Thursday, May 17, 2012

Billionaire Gives TED Talk Saying Rich Don't Create Jobs, TED Refuses to Post

In the US, the propaganda system is pretty sophisticated. You're not told what to say. It just happens that when you say things that undermine the interests of wealth, those things tend to not get a forum.

Why do we hear a lot about the sins of Fidel Castro, Saddam Hussein, and Hugo Chavez but we hear just about nothing of the atrocities perpetuated by Uribe, Karimov, and Suharto (Colombia, Uzbekistan, and Indonesia for those who don't know)? The pattern is so obvious I think it takes some real fortitude to fail to see it. The former engage in policies that tend to prevent the accumulation of wealth for US investors and the later don't. So the atrocities of the former matter and the atrocities of the later don't.

Billionaire venture capitalist Nick Hanauer has given a talk as part of the TED circuit explaining why really the rich don't create jobs. TED offers some good stuff, but they are a conference of rich people and apparently they don't like this message. So they've refused to publish it, claiming it is too controversial.

You can't watch it, but you can read it below.  It is worth the read.
It is astounding how significantly one idea can shape a society and its policies. Consider this one.

If taxes on the rich go up, job creation will go down.

This idea is an article of faith for republicans and seldom challenged by democrats and has shaped much of today's economic landscape.

But sometimes the ideas that we know to be true are dead wrong. For thousands of years people were sure that earth was at the center of the universe. It's not, and an astronomer who still believed that it was, would do some lousy astronomy.

In the same way, a policy maker who believed that the rich and businesses are "job creators" and therefore should not be taxed, would make equally bad policy.

I have started or helped start, dozens of businesses and initially hired lots of people. But if no one could have afforded to buy what we had to sell, my businesses would all have failed and all those jobs would have evaporated.

That's why I can say with confidence that rich people don't create jobs, nor do businesses, large or small. What does lead to more employment is a "circle of life" like feedback loop between customers and businesses. And only consumers can set in motion this virtuous cycle of increasing demand and hiring. In this sense, an ordinary middle-class consumer is far more of a job creator than a capitalist like me.

So when businesspeople take credit for creating jobs, it's a little like squirrels taking credit for creating evolution. In fact, it's the other way around.

Anyone who's ever run a business knows that hiring more people is a capitalists course of last resort, something we do only when increasing customer demand requires it. In this sense, calling ourselves job creators isn't just inaccurate, it's disingenuous.

That's why our current policies are so upside down. When you have a tax system in which most of the exemptions and the lowest rates benefit the richest, all in the name of job creation, all that happens is that the rich get richer.

Since 1980 the share of income for the richest Americans has more than tripled while effective tax rates have declined by close to 50%.

If it were true that lower tax rates and more wealth for the wealthy would lead to more job creation, then today we would be drowning in jobs. And yet unemployment and under-employment is at record highs.

Another reason this idea is so wrong-headed is that there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the median American, but we don't buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, we go out to eat with friends and family only occasionally.

I can't buy enough of anything to make up for the fact that millions of unemployed and underemployed Americans can't buy any new clothes or cars or enjoy any meals out. Or to make up for the decreasing consumption of the vast majority of American families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.

Here's an incredible fact. If the typical American family still got today the same share of income they earned in 1980, they would earn about 25% more and have an astounding $13,000 more a year. Where would the economy be if that were the case?

Significant privileges have come to capitalists like me for being perceived as "job creators" at the center of the economic universe, and the language and metaphors we use to defend the fairness of the current social and economic arrangements is telling. For instance, it is a small step from "job creator" to "The Creator". We did not accidentally choose this language. It is only honest to admit that calling oneself a "job creator" is both an assertion about how economics works and the a claim on status and privileges.

The extraordinary differential between a 15% tax rate on capital gains, dividends, and carried interest for capitalists, and the 35% top marginal rate on work for ordinary Americans is a privilege that is hard to justify without just a touch of deification

We've had it backward for the last 30 years. Rich businesspeople like me don't create jobs. Rather they are a consequence of an eco-systemic feedback loop animated by middle-class consumers, and when they thrive, businesses grow and hire, and owners profit. That's why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.

So here's an idea worth spreading.

In a capitalist economy, the true job creators are consumers, the middle class. And taxing the rich to make investments that grow the middle class, is the single smartest thing we can do for the middle class, the poor and the rich.

Thank You.
Update: The video is now available on Youtube.


Paul said...

In a capitalist economy, the true job creators are consumers, the middle class. And taxing the rich to make investments that grow the middle class, is the single smartest thing we can do for the middle class, the poor and the rich.

From this layman's perspective this should be uncontroversial. Seems to me that this would not be the case if the aggregate demand far outstripped supply and there wasn't enough capital for new investments to increase supply.

Jon said...

But the government can create capital in that case. If the government is independent. Take the case of S Korea. There was demand for nice cars, but no supply that Koreans had access to because their government wouldn't allow the importation of cars. The demand created the supply. The government stepped in to provide the access to capital. The result is that today S Korea is a world leader in automotive.

