Whenever there are in any country uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a common stock for man to labor and live on. If for the encouragement of industry we allow it to be appropriated, we must take care that other employment be provided to those excluded from the appropriation.

Thomas Jefferson, from a letter to James Madison (1785)

In this week’s Sift:

  • Where Jobs Come From. Conservatives would have you believe that capitalists create jobs, conjuring both workers and customers out of the aether. Right now, it looks more like customers create jobs — workers and capitalists would pop up as needed if only we had customers.
  • Short Notes. A government report has global warming leading to droughts sooner rather than later. Bush-haters and Obama-haters compared. Kansans will respond to global warming as long as they don’t have to admit it’s happening. Obama used to just be the anti-Christ; now he’s the Angel of Death. The Times takes a closer look at Chamber of Commerce donors. And more.

Where Jobs Come From

In the Pollyanna world of free-market economic theory, long-term unemployment is impossible: When people are unemployed, wages drop. That makes it possible to produce products more cheaply, which makes it possible for people to buy more stuff. At some point, then, it makes sense to produce stuff that you wouldn’t have produced at the higher wage, and so you hire people. It’s the Invisible Hand of the Market; it fixes everything.

The same thing is supposed to happen for services. At some wage, it makes sense to start hiring gas-station attendants and movie-theater ushers again. So people will, and unemployment will go away.

In theory, only a few things can keep this from happening: Union contracts or minimum-wage laws might prevent wages from falling far enough. Unemployment benefits or welfare might keep potential workers from becoming desperate enough to take the very-low-wage jobs. Or maybe the workers are just lazy, and they’re lying about the fact that they want to work.

The intoxicating thing about theory is that it saves you from needing to know anything. You don’t need to know any of the lying, lazy unemployed yourself to know that they must be out there. You don’t need to ask the unemployed whether they’re willing to take less money — they can’t be, or otherwise the theory says they’d have jobs by now. You don’t need elaborate economic models to tell you to cut the minimum wage or break the unions or cut off unemployment benefits — if there’s still unemployment, that must be the reason. The theory says so.

The problem, of course, is that as wages go down, people’s ability to buy things goes down too. So it’s easier to make things but harder to sell them. Imagine taking this as far as it can go: If you could cut everybody’s wages to zero, you could make damn near anything and sell it for pennies. But no one would have pennies, so it wouldn’t matter.

Emotions complicate the problem. You might stop buying stuff just because you’re afraid of losing your job, even though everything looks secure. They can cut prices all they want, but you’re still going to wait and see. If you’re a business, you may stop making stuff just because you’re afraid you won’t be able to sell it. Things may look fine at the moment, but who knows what the economy will be like by the time your new product hits the shelves next spring?

Debt complicates things too. Maybe my business looks fine, until my customers go bankrupt and can’t pay me. Now I can’t pay the people I owe, and they can’t pay the people they owe, and so.

In short, economies are complicated. You can’t just reduce them to one variable (wages) and assume things will work out if that variable goes low enough. If you take things a step further and use your one-variable economic model to infer things about the moral character of people you haven’t met, you’re just fantasizing. And if it makes you happy to fantasize a world full of lying, lazy people who expect you to feed them … well, maybe the wages of therapists will go down far enough that you’ll hire one.

So where do jobs come from? A bunch of factors need to come together to create a job. There has to be something worth doing, a worker willing and able to do it, a capitalist to pull together all the tools and materials of production, and a customer willing and able to pay for the product or service.

In conservative economics, though, all that really matters is the capitalist. If the capitalist has money and a good idea, the worker and the customer will appear by magic. If that were true, then a lot of conservative policies would make sense: Cut taxes on rich people, and they’ll use that money to become capitalists and create jobs. (The slogan here is “I never got a job from a poor person.” Daily Kos’ Citizen K takes that line apart — and incidentally is my source for this week’s Sift quote.)

The reason conservative economics hasn’t been working — we’ve been cutting taxes since Reagan and all it ever seems to produce is government debt — is that lack of capital and capitalists isn’t the problem. Lack of customers is. At this point, a customer with money would make workers and capitalists appear by magic. Lack of demand, not lack of capital, is the reason businesses aren’t hiring.

And now we get to the most serious problem with conservative trickle-down economics: Rich people make bad customers. There aren’t enough of them, and they don’t really need the things they buy, so they’re unreliable. Also, they use a lot of one-of-a-kind services that don’t scale up and so don’t lead to long-term growth. So an economy that depends on rich people to be its customers is not going to be as healthy as an economy that sells to the middle class.

In the same letter to Madison I quoted at the top of this post, Jefferson (who was living in pre-revolutionary France as the US ambassador) reflected on:

that unequal division of property which occasions the numberless instances of wretchedness which I had observed in this country and is to be observed all over Europe. The property of this country is absolutely concentred in a very few hands, having revenues of from half a million of guineas a year downwards. These employ the flower of the country as servants, some of them having as many as 200 domestics

In Jeffersonian America, on the other hand, it was easy to find work and even to learn a trade that you could turn into a business of your own. (Visiting Frenchman Alexis De Tocqueville observed “hands are always in request” in early America.) It wasn’t because we had more rich people than France did. We had more unappropriated land and reliable middle-class customers, not richer capitalists.

Market Failures. When we talk about jobs, it’s easy to confuse the mechanisms of unemployment with the causes. In any particular industry, for example, technology is likely to be putting people out of work. That’s been happening since the invention of the plow.

But if the same stuff can be produced with less work, that’s a good thing. It only becomes a problem if we make it a problem. Two possibilities arise: Either there is still undone stuff worth doing, or there isn’t. If there isn’t — if everything everybody wants is producible without everybody working — then we have a distribution problem; either we’ll have to figure out a better way to share the work around, or we’ll have to disconnect work from consumption.

But I don’t think that’s where we are. It seems to me that there is plenty of stuff that needs doing. To give just one example, we need a new electrical grid. We need the grid to do at least two things the current one won’t: move electricity cheaply from sunny and windy places to densely populated places; and interact with smart houses to schedule non-urgent uses of electricity for times of low demand.

In the long run a smart grid would be a tremendous investment, and in the short run it would create a lot of jobs, but it’s not getting built. The only private interests in a position to build it are power companies, and their motivations run both ways. (If you already own a coal plant, you don’t want to make it easy for wind farms to compete with you.) And government can’t build it because it would cost money and government spending is evil.

The smart grid is an example of a market failure. Overall, a dollar invested in a smart grid today might net the economy two dollars or ten dollars or a hundred dollars down the road. But the market isn’t able to capture that profit in a package it can sell to an investor, so the private sector won’t build it. The same thing was true about the public infrastructure projects of the past — the canals, the highways, the airports, rural electrification, the TVA, and so on. They were great ideas, but the private sector would never have built them, because the profit from them scatters throughout the economy rather than concentrating in the hands of the investors.

The only way to build big public infrastructure is through government. We need to tax the rich and invest the money in building a healthy economy for the future — the same way America always did before conservatives took over in the 1980s.

Or we could not tax the rich and they could hire more domestics, like the pre-revolutionary French aristocrats did. That’s the alternative jobs plan.

James Kroeger’s Response to My Affluent Republican Brother is worth reading in its entirety, but it contains one argument for taxing the rich that I had never thought of before: Raising taxes on the rich actually has very little effect on their lives.

Here’s why: Poor people buy bread because they want to eat bread, not because they want to own the biggest loaf on the block. And if poor people suddenly had more money to spend on bread, it wouldn’t be that hard for the economic system to adjust and bake more of it.

But the stuff rich people buy is different. If rich people have more money to spend on beachfront property, the price of it will go up. But they won’t manage to buy any more of it, because there isn’t any more of it. The same thing is true of Renoirs or century-old bottles of wine. The whole point of buying these things is to win the competition with other rich people.

So what happens if taxes go up and rich people suddenly have less disposable income? Nothing much. As long as you maintain the same relative ranking among the other rich people, you win the same auctions for the same objects — just at a lower price.

A similar thing happens with manufactured luxury goods. The only reason to buy a 500-foot yacht is to outclass the other billionaires. If all billionaires had less money, maybe you could outclass them with a mere 400-foot yacht. The biggest would still be the biggest, and that’s all that really matters.

One result of cutting taxes is that we don’t have the money to pay teachers, so we’re laying them off. This is another example where the jobs issue has gotten disconnected from what needs doing. Have we discovered some more efficient way to educate children that makes teachers obsolete, or lets one teacher effectively handle more students? Not that I’ve noticed. Do we have a vision of the future that makes a place for large numbers of poorly educated workers? I don’t think so.

So teaching kids is still something that needs doing. We have unemployed people who are trained to do it. It’s a long-term good investment. And we are still a rich country. But we’re going to lay teachers off because rich Americans don’t want to pay taxes.

Citizen K says we should substitute “unused business opportunities” for Jefferson’s “uncultivated lands” in this week’s Sift quote. I’ve talked elsewhere about the idea that “appropriation” is about more than just land. The stock of ideas and inventions passed down from previous generations is also part of the common inheritance. If those ideas seem to belong to the corporations who own our industries, people are once again being “excluded from the appropriation”.

Short Notes

It’s about life rather than politics, but check out my article Sudden Death for UU World.

I have the feeling there’s the root of a big idea in here: A small nonprofit group is getting people in Kansas to “conserve energy and consider renewable fuels” by “focusing on thrift, patriotism, spiritual conviction and economic prosperity” rather than on scientific evidence of global warming.

Here’s what I think is going on: Conservatives have gotten very good at demonizing certain words and people. The kind of folks who watch Glenn Beck will often know nothing about an issue other than the name of a villain and a phrase that describes the conspiracy he’s supposed to be masterminding. So if you mention Al Gore or global warming, you belong to the Dark Side.

At the same time, though, conservative indoctrination hasn’t rewired people’s basic intuitions, many of which are sound. So a lot of the same people who are sure that global warming is a socialist plot also sense that burning all this fossil fuel can’t be a good idea — eventually the outdoors will smell like a big truck idling in a small garage.

That is the challenge of liberal messaging: How do we reach the basically healthy intuitions of low-information voters, even the ones who have been trained to have a Pavlovian aversion to certain words and names?

Atlantic’s Kevin Drum summarizes a new paper from the National Center for Atmospheric Research:

In other words, virtually all of the world except for China and Russia will experience increased drought by 2030 and severe drought by 2060

It’s a global-warming effect, which means Republicans will refuse to believe it and will filibuster doing to avoid it anytime soon.

Now that it doesn’t matter any more, we can get accurate coverage of the Dick Cheney hunting accident. The guy he shot in the face was not an “old friend” as the media reported at the time. His injuries were serious. It was Cheney who was violating safety protocols, not his victim. And Cheney has never apologized.

Kevin Drum again, this time comparing left-wing craziness to right-wing craziness, and in particular Bush-hatred to Obama-hatred and Clinton-hatred. He notes these differences:

(1) Conservatives go nuts faster. It took a couple of years for anti-Bush sentiment to really get up to speed. Both Clinton and Obama got the full treatment within weeks of taking office.

(2) Conservatives go nuts in greater numbers. Two-thirds of Republicans think Obama is a socialist and upwards of half aren’t sure he was born in America. Nobody ever bothered polling Democrats on whether they thought Bush was a fascist or a raging alcoholic, but I think it’s safe to say the numbers would have been way, way less than half.

