We hear it often that business creates jobs: a notion that seems to go largely unquestioned. Virtually all politicians and pundits accept this basic causal reasoning and from this posture offer countless suggestions regarding appropriate policies. Indeed, this simple notion attaches to a whole range of issues and ideas, of ways of doing politics, and more. The idea that businesses create jobs raises certain questions. If we go so far as to reject this proposition outright, however, it opens up a whole different manner of viewing politics and treating problems like unemployment.
First the questions that help reveal the underlying or hidden tendencies. In a very simplistic sense, of course, businesses do create jobs since many people work for business. This is true, but incomplete, telling only part of the story. Governments also create jobs as do non-profits and organizations that we would not really consider ‘business.’ But why should someone working as a teacher, a cop, a soldier, a staffer at a community organization, or even a doctor not count the same as someone working at Wal-Mart or Starbucks just because the latter are businesses? If only businesses create jobs, then who created those other jobs? By this logic, I suppose, laying- off 100,000 teachers should have no impact on the employment picture since again governments do not create jobs. Of course, some may contend that only businesses create “productive” jobs, but this seems to refer solely to manufacturing or even agricultural jobs, which is a very small portion of our labor market. So if jobs come from different sources other than business, why privilege business in our thinking about the sources of jobs and exclude others?
The mantra that business creates jobs raises even more fundamental questions crystallized by the current electoral races. If businesses create jobs, then why does everyone blame the government for unemployment? Should we not blame business? If there is widespread unemployment and businesses create jobs, then apparently they are not creating enough jobs. Ironically, Democrats and particularly Republicans, who strongly embrace the pro-business position encapsulated in “business creates jobs,” run on a platform of creating jobs. But if businesses and not government create jobs – according to the prevailing logic – then why would you even want to go into government for the purposing of creating jobs: the top issue in this campaign? Since most politicians are also business people, then why not just create jobs from their privileged location where jobs are created: business. Again this is particularly strange and ironic to hear coming from Republicans who a) blame the government for unemployment, b) turnaround and argue that businesses create jobs, and then c) clamor to take control of the government in the name of creating jobs.
Accepting the causal logic that businesses create jobs, of course, leads to the question: why don’t they? The argument usually heard from politicians and pundits is that government – which really does not create jobs according to this narrative – gets in the way of business and thus prevents them from creating jobs. According to this viewpoint, government – which cannot create jobs — must create the conditions conducive for business to do their thing and create jobs. Of course any good analyst immediately recognizes within this explanation that the government in fact does ‘create’ jobs by conditioning the ability of business to create jobs, but that is a different sort of contention than I wish to pursue here.
An alternative explanation often heard why businesses are not creating jobs is because there is no demand. Businesses need customers. And as everyone knows, during a recession demand falls, inventories become bloated, businesses face declining revenue, and lay-off workers. But from this vantage point, businesses do not really create jobs, demand creates jobs.
The difference between the two views — businesses create jobs versus demand creates jobs — may seem trivial and even semantic, but the policy implications and even ideological underpinnings are vastly different. If we accept the notion that businesses create jobs, then we pursue policies that privilege and favor business. This includes tax breaks for business and the wealthy who run the businesses and invest, subsidies, privatization or government out-sourcing, and deregulation, to name a few. Or to put it in Republican terms, policies that get the government off the backs of business. Since jobs are important – a point everyone tends to agree on – and given that businesses create jobs, then such pro-business policies become priorities, prompting politicians to compete against one another to prove their pro-business credentials.
If, however, we accept the notion that demand creates jobs rather than business, then we must ask why demand is low. This invariably leads us to focus on different factors like incomes, wages, poverty, the struggles of ordinary families to make ends meet, and the distribution of income and wealth. If we look into these areas what we find, as described in detail in the recent works of Robert Reich and Ariana Hunffington, is a pattern of rising inequality. Indeed, the share of income going to the middle and working class in recent decades has fallen. Working class families have struggled amidst declining or stagnant real wages with many leveraging their only asset, their home, to borrow to make ends meet. But that panacea of cheap money to sustain consumer spending is over and demand has plummeted. Meanwhile, the share of income going to the richest segments of the population has skyrocketed while their tax burden has fallen. Not since the 1920s has the share of income going to the wealthiest 1% of the population been so great. Never has their tax burden been so light.
Accepting that demand fuels the creation of jobs, of course, leads to a different policy approach than if we start with the notion that businesses create jobs. Rather than designing policies that favor business, policies targeting demand would favor middle and working class individuals and force us to come face to face with the needs to redistribute income and/or engage in stimulus spending to bolster demand. But not in an ideologically naïve way like most politicians – arguing that they represent the middle and working class and then contend that the best way to help the middle class is to favor big business. Instead, policies would focus on taxing the wealthy to the levels of the past, favoring workers and wage increases, and even subsidizing demand rather than supply.
Those touting the notion that businesses create jobs and hence favoring pro-business policies would surely scream “class warfare” at this point. But their approach and viewpoint is equally class-oriented: it just favors the business class. If calling for a redistribution of income downward constitutes “class warfare,” then surely promoting policies that redistribute income upward must also qualify as such. The notion that business creates jobs is thus a salvo in class warfare that passes for normal. The notion is so accepted, that we disagree only on how to help businesses in their quest to create jobs. But this, after all, is the power of ideology: to convince and persuade people to the point of creating the notion of universal truth, of accepted wisdom, of fashioning the “point of departure” for any discussion.
Stephen D. Morris, October 2010