Paul said...

Jon -

W/ regards to the following -

The demand created the supply.

I generally tend to think this is true. Or rather more specifically, I think resolving an issue due to a lack of supply is easier than resolving an issue due to a lack of demand.

I don't have any disagreement with what you clarify. Perhaps I did not articulate well enough in my (brief) original post.

Chad said...

Sad to think that you really believe that gov't is the answer.

Hey Jon - why not just mandate that no job can use power equipment. All ditches must be dug with shovels and picks - you just created a huge labor demand.

Why don't you just mandate that no one is allowed to repair their automobiles or you can't cut your grass maybe you should just work on mandating that if your not a professional house cleaner then you can't clean you house.

To address that idiot speaker for a second. I may not know a billionaire (possibly do), but I know quite a few millionares and there is little doubt they create jobs. They create jobs without trying to create jobs - ignorance.

Jon said...

Is the fact that you know millionaires supposed to somehow prove that millionaires create jobs?

Another question. If waste is bad for an economy how do you explain the fact that WWII ended the Great Depression? In my view on Capitalism there are times when massive waste and inefficiency is just what the doctor ordered in terms of returning an economy to a healthy state. Apparently the Japanese economy has improved dramatically because of the tsunami. It has created demand for repairs, which has improved their economic performance in a major way.

I don't like to see waste and inefficiency, but I recognize that on Capitalism this is sometimes required. That's one of the reasons I don't like Capitalism. There are other economic arrangements that don't incentivize waste.

Chad said...

Just by me knowing millionares proves nothing, but the ones I personally know have been investing, creating businesses and jobs for as long as I have known them.

It is eye opening when I get the opportunity to speak to them and to hear their opinions about this narritive. There is always two major things I take away from those conversatons. First - they are winners in life, in business and in their communities - they speak about personal responsibility and the fact that they do more for their communities than government ever can. The second point is that they are always 10 steps ahead of government and the Progressive movement. Everytime they try and move the target it just creates new opportunities or new avenues to succeed that much more. Every regulation made closes the door on new competitors. The gov't by way of regulation has helped to create the wealth gap and continues to do so.

That does not even account for the people they employ to make their lives easier and that certainly does not take in account the seemingly endless number of charity and good deed events that they are involved with that touch their hearts.

Jon said...

How does any of that change what is said in this TED talk? The last thing a business wants to do is hire people. It's a last resort and is only something that is done when demand compels them.

And demand comes from where? There aren't enough rich people to sustain demand at the required level. Like Hanauer says, he's going to buy just a few shirts and have no more than a few cars regardless. He gets 1000 x the income, but he doesn't consume 1000 times as much. You need other poorer people with purchasing power to retain the kind of demand necessary to generate the jobs.

Nothing you've said changes that.

And of course nothing you've said is an answer to my question about WWII. Are you able to answer my question? Or is it something you just can't make any sense of from your right wing perspective?

Chad said...

About WWII - I don't hold an economics degree and don't have the time to study the econmic environment of WWII.

From the tiny bit I do know, I believe that the post war boom was a result of free market reforms and deregulation. If I am not mistaken Congress rejected numerous Keynesian initiatives, dropped many price controls, and cut taxes sharply which created an extremely low unemployment rate.

Jon said...

I'm not talking about the post war boom. I'm talking about the war boom. Price controls. Rationing. This was as close to a centrally planned economy as our country ever got. And we also got the most rapid economic growth in our history. A complete reversal of our economic problems.

So with regards to your claim that we should take away the heavy equipment and use shovels and picks only, what do you make of all the effort expended for the war? That's worse than using picks and shovels. At least then you're building ditches, which are useful. What your doing is building bombs that just get blown up. Ships that sink. Tanks that are destroyed. That's some real waste there. And yet it turned our economy around. What does that tell you?

What it tells me is that yes, on capitalism waste is good for the economy. That's the very nature of capitalism. That applies to your claim about picks and shovels. It CAN BE good for the economy if conditions are right, which they are today (underutilized labor resources, concentrated wealth, as with WWII).

Chad said...

In a specific situation I could be in the MLB Hall of Fame as well. Your taking one moment in time - a specific moment/time and attempting to convince me/others that the steps taken right then would work on a larger scale in 2012. That dog don't hunt and sure if you controlled everything it may work for a time, but like Greece, like Italy and like France - it all comes a crashing down! Those people thought they were retiring at 60 - students were getting free education and health care, but when this mess runs it's course they will not start getting benefits until they are 70+ if at all, they will be paying full boat for eduction and health care.

That is exactly what The Progressive movement does. It is like a cancer that if not treated will spread and will eventually kill the body it needs to live.

Jon said...

Chad, the failed economies in Europe that you mentioned failed by not learning the WWII lesson and pursuing the same strategy you recommend. Throw in Ireland as well, a poster child for right wing economic theory. Cutting spending to balance budgets and restore investor confidence. It's all failed spectacularly.

Seriously, where has right wing economic theory ever been applied with any success? Every time it's tried it blows up. It consistently represents the worst performance in the world.