(3) Conservatives go nuts at higher levels. There are lots of big-time conservatives — members of Congress, radio and TV talkers, think tankers — who are every bit as hard edged as the most hard edged tea partier. But how many big-time Democrats thought Bush had stolen Ohio? Or that banks should have been nationalized following the financial collapse?

(4) Conservatives go nuts in the media. During the Clinton era, it was talk radio and Drudge and the Wall Street Journal editorial page. These days it’s Fox News (and talk radio and Drudge and the Wall Street Journal editorial page). Liberals just don’t have anything even close. Our nutballs are mostly relegated to C-list blogs and a few low-wattage radio stations. Keith Olbermann is about as outrageous as liberals get in the big-time media, and he’s a shrinking violet compared to guys like Rush Limbaugh and Glenn Beck.

Colorado is voting on Prop 62, which will make every fertilized ovum a person under the law — including those in test tubes. I think the most convincing arguments against Prop 62 come from its supporters, so I’ll link to some: Here, Personhood Colorado explains why the facts you may be hearing against Prop 62 are “lies” and “scare tactics”. So, for example, Prop 62 won’t ban contraception — just certain kinds of contraception. It won’t ban in vitro fertilization — it will just make in vitro fertilization impractical. And so on.

And if you weren’t convinced by those arguments, maybe morphing Obama into the Angel of Death will persuade you.

Apparently it’s outrageous to accuse Sharron Angle of racism when all she’s done is connect Harry Reid to scary Latino thugs in a misleading ad. “Illegal immigration is not about race,” said an Angle spokesman. That must be why so many people are worried about illegal Canadian immigrants.

The NYT looks into the U.S. Chamber of Commerce’s political activity and the donors who support it. The Chamber’s doesn’t disclose its donors, but the Times was able to find out this much:

  • they’re spending $144 million on lobbying this year, more than any other group
  • the Chamber claims to represent small businesses, but half of its contributions in 2008 came from just 45 donors
  • big gifts from specific companies coincide with big campaigns on issues that affect those companies

The Weekly Sift appears every Monday afternoon. If you would like to receive it by email, write to WeeklySift at Help me figure out what to do with the Sift’s Facebook page.

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  • Anonymous  On October 25, 2010 at 8:25 pm

    Hi Doug, I don't know if you saw this story in Time, but I thought it was quite good on this topic. It's called “How to Restore the American Dream.”,8599,2026776,00.html

    Irene Gravina

  • Dirk Wright  On October 26, 2010 at 9:38 am

    In response to this paragraph:
    “Citizen K says we should substitute “unused business opportunities” for Jefferson's “uncultivated lands” in this week's Sift quote. I've talked elsewhere about the idea that “appropriation” is about more than just land. The stock of ideas and inventions passed down from previous generations is also part of the common inheritance. If those ideas seem to belong to the corporations who own our industries, people are once again being “excluded from the appropriation”

    I can say that intellectual property is not appropriated forever. Patents and trademarks expire. Granted, it's not the latest technology, but the real purpose of patents anyway is to “promote the useful arts”, as in the Constitution.

  • Doug Muder  On October 26, 2010 at 5:27 pm

    In referring to “the stock of ideas and inventions” I had in mind something more general than patents and copyrights, and I should probably have fleshed this idea out better.

    For a long time, the progress of society and industry benefitted just about everyone. Factory workers made more from their work as their factories became more productive. But that healthy process seems to have stopped. Now, increases in the general productivity benefit only capital while wages stagnate.

    Ownership of patents is, I think, a small part of that problem. The structure of the economy allows a small group to monopolize the benefits of progress, even while many particular ideas lose patent protection.


  • By What is Job Creation? « The Weekly Sift on January 16, 2012 at 12:17 pm

    […] is the question: What does it mean to create a job, anyway? Let me repeat something I wrote a little over a year ago: A bunch of factors need to come together to create a job. There has to be something worth doing, a […]

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