.  Davidson understands, unlike the sophomoric economics fraternity, that there is precious little in a capitalist economy that can be done to create jobs on a net basis.   

His reasoning, as offered in the New York Times Sunday Magazine as to why jobs aren’t amenable to creation:

Starting this week, I’ll be writing a regular column in the magazine that tries to demystify complicated economic issues — like whether anyone (C.E.O.’s, politicians, people running for the presidency) can actually create jobs. The fact is that creating them in a far-too-sluggish economy is practically impossible in our current capitalist democracy. No corporate leader is rewarded for hiring people who aren’t absolutely required. Most companies hire only when its workforce can no longer keep up with the demand for its products.

Even with all the attention on hiring, the government’s ability to create jobs is pretty dispiriting, no matter who is in charge. The most popular types of jobs programs involve state tax breaks or subsidies that seek to seduce a company from one state to another. While this can mean good news for “business-friendly” states like Texas, such policies don’t add to overall employment so much as they just shuffle jobs around. This helps explain Rick Perry’s claim that more than one million jobs were created under his watch in Texas while the rest of the country lost more than two million.

Get that?  Companies don’t create jobs.  Demand for what they sell creates jobs.  And neither do politicians create jobs.  Neo-Keynesians would say that deficit government spending can create the demand for what companies sell.  But this is just pulling demand forward, and if there is not an underlying bias for growth within the economy, it just robs from the future to pay for the present.  Fully-developed economic systems in which populations aren’t growing (i.e., Western Europe and Japan), or are growing very slowly (i.e., the US) do not have an underlying bias for growth.  Keynesian borrowing in the face of stagnant or declining populations is effectively digging the hole from which the economy must climb deeper.  It is the exact opposite of what should be done, so it is precisely what virtually every political economist these days prescribes. 

Mr. Davidson doesn’t mention it in the article (but perhaps does elsewhere), but the answer for high unemployment is to lower the costs of employment.  Not only the wage, but also the benefits packages and the legal liabilities, make employing an American many times more expensive than, say, his Chinese counterpart.  And so long as America continues to trade with low-wage nations like China, American wages will be forced downward while Chinese wages will rise.  If the market-clearing wage price is not allowed to obtain, there will be a surplus of workers to jobs.  

Get the government out of the employment relationship, and watch the jobs market bloom.  The jobs will be lousy, low-paid jobs because that’s the sort of jobs we are competing with China, et al, over, but there will be jobs.

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