Who Creates Jobs?

Today, the White House holds its “Jobs Summit” stunt. It’s typical Washington-think: Assemble interest groups and concoct special tax credits and handouts to the politically connected. What conceit. The political class think that economies revolve around them, that Washington makes things happen, that politicians are the most important players.

Today’s Washington Post suggests that the way to create jobs is public spending by the federal government:

Obama's options are limited, as the administration already has signaled that it is unwilling to make any investments that would add significantly to the nation's ballooning deficit.

At least the Administration talks about the private sector:

"We want to make sure it is not just the public sector doing this in a vacuum," said Valerie Jarrett, a senior adviser to Obama. "It's important we engage the private sector as well."  Administration officials, however, have excluded major trade associations from the summit... .

Some of those groups privately complain that their job creation ideas, including enactment of stalled free trade deals that they say would boost exports, are opposed by labor unions, which will be heavily represented at the forum.

The White House, which has clashed with some of the business groups over their opposition to health-care reform and other initiatives, says it has met repeatedly with those organizations and wants to hear fresh ideas.

Yes. I am sure those "fresh ideas" will come from the trade unions whom the White House just hasn't heard from much over the past year. At the summit they will also hear from environmental groups “Green for All” and “Coalition for the Green Bank.” I’m sure they’ll have great ideas for job creation.

Will at least some free-market economists get to speak?  No.  The White House will hear from Paul Krugman, Joe Stiglitz, and Jeffrey Sachs. "Fresh ideas" won’t be heard from these folks.

They and the political class can’t imagine a decentralized world where good things happen…without them.  But in the real world, that’s exactly how good things happen, and how jobs are created.

When government sets simple rules that everyone understands and then gets out of the way, free people create jobs.

Hong Kong demonstrates this.  Last century, Hong Kong was third world poor.  50 years ago, its citizens’ average income was under $700 (in today’s dollars) per year.  Today, it’s $43,800.  Hong Kong got rich because Hong Kong’s rulers,  stuffy British bureaucrats, practiced what I’ll call “benign neglect”: they enforced rule of law—kept  people from stealing from each other, or killing each other--- but then sat around and drank tea.  They left people alone, and free people, left alone, created prosperity.

America’s founders did the same thing.  The Constitution announced that American would be a country of limited government.  That provided the simple and understandable rules that allowed America to grow into the richest country ever.

Today’s political class thinks that they can improve on that, but they can’t.  Their micromanagement kills jobs.  When Washington threatens to drastically change the rules of the game with health care mandates, cap and trade, financial regulation, a second stimulus, and (of course) a "jobs bill", the private sector can't make investments with any confidence.  At least the Post quoted one businessman who said Washington should stop fiddling:

Peter Y. Solmssen, interim U.S. chief executive of Siemens Corp., a German conglomerate, said fixed policies would help businesses, large and small. "We both need a certain amount of certainty, which gives us the opportunity and capability to plan."