When businesspeople take credit for creating jobs, it is like squirrels taking credit for creating evolution

In Bloomburg, venture capitalist and 1%er Nick Hanauer argues that our popular discourse misunderstands where jobs come from. A long excerpt:

As an entrepreneur and venture capitalist, I’ve started or helped get off the ground dozens of companies in industries including manufacturing, retail, medical services, the Internet and software. […] Even so, I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate. […]

When businesspeople take credit for creating jobs, it is like squirrels taking credit for creating evolution. In fact, it’s the other way around.

It is unquestionably true that without entrepreneurs and investors, you can’t have a dynamic and growing capitalist economy. But it’s equally true that without consumers, you can’t have entrepreneurs and investors. And the more we have happy customers with lots of disposable income, the better our businesses will do.

That’s why our current policies are so upside down. When the American middle class defends a tax system in which the lion’s share of benefits accrues to the richest, all in the name of job creation, all that happens is that the rich get richer.

And that’s what has been happening in the U.S. for the last 30 years.

Since 1980, the share of the nation’s income for fat cats like me in the top 0.1 percent has increased a shocking 400 percent, while the share for the bottom 50 percent of Americans has declined 33 percent. At the same time, effective tax rates on the superwealthy fell to 16.6 percent in 2007, from 42 percent at the peak of U.S. productivity in the early 1960s, and about 30 percent during the expansion of the 1990s. In my case, that means that this year, I paid an 11 percent rate on an eight-figure income.

One reason this policy 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 average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. […]

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 enjoy any meals out. Or to make up for the decreasing consumption of the tens of millions of middle-class families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.

If the average American family still got the same share of income they earned in 1980, they would have an astounding $13,000 more in their pockets a year. It’s worth pausing to consider what our economy would be like today if middle-class consumers had that additional income to spend.

Now I just need to figure out how to turn this into a cartoon.

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10 Responses to When businesspeople take credit for creating jobs, it is like squirrels taking credit for creating evolution

  1. 1
    Kevin Moore says:

    Whatever cartoon you come up with, the squirrels should be a prominent feature.

  2. 2
    sly says:

    It is not the employer who pays the wages. Employers only handle the money. It is the customer who pays the wages.

    That’s Henry Ford on the subject.

  3. 3
    Simple Truth says:

    If the average American family still got the same share of income they earned in 1980, they would have an astounding $13,000 more in their pockets a year.

    If this is accurate, it’s staggering. There’s a lot of things that I question about it (does it take inflation into account? Is this just household income without accounting for the increase in double income homes?), but I mean, wow. That’s a big difference.

  4. 4
    Jake Squid says:

    Myeh. Hanauer’s just some sort of commie socialist who wants to control our lives. If he wasn’t, he wouldn’t be saying stuff like that.

    /sarcasm tag

  5. 5
    Charles S says:

    Simple Truth,

    Here is the source for the claim:
    It mostly happened after 1997:

    The data is based on household incomes and is inflation adjusted (or rather, since it is simply applying the income ratios from 1979 to the current pool of household income, inflation is already factored out). Dual income households probably aren’t relevant, since the overwhelming driver is that top 1% households now take up a much larger percentage of all income.

  6. 6
    Korolev says:

    Very sensible – a poor population is a population that does not consume, and a population that does not consume causes businesses to fail. I think a lot of business people, at the back of their mind, understand that by laying off people and refusing to raise wages when they obviously could, they are going to eventually shoot themselves in the foot.

    The Australian government, in 2008, took out a relatively big loan and gave everyone a couple thousand dollars in “stimulus” money. And it worked. Our economy is doing quite well, our unemployment is quite low and although the Global Financial Crisis, as our government took to calling it, did hurt our economy, it didn’t hurt it for very long. We also regulated banks more and increased our minimum wage.

    A lot of US businesses only think in the short term – they only think in terms of “how do we raise profits NEXT YEAR”, not “how do we keep profits high for 10 years”. Their thoughts are so focused on “the next quarter” that they become myopically focused on only the next quarter, to the detriment of the future.

    Off-shoring for example: Sending jobs away to make profits – and that works great in the short term. But in the long term, fewer jobs at home means fewer customers at home. You might make super-profit in the short term, but in the long term, your company will suffer because there won’t be enough customers, and the off-shore employees can’t buy your stuff because you don’t pay them enough.

  7. 7
    Nancy Lebovitz says:

    Shouldn’t money sent off-shore come back eventually, as the other countries become more prosperous?

  8. 8
    Simple Truth says:

    @Charles S. – thank you for finding that. I will definitely read that when I’m done with my finals.

  9. 9
    Bear says:

    Nancy, not necessarily. As the other countries become more prosperous, they very likely build their own markets for the same goods and services–thus making sure that the prosperity stays internal rather than returning to the US.

  10. 10
    Nancy Lebovitz says:

    I think Jane Jacobs is right that as places become more prosperous, they don’t aim for self-sufficiency. Instead, they find more things to buy that they don’t make at home.