Henrey Blodget: Sorry, Folks, Rich People Actually Don't 'Create The Jobs'

[Winehole23]

As America struggles with high unemployment and record inequality, everyone is offering competing solutions to the problem.
In this war of words (and classes), one thing has been repeated so often that many people now regard it as fact.


"Rich people create the jobs."


Specifically, by starting and directing America's companies, entrepreneurs and rich investors create the jobs that sustain everyone else.
This statement is usually invoked to justify cutting taxes on entrepreneurs and investors. If only we reduce those taxes and regulations, the story goes, entrepreneurs and investors can be incented to build more companies and create more jobs.


This argument ignores the fact that taxes on entrepreneurs and investors are already historically low, even after this year's modest increases. And it ignores the assertions of many investors and entrepreneurs (like me) that they would work just as hard to build companies even if taxes were higher.


But, more importantly, this argument perpetuates a myth that some well-off Americans use to justify today's record inequality — the idea that rich people create the jobs.


http://static3.businessinsider.com/image/4e9a0fb86bb3f7754b000000-942-660/income%20inequality%201997-2008%20hi-res.png (http://static3.businessinsider.com/image/4e9a0fb86bb3f7754b000000-960/income%20inequality%201997-2008%20hi-res.png)Economic Policy Institute (http://www.stateofworkingamerica.org/pages/interactive#/?start=1917&end=2008)
In the last 15 years, almost all of the income gains have gone to the richest Americans.




Entrepreneurs and investors like me actually don't create the jobs -- not sustainable ones, anyway.

Yes, we can create jobs temporarily, by starting companies and funding losses for a while. And, yes, we are a necessary part of the economy's job-creation engine. But to suggest that we alone are responsible for the jobs that sustain the other 300 million Americans is the height of self-importance and delusion.
So, if rich people do not create the jobs, what does?


A healthy economic ecosystem — one in which most participants (especially the middle class) have plenty of money to spend.


Over the last couple of years, a rich investor and entrepreneur named Nick Hanauer (http://www.businessweek.com/news/2011-12-07/raise-taxes-on-rich-to-reward-true-job-creators-nick-hanauer.html) has annoyed all manner of other rich investors and entrepreneurs by explaining this in detail. Hanauer was the founder of online advertising company aQuantive, which Microsoft (http://www.businessinsider.com/blackboard/microsoft) bought for $6.4 billion.



What creates a company's jobs, Hanauer explains, is a healthy economic ecosystem surrounding the company, which starts with the company's customers.


The company's customers buy the company's products. This, in turn, channels money to the company and allows the the company to hire employees to produce, sell, and service those products. If the company's customers and potential customers go broke, the demand for the company's products will collapse. And the company's jobs will disappear, regardless of what the entrepreneurs or investors do.

Read more: http://www.businessinsider.com/rich-people-create-jobs-2013-11#ixzz2mGlvgc3B

[boutons_deux]

yep, cutting taxes on the 1% and corps / trickle-down is a scam by the VRWC buying Congress and well known for 35 years.

Ryan and House Repugs have passed his screw-the-47% and enrich-the-!%+corps budget 3 times. aka, more trickle down scamming.

[Capt Bringdown]

"We live in a kleptocracy. Deficit hysteria is just a convenient con to loot the rubes. The power of the monetary sovereign to create unlimited financial resources is reserved for the use by the rich and elites. The rest of us are forced into the constraints of the gold standard (although the US went off the gold standard 40 years ago) and austerity. We are told for us there is no money.

It is important to note that while the monetary sovereign can create infinite financial resources, it can not create actual resources. Rather it can use its fiscal and monetary powers to effect redistributions of actual resources, and these redistributions of actual resources can result in the creation of new actual resources, accomplish a social good, or as now, destroy both current and future resources."


http://www.youtube.com/watch?v=00iY4cpEQDY

[boutons_deux]

Heard on NPR that startups don't really create that many jobs because many entrepreneurs don't want to manage a 100 or 200 person company, want to stay at 20 or less.

[angrydude]

Yep, rich people don't, people with CAPITAL do.

[boutons_deux]

Yep, rich people don't, people with CAPITAL do.

ignorant fuck, capital is wealth, money beyond the cost of operations. iow, wealthy people have capital, and they invest in the funny money, corrupt financial casino, not in The Real Economy.

[SnakeBoy]

So Winehole do you agree with the article...that consumer spending is the real driver of economic growth?

[Wild Cobra]

I get tired of these threads that promote whining.

[Winehole23]

So Winehole do you agree with the article...that consumer spending is the real driver of economic growth?Appeals to intuition; complex systems would seem to need more than top down inputs. Honestly, it's not easy to know the answer to questions like this. Silly to think, I hoped the article might spark a conversation.

[Winehole23]

I get tired of these threads that promote whining.a cheap win: you've proven your point by whining.
.

[Winehole23]

Yep, rich people don't, people with CAPITAL do.the feedbacks caused by broader patterns of consumption and growth, including such intangibles as "animal spirits" are considerable; in this sense investment is just one facet of a golden egg that lays itself, so to speak. it might be a mistake to explain the outputs of highly complex systems by reference to linear causes.

[TeyshaBlue]

Consumer spending is an engine that creates need or cause, but not many jobs are created by the 64k/yr set.

