Selected in the top 100 Economics Sites

Follow me on Twitter

Tuesday, February 8, 2011

From the great Herb Meyer.....


"There's only one thing really worth working create work. I don't know if you've ever thought about machines," he said. "Every machine that's put into a factory displaces labor. That's a very old story, of course. The man who's put to work the machine isn't any better off than he was before; the three men that are thrown out of a job are very much worse off. But the cure isn't socialism — or, if it is, I'm too much of a capitalist myself to see it. The cure is for somebody to buckle to and make a job for the three men.

"I believe that that's the thing most worth doing in this modern world," he said quietly. "To create jobs that men can work at, and be proud of, and make money by their work. There's no dignity, no decency or health today for men that haven't got a job. All other things depend on work today; without work men are utterly undone." — from Kindling, by Nevil Shute, 1938

More than 60 years after Nevil Shute wrote his savvy novel about a British investment banker who struggles to restart a dormant shipyard in the midst of England's depression — the book should be required reading for MBA students — the need for work sits at the top of our national agenda. Indeed, as the 2004 election cycle revs up, the only thing that President Bush and Senator Kerry agree about is that today we are not creating enough new jobs.

The question is, "Why not?" One obvious reason is that we are only now emerging from a recession. This should improve the jobs situation over time as economic growth takes hold. Another is outsourcing — the transfer of both manufacturing and service jobs that would have been done by Americans to workers overseas who are well educated, well trained, and willing to work for a lot less money. This won't improve over time; we are so addicted to low prices that we bemoan the loss of jobs to foreigners even while driving to Wal-Mart for a $60 DVD player made in some country whose capital has only just gotten indoor plumbing.

A less obvious reason we aren't creating new jobs fast enough is that — like agricultural productivity a century ago — manufacturing productivity today has risen so high, so fast, that we are able to make whatever we need with fewer people. Since 1995, more than 22 million factory jobs have disappeared worldwide, while global industrial output has risen by more than 30 percent. This really is a worldwide phenomenon; the total number of manufacturing jobs has dropped not only here in the U.S., but in low-wage countries including Brazil and even China.


There is one more reason we aren't creating jobs fast enough, but saying it out loud would be so unpopular, and so politically toxic, that none of our leaders — including those few who actually understand it — seem willing to take the risk. So, here goes: We aren't creating jobs fast enough because we have crippled the people who do the creating, and turned them from the heroes and heroines they are into villains. Read the last sentence again, then say it aloud to whoever happens to be nearby. This is the core of the problem — no, it is the problem — and until we fix it we aren't going to start creating new jobs fast enough. And yes, it really is this simple.

People who create jobs are entrepreneurs, which Webster's defines as "a person who organizes and manages a business undertaking, assuming the risk for the sake of the profit." Sometimes these are people who invent new products or services, then launch companies that become billion-dollar enterprises that in turn spawn new industries. Think of Apple computers, or Starbucks. And sometimes these entrepreneurs launch smaller enterprises, such as neighborhood shops or a local business that specializes in making windows for new homes or in remodeling kitchens. Anyone who launches a new venture is by definition an entrepreneur, and these are the people whose efforts create work for everyone else. They are the only people who create work, which is why entrepreneurs are vital to the economic health of any free society.

The jobs that entrepreneurs create — keep in mind that 80 percent of all new jobs are created by small businesses — provide incomes to the people they hire, who in turn spend their money on the products and services they need and want. This is what allows the big manufacturers, such as the automakers, to rev up their own production lines and by doing so to expand their own workforces. And all this activity, over time, generates enough economic activity to enable still more entrepreneurs to launch or expand their own ventures and thus to keep the economy — think of it as one huge "jobs machine" — humming.

Common sense suggests that a country whose people want jobs would do everything possible to help entrepreneurs to succeed — to encourage them, or at the very least to get out of their way. Alas, nothing is so rare today as common sense. And in the last decade or so we Americans have been making it less attractive for entrepreneurs to do what they do — and less likely they will succeed when they do give it a shot. Through a combination of high taxes and onerous regulation, we have discouraged entrepreneurs from doing the one thing they must do for everyone else's sake — namely, create new jobs.

More precisely, unlike their predecessors, today's entrepreneurs struggle to expand without creating jobs, because the cost of doing so — both financial and emotional — just isn't worth it. This is the big shift in attitude that no one wants to talk about. Even in my own tiny, home-based publishing business, we are killing ourselves to grow — and terrified that if we grow to the point when we need to hire someone, we will be crippled by local, state, and federal taxes on our employee's salary, and made miserable by regulations that might force us to rip out the flower bed for a wheelchair-access ramp or even be sued by someone who never applied for the job we created but somehow feels that he or she is the victim of discrimination.


And if we push forward anyway and actually do create a job — and assuming the company isn't hit with a multimillion-dollar fine because one morning I lost control of myself and said something vicious like, "You look nice today, Lucille" — rather than be celebrated for our achievements we will be berated or reviled for getting rich on obscene profits.

This is nuts. We have reshaped our society to protect endangered species whose continued survival is of no discernible benefit, such as the black-footed ferret or the spotted owl, while blithely writing laws and regulations that threaten the survival of the one species — the entrepreneur — on whom our lives and welfare utterly depend. And we wonder why we aren't creating enough new jobs! It's like slaughtering herds of dairy cows, then wondering why we haven't got enough milk. Really, it is.

With the need for jobs so pressing, this is the time to launch a full-bore effort to teach Americans just how their jobs get created in the first place; to teach them what entrepreneurs are, what they do, how they do it, what risks they take — and what tax and regulatory changes we must make to help more of them succeed. Above all, we need to teach all this to our children. Which means we need to crash head-on into the Leftist, anti-business culture of our country's education establishment and force it to stop teaching our children that the Furbish lousewort must be protected at all costs, but that entrepreneurs are ruining the planet and should be made extinct.

Until we get Americans to understand that their welfare depends utterly on those few among us who create work — that "soaking the rich" also means "no work for you" — we will never create enough new jobs no matter how rapidly our economy may grow. Entrepreneurs will survive, for we are a hardy species. It's the workers who will suffer, and for their own sakes they need to understand how the world works. This means we want more than merely their tolerance. We want their understanding and even, perhaps, their gratitude.

At the very end of Kindling, the investment banker returns to the now-bustling shipyard that his efforts brought back to life — after serving three years in prison for violating a securities regulation while raising the needed capital.

Upon the blackened, ten-foot wall not many yards from the gate there was a sign that he did not remember. Hesitating for a moment to go in, he went across to look at it. It was a bronze plaque, about three feet square, apparently a memorial of some sort, dignified and restrained. As he approached he saw it bore, embossed in low relief, the sculptured head and shoulders of a man, in profile. He read the words below:

Henry Warren
He Gave Us Work

Maybe Kindling should be required reading not just for MBA students, but for politicians, union leaders, high-school seniors — and especially for ambitious prosecutors who know how easy it is to trip up an entrepreneur on some technical violation, then trick the public into thinking they have "stood up for the little guy" when all they've really done is thrown a monkey wrench into the jobs machine those little guys so desperately need to keep running.

No comments: