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President Obama, speaking at a Chrysler plant in Toledo, attempted to highlight the successes of his bailout bonanza of the American auto-industry. “This plant directly supports hundreds of jobs right here in Toledo. After all, without you, who’d eat at Chet’s or Inky’s or Rudy’s?”
A few days later Chet’s closed up shop and went of business. Ouch. Presumably, the president would surmise that the diner’s demise was a “bump in the road” on the way to recovery.
It has been tough few weeks not only for the American economy, but also the widely held notion that government is the omnipotent mechanism of job creation (see Paul Krugman). The president’s big government economic policies have been nothing short of a disaster, not only because the economy seems set for impending doom, but its structure was built with a house of cards of economic fallacies.
Take the president’s most recent dubious assertion that the creation of ATM’s and other innovative machinery are the cause of our economic woes. The president posits that invention of ATM’s and other new productive uses of capital have caused reductions in human capital i.e. increased unemployment in America. Nice one.
But this fallacy has been repudiated so many times by various eminent economists and through the course of history, that it is difficult to comprehend this line of reasoning. Surely, the invention of technological goods such as the IPod have immediately eliminated jobs in CD stores, but the abundance of jobs created at Apple and innumerable other technology companies have more than compensated for the losses. How many more manufacturing jobs have been created to build the parts for ATM’s? Or the computer programmers hired to maintain these machines?
Greater innovation in machinery and the creation of new technology have led to greater efficiency in production. Creative destruction in the market forces labor and capital to be reallocated more efficiently. The ability of an entrepreneur or company to reduce the price of their product and sell it in the free market increases their profits and ability to hire new workers.
The myth that the president purports flows from the natural corollary that government creates jobs through “stimulus” spending. When government “investments” to fix the economy inevitably fail, blame technology or joke as the president did at his “jobs” council that “Shovel-ready was not as, uh, shovel-ready as we expected."
The 14 million unemployed are not laughing. Nor are the American taxpayers, whose hard earned money has been so wantonly wasted.
If the president is skeptical of innovation, try the tried and true method towards a prosperous economy. Unleash the immense potential of the private sector economy from the boot of these failed policies and drastically trim the size of the federal government.
And then bury something that is actually shovel-ready, these fallacies.