Matthew T Grant


Tall Guy. Glasses.

The Dialectic of Job Creation

Scott Brown was asked recently to comment on Elizabeth Warren and he, predictably, refused. He said that he wasn’t going to weigh in on the field of Democratic candidates for the senate seat he now holds but, as a way of obliquely criticizing Warren, he also said that he wasn’t going to “beat up on job creators” either.

Brown was, of course, referring to Warren’s recent comments, construed by the Right as “a class warfare rant,” on taxation and the rich, but he was also simply demonstrating party discipline. Just as every Republican mechanically refers to “Obama’s job-killing healthcare plan,” thus replacing rational dispute about the pro’s and con’s of this latest attempt to address real problems with partisan nay-saying boiled down to a knee-jerk epithet, they are now responding to any discussion of raising taxes on the wealthiest Americans as an attack (“warfare”) on “job creators.”

While I find the equation of “the rich” and “job creators” problematic on many levels, the level I would like to focus on is that of the dialectic. Dialectical thinking, on which Elizabeth Warren relies in the comments under discussion, means putting things in context, focusing on complexity, and striving to understand how elements of any system influence and mutually define one another.

Consider the question, “Who creates jobs?” You could say, along with the Republicans (and devotees of Ayn Rand), that people who build companies create jobs. The logic behind this is not complicated: Companies can be seen as “a bunch of jobs,” so if you create a company, you have created jobs. QED.

But how do you “build a company”?

Well, you have a product or a service that you try to sell to others. If enough of them buy, you not only have enough money to live on, but you also have enough to hire more people to help you sell and more people to help you make or deliver what you are selling. If, however, you cannot interest enough people in your product or service, then you go out of business (or muddle along in a sustainable but non-growing state).

In other words, the demand for your goods is just as critical, if not more so, for your success than what you have on offer and how you offer it. Without the demand, after all, no customers and without customers, no company. (This is why “demand generation” is such a critical marketing function.)

So, it’s not just “the job creator” who creates jobs. Jobs are also created by the demand of the market.

Here’s how it plays out in our current situation.

Companies have a stockpile of capital and banks have money to loan, however, companies are not hiring and banks are not lending. Why not? Don’t they want to create jobs? I thought that’s what the wealthy did with their money?

The answer is that, when you have high unemployment, for example, fewer people have money to spend. This means that while demand for certain essentials may remain constant, demand for a wide range of goods and services will decline. If the demand declines, however, then companies won’t spend money in order to create and sell more products.

And they won’t spend this money because they are not in the business of job creation; they are in the business of making money.

So, who are the real job creators? It would be easy to say, “Everybody who has any money to spend,” because it is their demand for goods and their willingness (and ability) to pay for them that, in the final analysis, creates jobs. But if you said that, you’d have to admit that job creation is not simply the job of certain individuals with a dream but, rather, that job creation is an effect of an entire system working in concert.

And if you said that, then you’d be right.

Category: Thinking Out Loud

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2 Responses

  1. I hear often that small businesses are the biggest jobs creator. This fits into your argument above in that a thriving “small business” economy creates greater aggregate demand for higher level service positions than consolidated big box providers. These better-paying jobs result in higher demand for goods and services, especially in the nominally disposable categories.

    So in addition to serving as the greatest source of new jobs, a small business economy creates its own customers. It’s not the most efficient system, but it might well be the most viable.

  2. admin says:

    That sounds right, Todd. Again, I just don’t go along with equating wealth with job creation. Indeed, if I understand anything about financial markets, it’s quite possible to make a bunch of money there without creating a single job anywhere in the real economy.