Freeman

ARTICLE

A Real Con Job

JULY 01, 1976 by ROBERT G. ANDERSON

“Consumption is the sole end and purpose of all production.” Adam Smith pretty well said it all with that statement two hundred years ago in The Wealth of Nations.

Unfortunately, this basic economic truth has been all but lost in today’s world. The public press and political rhetoric today focus attention on creating employment. The plight of the unemployed and the presumed inability to obtain employment have become the overwhelming concerns of our society.

This concentration upon job creation has tended to conceal the ultimate end toward which a job is directed. Full employment has become an end in itself and society is assumed to have attained its final goal if all are employed. The prevailing economic wisdom holds that the purpose of production is to create jobs; but, in reality, we produce in order to enjoy the fruits of production.

While it may indeed be true that work can build character and is valuable for that purpose, this does not negate the economic necessity that the job be productive. In a free society, as Adam Smith observed, we produce in order that we may consume. Job creation, which generates greater production grows out of the desire for greater consumption.

The pursuit of full employment as a political goal is in total conflict with the ideal of a society of free individuals. The political goal of “job creation” not only involves the use of force, but will assure a waste of scarce resources by massive misallocation within the labor market.

In a free society the desire to consume more will generate productive work. The creation of “jobs” by political action, however, will hamper productive effort by siphoning scarce resources away from the market into the public sector.

In an unhampered market society all individuals seeking productive jobs can find employment. With unrestricted competition among employers, and a freely adjusting wage rate, there would be employment for all who wished it. Each individual, guided by his own self-interest, would maximize his productive work in an effort to achieve his goal of greater consumption. The jobs so created are the basic means by which individuals acting voluntarily and peacefully can attain a higher level of consumption.

Tragically, our society today does not enjoy the benefits of such freedom in the economic sector. Government intervention over many years has generated massive distortion and permanent unemployment within large sectors of the labor market. Union cartels, protected by various laws, effectively exclude competing labor; minimum wage laws bar low-productivity workers; welfare legislation encourages people not to work; and government-generated inflation in the pursuit of “full employment” creates inevitable economic recessions. These forces, and many others, have established a continuing corps of unemployed, or worse yet, the so-called “unemployables.”

Rather than examine the political causes of unemployment, and the resulting loss of consumption generated by such unemployment, all political attention is focused on unemployment itself. Again, it is a case of government attacking the adverse effects of its earlier actions rather than ceasing the interferences that have caused the problem. Ironically, the remedy continues to center on the effect rather than the cause of government-created unemployment. The problem thus is being aggravated by such attempts to solve it.

The political answer seems so simple: The way to eliminate unemployment is to make the state “an employer of last resort.” After all, socialist societies have no unemployment problem. The socialist system assures every individual a “job.” Why not borrow another of the socialist “virtues” in order to “solve” one of our major economic dilemmas?

But that is to lose sight of the problem: We do not seek jobs for their own sake; the end we seek is improved consumption. Unless work will generate greater production of those goods individuals wish to consume, it is wasted effort and should be avoided. Work is a great consumer of resources, (we wear out) and employment is beneficial only if it yields a return greater than the value of the resources expended.

The failure to understand this economic truth has led to such policies as “featherbedding,” shortened hours of work, restrictive work rules, attacks on automation, and the like. The false belief that there exists only a given quantity of work, and that more jobs can be created only by dividing this work among more people, has led to the adoption of such programs.

In reality, there can never be a shortage of work. As long as individuals possess wants, the demand for their fulfillment will always be present. The employment of labor is a never-ending race to satisfy more and more of man’s wants. The creation of jobs is a natural consequence of the insatiable human desire to attain an ever higher level of material well being — and there is no other way that can be achieved.

This improvement in well-being depends upon more productive work. The objective of every job is “to get more goods out of the woods in a shorter period of time!” This is the only way man has ever been able to improve his material circumstances. In a free market society it is the combining of labor with capital (better tools) in a social division of labor that has brought about this result. Labor, employing an ever-increasing quantity of capital, generates a higher and higher productivity, with its ultimate benefit in a higher level of consumption for the worker.

Abandonment of these economic facts of life in favor of job creation by the state can lead only to a decline in prosperity. Job creation demands economic resources to sustain such employment. As long as the productivity on the job exceeds the resources consumed in employment, a growth in prosperity is assured. A freely functioning market, guided by consumer-directed signals of profit and loss will employ productive resources most efficiently. Without such market direction, the return from labor devoted to a job can never be known.

Government, as the “employer of last resort,” has no resources of its own to create jobs. All too often overlooked is the fact that “government funds” are a figment of political rhetoric. Governments do not create the resources they consume, but redistribute instead the resources of others. Before governments can provide resources to anyone, they must first withdraw such resources from private ownership and control — tax them away from someone.

The notion that government can be “an employer of last resort” denies this truth by implying that government possesses in itself the resources for job creation. What in fact must occur, if government is to be an employer, is an even greater growth in the political redistributive process in our society. More victims must be plundered of their resources in order to support an ever-growing throng of government wards.

The resources surrendered by productive individuals to sustain the government’s role as “an employer of last resort” impoverishes even further the productive citizen. These lost resources, which would have been privately channeled back into the market through increased consumption or productive savings, are instead transferred to the new corps of government beneficiaries.

The political transfer of these resources does indeed create jobs in the government sector. What it does not create is an improvement in the economic well-being of the citizenry. In fact, it creates precisely the opposite effect.

The ever-increasing burden of government on the private productive sector discourages future productive effort. The government seizure of private resources prevents the employment of these same resources in a job-creating market role. The further impoverishment of productive individuals retards even further the market’s ability to increase productive employment. Future productivity and well-being suffer from the lost resources that are redistributed by government to its new job corps.

If the new government job corps could generate greater productivity than is consumed in resources, there would be no reason for its creation. The market much earlier would have created such jobs, since it would have ‘been in the self-interest of all to have done so. To use government as “an employer of last resort” is an open admission that job productivity must be less than the resources consumed in such employment.

When the goal of government is to become the “employer of last resort,” when consumption is no longer the sole end of production, when the job becomes an end in itself rather than a means to an end, then the prosperity of the society will surely be adversely affected. What we get will not be greater abundance through the creation of productive real jobs —but instead a real con job!

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July 1976

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Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
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