[TeyshaBlue]

As one small example. Steve bought a small print shop. 2 employees. He knows marketing. He expands the clientel and generates demand for his business. He buys 2 new 4 color presses from an American company because supporting the domestic economy is important to him....just like David MacNeil (Google him if you must). He hires 5 more printers at 18.50/hr. to man them. Bam. Job creation

[Winehole23]

but without demand, no new jobs, no? companies don't expand when people aren't buying.

[Winehole23]

did the job create the demand, or is it closer to the truth to say the reverse?

[TeyshaBlue]

In t hat particular example, he created demand through marketing. But as I stated upstream, demand is an engine of cause for sure. Its a combo.

[Winehole23]

whether we're looking at the aggregate or the particular instance, as you point out, does matter. generalizing from the particular and using macro-level generalizations to explain particularities are both probably as persuasive as they are wrong -- which is to say, very persuasive and very wrong.

[TeyshaBlue]

I think if you are in a position of wealth, you have the ability to harness demand to create jobs. Its a partnership.

[Winehole23]

when statistics and scientific theories dovetail with what we think we already know, they get roped into pseudo-rationality and the agonism of competing glibnesses. it can be hard to resist.


by dint of railing at idiots, one risks becoming an idiot oneself

[TeyshaBlue]

Glibnesses. I gotta write that one down.:lol

[TeyshaBlue]

As a cut and paste to the OP...callback to Harry Reid's unicorns.
http://www.forbes.com/sites/paulroderickgregory/2011/12/25/sen-harry-reids-unicorns-fact-checking-a-whopper/

[Th'Pusher]

I think if you are in a position of wealth, you have the ability to harness demand to create jobs. Its a partnership.

You can generate demand without wealth. You can't generate wealth without demand, but wealth is required to fulfill demand.

[Winehole23]

the old-fashioned distinction between rentiers and producers would seem to be lost on Sen. Reid and new-fangled promoters of social resentment.

[angrydude]

There is no demand for something before it exists.

What was the demand for Amazon's air delivery system before yesterday? It was 0. today? A lot higher.

It can't exist without capital investment. That isn't the same thing as trading stocks.

And the FED puts that capital into the wrong sectors (like financial markets) through its manipulations.

[boutons_deux]

You can generate demand without wealth. You can't generate wealth without demand, but wealth is required to fulfill demand.

you can build little, sell a little, build a little more, repeat, repeat, repeat, generating profits to finance the next round of build. and each iteration of build should increase the skill to build it.

[Winehole23]

There is no demand for something before it exists.some needs are more unavoidable than others. clothing food and shelter come to mind.

[TeyshaBlue]

you can build little, sell a little, build a little more, repeat, repeat, repeat, generating profits to finance the next round of build. and each iteration of build should increase the skill to build it.

You wont do this without a war chest.

[Wild Cobra]

a cheap win: you've proven your point by whining.
.
A statement of fact or my opinion is not whining. This thread title is food for whiners.

[TeyshaBlue]

Actually, the thread title is food for thought.... but you have to be hungry to recognize this.

[Winehole23]

A statement of fact or my opinion is not whining. This thread title is food for whiners.self-fulfilling prophecy. you're the winner in this thread, hands down.

lol whining about absent whiners

[Winehole23]

There is no demand for something before it exists.

What was the demand for Amazon's air delivery system before yesterday? It was 0. today? A lot higher.

It can't exist without capital investment. That isn't the same thing as trading stocks.without capital investment there may be no job in the first place, but in the second there is no profit for the capitalist without labor and the value added to production thereby. can't have one without the other: interdependence.

[Winehole23]

neither labor nor capital, but both, presupposing the market.

[Winehole23]

there's no golden egg without all the parties, and all the contracts/exchanges obtaining between.

[Winehole23]

putting either capital or labor (or the consumer, for that matter) first reflects ideology, not reality.

[Rogue]

They don't create no jobs, they just divide the same weight of black bread into more pieces so that more people will be able to feed themselves

[Winehole23]

huh?

[boutons_deux]

You wont do this without a war chest.

lots of entrepreneurs start out very small, with capital too small to be called a war chest (Americans just love war and killing)

[TeyshaBlue]

Lots of them fail because they under-capitalized their start up.

[boutons_deux]

Lots of them fail because they under-capitalized their start up.

90% in 2 years fail, but not all because of lack of capital.

Just goes to prove that the mythical American Dream of "anybody can be a millionaire" is bullshit. Probably 90% of the people are best suited to be wage slaves, not entrepreneurs, and working for managers 90% of whom are shitty managers.

[TeyshaBlue]

lol war and killing.

[AntiChrist]

derrr, poor people do

[Winehole23]

there's the glibness I was talking about

[Th'Pusher]

DarrinS gets asshurt by any assertion that goes against his narrow worldview. He can't help but to respond, but he has no value to add.

[Winehole23]

lol boutons looking down his nose at the 99%

[boutons_deux]

lol boutons looking down his nose at the 99%

LOL WineHole looking up his asshole, looking for his head

[boutons_deux]

lol boutons looking down his nose at the 99%

There's been lots of "looking down their noses" studies of small business startup by the 99%, what makes some succeed, and what makes a huge majority of them fail within 2 years. GFY

[Winehole23]

Probably 90% of the people are best suited to be wage slaves, not entrepreneurs, and working for managers 90% of whom are shitty managers.whatever you say, Mr. Boss Man