Daniel Hannan: Politicians can’t create jobs

This is an important point – and one that all politicians ought to be reminded of, often and firmly.

I am not an economist, so there is no way I am going to articulate this eloquently or even remotely well, but…I would not be myself if I didn’t give it a shot.

There is an old joke – very old – that could get people sent to jail if they said a variation of it back behind the iron curtain, where I grew up:

What is the fastest way to get rid of all the sand in the Sahara desert?

Create a government department with the sole purpose of supplying sand to the Sahara.  Give it a steering committee, a 5 year plan and lots of money and power to enforce policies.  For a little while, nothing will happen.  Then:  BOOM!  Sand will be more scarce in the Sahara than meat is in butcher shops!

(If you are one of the younger readers who does not remember what life behind the iron curtain was like, let me just say that butcher shops usually had very, very little to offer.  If a supply of meat was even rumoured to be coming in, people would stand in lines for hours, sometimes lining up all night just so they may be one of the first few in line in the morning because the supplies were so meager that even with limits per customer, only the first few people in line would get to buy any meat.  Bread and milk were usually available, but again, even with bread, the supply would run out before the demand.  I remember days when the limit would be set at one quarter loaf of bread per customer, so that my mom would go line up and send me to line upseparately, so we’d get half a loaf between us.  No kidding.  We had money – but there was no ‘stuff’ to buy with it.)

‘Governments creating jobs’ is one of those easy to fall into fallacies.  Like ‘the broken window’ fallacy:

The fact is that governments do not just ‘have money’ to spend:  their money comes from taxes, current or future.  Taxes are taken from people who earn it by the threat of force:  these people now no longer have that money to spend to look after themselves and their family.

Ah, say government spending proponents, but what if people want to save their money instead of spending it?  That would be bad for the economy and that is why governments must take it from them and spend it!

Isn’t that just a little oppressive?  And arrogant?

A government is supposed to represent the people and do the people’s bidding – not force people to do the government’s bidding!

The suggestion that governments should spend the people’s money because people don’t want to spend it themselves is illustrative of how the relationship between the citizens and our government has been inverted:  insted of being our servant, the government has become our master, forcing us to do what we do not want to do.

That we are proposing ‘government stimulus spending’ and ‘government creating jobs’ as desirable actions should give us a moment of pause to consider what this implies about our relationship to our governments and the status of our civil liberties!

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2 Responses to “Daniel Hannan: Politicians can’t create jobs”

  1. Ralph Musgrave Says:

    “The fact is that governments do not just ‘have money’ to spend: their money comes from taxes, current or future.” Nonsense: governments / central banks can print money (as indeed do private banks). Haven’t you heard of QE – that’s printing money and buying back government debt?

    As for the idea that given a rise in saving by private sector, governments should not spend more, the result would simply be unemployment. “Paradox of thrift” unemployment, as Keynes called it. Is that what you want?

    Xanthippa says:

    The de-coupling of currency from actual, physical commodieites of any value (governments printing money) is a huge part of this problem. Lowering the value of fiat currency, it – in a very real sense – destroys the purchasing ability of individual citizens whose labour is compensated by the devalued currency. If these citizens have contracted their work for compensation if currency (as most of us do), by printing more money, their wages will have been effectively lowered.

    This is not good for anyone – and could be regarded as third party interference in contracts among private parties.

    As for Keynes: if he said it was bad, then that is exactly what we should be doing!

    His policies are not only nonsense on economic grounds, they de-legitimize gocernment by engaging it in actions which are contrary to the wishes of its citizenry. That is tyranny, plain and simple.

    Not only is applying the destructive Keynesian policies destructive to the legitimacy of government, it is fundamentally contrary to the free trade among consenting individuals which has over and over been demonstrated to be the most successful vehicle for increasing wealth and raising living standards.

    As for unemploymnet: do you remember the last time unemployment was 100%? Do you remember what system that was under?

    Just off the top of my head: Soviet-style communism came close, but it never quite reached 100%. They kept political dissidents on a ‘black list’ – not allowed to be employed – so that they could be picked up and thrown into jail for vagabondry. This way, there were no ‘political prisoners’ in the socialist paradise!

    Before thaat, however, Europe did enjoy a political system with 100% employment. It was called serfdom!

  2. Ralph Musgrave Says:

    Xanthippa, Re your first para and the idea that inflation lowers the purchasing power of wages, this is true only to a minute extent. The reason is that about 90% of money derived from wages is spent within a month or two.

    As to those who want to save for the long term, they do not have to do so by storing up money. Indeed any long term saver who puts the bulk of their savings into cash is a twit. Moreover, people who hoard cash do not do the country any favours: reason is that having the population hold large amounts of cash is potentially destabilising – if they all decide to spend too much of it at once.

    Next, we all accept that inflation well over 2% is not desirable. As to inflation of around 2%, that is no problem in my opinion, or in the opinion of the vast majority of economists. Indeed, it is widely accepted that 2% or so inflation is better than zero inflation, for a variety of reasons I won’t spell out here.

    Re Keynes, I am fascinated by your theory that Keynes’s ideas “de-legitimize government by engaging it in actions which are contrary to the wishes of its citizenry. That is tyranny, plain and simple.” And that his idea are “contrary to the free trade among consenting individuals…”.

    Please, please direct me to an article or paper which argues the latter points in more detail.

    Xanthippa says:

    I have started out stating that I am not an economist. However, I have studied logic and can follow from a-to-b-to-c…

    Proposition 1: Governments derive their legitimacy from representing the wishes of their citizens
    Proposition 2: People want to save money

    If governments do not follow the wishes of their citizens and spend instead, they loose their legitimacy.

    Why is that difficult to follow?


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