Politicians and the Peculiar Worship of Full Employment

With the Bureau of Labor Statistics set to announce presumably another dire unemployment figure tomorrow, it's a certainty that politicians from both sides of the aisle will issue all manner of statements suggesting if we just let them make more laws and spend more money, jobs will be plentiful. Politicians bloviate about numerous things, but none more than job creation.

"Job creation" is the altar at which politicians worship. Last spring President Obama defended his administration's near trillion dollar "stimulus" plan because it would supposedly lead to the creation of 3 million new jobs, while House Minority Leader John Boehner explained Republican opposition to Obama's plan because it would create too few jobs.

It seems both sides miss the point.

That is so given the paradoxical truth that economic growth is at its core all about destroying jobs. Rather than a signal of an economically advanced country, what economists term "full employment" is more realistically the property of industrially backward countries.

In impoverished countries like Bangladesh it's a near certainty that everyone works. And for those who beg, that's their work. Back during the Bosnian conflict of the mid ‘90s, news reports suggested that unemployment there was 75 percent, but for the U.S. military personnel in country, they witnessed the greater truth that the impoverished Bosnians were constantly working.

In economically advanced countries, the obvious goal is to produce more with less effort or, to produce plenty with as few workers as possible. In that sense the advance of machines and other forms of automation in the developed world has been profoundly good for all of us.

Thanks to the rise of the machine, children no longer have to work, and while the massive influx of women into the U.S. workplace has been profoundly good for economic growth, increased efficiency when it comes to production means that for two-parent families, work by both parents is increasingly a choice rather than a necessity. In short, a society is progressing when there is not full employment.

If jobs were the be all, end all for U.S. citizens, the path to full employment would be pretty simple, and it might include abolishing some of the labor-saving devices that have destroyed jobs including the computer, the ATM and the automobile. Jobs themselves can always be created, particularly if we're willing to lower our standard of living in concert with doing work that intellectual advances previously made unnecessary.

Of course most wouldn't recommend going down such a path, and with good reason. Not only would our day-to-day existence be more difficult, but for individuals to cheer the unnecessary creation of jobs is for them also to cheer a reduction in their pay.

Indeed, it can't be stressed enough that in modern economies, one individual's work is an investor's cost. Or to put it more simply, there aren't many good jobs without investors willing to supply capital so that they can be created.

In that sense, when Americans decry the offshoring of work or technological advances that make certain jobs superfluous, they're shooting themselves in the proverbial foot. They are because while outsourcing and technical advances lead to job destruction, they also make the cost of doing business less expensive which frees up the capital necessary to fund the pursuit of other works.

Harsh as it may sound to some, businesses are only in business thanks to investors willing to support their operations. But what this means is that if businesses successfully destroy jobs on the way to profitability, the act of doing so enables them to attract the capital necessary to enter into new lines of work that almost as a rule will require them to hire people. Production is always the end, while employment is frequently the means to that end.

Returning to politicians and their peculiar worship of jobs, rather than devising endless programs meant to create them, they would do best by those eager to work if they did nothing at all. That's the case because it is government intervention in the economy in the name of jobs that is scaring off investors.

Corporate bailouts are supported by politicians owing to their belief that they'll save jobs. In the near-term that's true, but over the long-term bailouts repel the capital necessary for true job creation for keeping human and physical capital locked in the hands of failed managers. Investors as a rule invest to make money, and as such, they're logically unwilling to commit capital to the prominent business concepts of the past.

President George W. Bush foisted no less than two stimulus packages on the economy to President Obama's one (so far?), and both did so in name of job creation. But the obvious problem beyond stimulus merely redistributing wealth is that it too is anti-investment.

Investors correctly see that only the politically connected will receive stimulus funds, and they deduce that those in receipt will forever be in thrall to governments who seek to achieve social goals over profits. Stimulus similarly repels investment for those with capital being well aware that far from generating productivity, stimulus rewards the indolent at the expense of the productive.

Lastly, the Obama administration is mimicking the Bush administration in its support of a weak dollar, once again in the name of jobs. Sadly, Obama like Bush before him is failing to consider the investor in possession of capital in pursuing this most foolish of policies. Indeed, investors have to consider inflation before committing job-creating capital, and if monetary debasement is going to erode any returns, they logically invest elsewhere. It seems nearly every politician and economist believes in the power of debased money to create jobs, but reality and rational investors keep proving them wrong.

Looking ahead to tomorrow, whatever the unemployment number it's certain that politicians from both sides will wail about those out of work and what they're doing to improve things. Readers shouldn't be fooled by their sympathetic tones because in truth, it is the political class itself that is alienating the very investors possessing the ability to actually put people back to work.