How to create jobs and put people to work

Everyone agrees that we need to create more jobs. Tens of millions of Americans who want to work are not working and this is not good. So far, however, no one seems to know how to do this, although proposals for doing so are out there, for example:

—from Paul Krugman who says more stimulus monies are needed, that the original 2008-9 stimulus was not enough… if consumers are spending less government should be spending more, and now is not the time to be trying to reduce the deficit.

—from those on the other end of the political spectrum who maintain no less repeatedly and insistently than Krugman that only by shrinking the size of government, by government spending less (the original stimulus was a mistake), only then will the entrepreneurs become more active, grow their own businesses, start new ones, and, most important, make new hires.

Who’s right? Someone in the middle?  But new government spending and shrinking the deficit are incompatible, even though this does seem to be our president’s position.

So far the left-right opposition has led only to a national stalemate. Nothing is happening to reduce the numbers of the jobless. And what is worse, as the economists are fond of telling us, the jobs lost during the recent recession are lost forever, are not coming back. So we must look elsewhere.

More and more people, at least those who think about these things, are asking themselves where might new jobs come from? Real jobs, that is, not government jobs which, while they may make work, make nothing that can be sold and turned for a profit leading to new growth and new job creation.

Real jobs come from industries that are growing and thereby creating new wealth. Government jobs may be growing but no new wealth is being created thereby.

In the 19th. century the industry of growth was agriculture. Immigrants flocked to our country to work the new lands of the West. Following close behind came the industrial revolution, the millions of jobs in manufacturing,  and the new wealth and huge new personal fortunes resulting therefrom.

When we now look to the sources of new jobs we no longer look to agriculture or manufacturing. In both industries machines have by and large taken over the work of men with the millions of jobs lost as a result.

Not everyone is willing to accept this. There are those who see manufacturing jobs as being lost abroad where labor costs are cheaper, sent there by uncaring and unscrupulous owners, and that the process can be stopped and the jobs kept in this country.

But they are wrong. No less wrong than the Luddites of 200 years ago. The loss of jobs overseas can’t be stopped.

Nor would we want it to stop, anymore than we would want to destroy the mechanized looms as did the Luddites of the past. Things change, no less now than then.

Furthermore the world is now one world, and will no less benefit from global specialization than did individual countries in the past. Who would want to start paying double or triple for their shoes by putting our own shoe makers back to work? In any case these too costly shoes wouldn’t be sold, accounting for their no longer being made here in the first place.

We need to admit that just as the jobs in agriculture never returned so will the manufacturing jobs not come back.

So where might we turn for new job growth? The question that everyone is asking.

The answer is the same as it has always been and should be obvious. The new jobs will come from those industries that are growing, and right now there are three of these that dominate all the others, all service industries, education, health care, and government itself.

Without for the moment talking about government itself, why, as we might reasonably ask, aren’t education and healthcare becoming the engines of our economy as a whole as were agriculture and manufacturing in the past?

The answer to this is not so obvious. The best answer I’ve seen is that given by Arnold Kling and Nicholas Schulz in a National Affairs essay, The New Commanding Heights.

They argue that there are “commanding heights,” or critical industries that dominate economic activity. And in 21st c. America the new “commanding heights” (Lenin’s term for the electricity generation, heavy manufacturing, mining, and transportation of early Soviet Russia) are education and healthcare.

Here is how Kling and Schulz speak of these new “heights.”

In America today, few people champion government control of the industries Lenin saw as the commanding heights. On the contrary, these sectors have been largely deregulated, and market forces have, for the most part, been permitted to govern their development for decades….

[But] the fight for control over the commanding heights of American economic life is still very much with us. And it is a fight that, at least for now, the free-market camp appears to be losing.

The commanding heights of our economy today … education and health care…are our foremost growth sectors — the ones most central to employment and consumption; the ones that, increasingly, drive our economy.”

Kling and Schulz point out that in both government control is now dominant, and little is left to the free market. And this situation, more than anything else, is why we don’t see in these now dominant sectors of the economy new job creation anywhere near the levels of the past in agriculture and manufacturing.

We must open up [both education and healthcare] to competition and entrepreneurial reform…growth in these sectors is what will get the American economy back to work.

How might this happen, again from the text of Kling and Schulz:

 Imagine what might happen if government involvement in education were restricted to giving school vouchers to households below the median income?

Education [would] be rapidly innovating through new technology.

Entrepreneurs would be free to redesign education completely. Perhaps the very concept of a school would ultimately be replaced by different educational components with entirely different business models.

Some companies might emerge as high-quality math educators and sell their services to individuals or schools or districts. Others might emerge as high-quality developers of social skills and builders of teamwork. Still other enterprises and services would emerge that no one can yet imagine.

[In respect to healthcare] government involvement now  serves to entrench industry incumbents. One of the most important ways it does this is by using licensing laws to protect the incomes of doctors, specialists, and allied health professionals. [Government] work rules serve the interests of healthcare providers, not consumers.

Instead, imagine if state governments experimented by setting up healthcare enterprise zones. These would be areas where entrepreneurs could set up healthcare delivery systems without any rules concerning what license would be required to engage in any particular activity….

Healthcare providers would be accountable for the quality of their work, not for the certificates hanging on their walls.

Instead of forcing work rules on the healthcare system, consumers and the government should hold innovative healthcare organizations accountable for results. If their success rates and error rates compare favorably with traditional hospitals and medical practices, then these alternative models should be free to remain in operation and to continue the process of redesigning healthcare.

What might we conclude from all this, In particular from what Kling and Schulz have to say?

If we want new job creation, we must get government out of its present dominant and stifling position in our two dominant growth industries, healthcare and education. If these industries were to be left to market forces, as were agriculture and manufacturing in the past, the new jobs would come.

Does Obama know this? Does the Republican House or the Democratic Senate know this? Evidently not, because they are doing nothing to make this happen.

One thought on “How to create jobs and put people to work”

  1. Good essay.

    My little brother argues that a third area should be the public sector infrastructure. I.e., do the $4 trillion deal, but Obama should fight for $500 billion of infrastructure spending in exchange for equiv cuts to Medicare/Medicaid.

    What do you think about that?


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