House of Cards: Truth Stranger Than Fiction

As a political economist and policy analyst I have to say I’ve found the NetFlix series, House of Cards very entertaining. Of course, it is over the top with political sleaze and corruption, something that probably syncs well with the public’s impression of Washington politics these days. (I find it interesting that the writers chose to designate the depraved, murderous POTUS Frank Underwood, played by Kevin Spacey, as a big “D” Democrat. With an annoyingly ambitious, self-righteous wife as co-president – sound familiar? Apparently, depravity with good intentions is somewhat acceptable these days in partisan circles, with Underwood often turning to the audience to explain the bare facts of Machiavellian realpolitik. How unfortunate for poor Niccolo, who was a true republican patriot, but recast by history as the apologist for a ruthless, depraved Prince.)

I have been most amused by Season 3, where Pres. Underwood proposes a massive jobs program paid for by slashing entitlements. This is just too juicy to let pass unnoticed. Let’s translate this “promise” of a full employment Nirvana: “I’m going to take your hard earned money we extorted through Social Security and Medicare taxes and give it away to companies that will employ workers for jobs that the productive private economy will not create because they lose money. Isn’t that grand? We’ll all feel better about humanity, even though we’ll be poorer for it (all except me, that is).”

The irony is that this absurd fiction is actually proposed too often as serious politics in the real Washington D.C. Quite a few other bloggers have explained the surrealness of a POTUS creating jobs from whole cloth just because he can command it from the White House. The numbers just don’t add up. But I was struck more by the widely accepted premise that asserts “jobs” as the end-all of what ails a society of free citizens. The Underwood character actually says, “People are dying from unemployment!” This cuts pretty close to home with Obama recently claiming that “chanting ‘Death to America’ does not create jobs.” Really? Is that what they’re beheading innocents over, a few good jobs?

People don’t die from unemployment, they die from poverty, deprivation, and disease. They die from oppression and violence. Unproductive jobs subsidized by governments do not alleviate poverty, they merely spread poverty around. The thing is, politicians focus on jobs because that is the only way they know how to spread the benefits of capitalism around the population. But we are moving into a new age that departs from the skilled labor-intensive manufacturing of the post-WWII years. Our financial policies have accelerated this trend away from labor by providing cheap capital to take advantage of cheaper labor overseas or machine/robot substitution. We are entering the information, artificial intelligence, and robotics age, and yet our politicians are still making false promises of a job and two chickens in every pot. Not going to happen. We need to think outside that box to discover how we are going to create and share wealth in the new economy. There are many alternative ways to participate in a market economy than solely as a labor input.

In the meantime, enjoy the entertainment. It’s hilarious. But don’t expect a job from America Works.

Jobs? (No, not Steve)

Gt_A_Real_Job

GetAJob

Jobs? Jobs. Jobs. And more Jobs. Where are the jobs? Always the wrong answer to the wrong question. Do we have to wait upon big employers or the government for deliverance? Why not foster entrepreneurship and broaden capital accumulation to promote wealth creation? Instead we try to make the planet turn in the opposite direction. Maybe the French are finally starting to get it (if they listen to this banker). No such luck on this side of the pond.

From the WSJ:

The Emperor Creates No Jobs

France’s top central banker speaks some blunt economic truths.

French and German ministers met Tuesday in Paris to discuss the euro zone’s stagnant economy and rising unemployment. We hope they took with them the recent annual reportfrom French central bank chief Christian Noyer, who offers as clear an assessment as you’re likely to find in Europe of what ails the euro zone.

“The underlying objective,” Mr. Noyer writes, “is growth. Not just a temporary spurt, sustained artificially by public spending, but strong and lasting growth that creates jobs and is based on the development of modern and competitive production capacity. This kind of growth cannot just be summoned up. It requires a profound change in public policy.”

Consider France’s inflexible labor market. Mr. Noyer says France “is one of the biggest spenders on employment policies in the developed world, but it still has one of the highest levels of unemployment.” The central banker argues that France’s various programs and incentives to boost employment are undermined by their sheer complexity.

He also asks a fundamental question: “Do these subsidies not serve to offset market rigidities that could in fact be addressed directly at a lower cost and with more effective results?” In almost any other country, the question would answer itself. But to argue for “flexibility” in France is to risk the barricades. Maybe it takes a central banker to say that the emperor creates no jobs.

German GDP, Mr. Noyer notes, “contracted almost twice as much as in France in 2009.” But Germany’s greater labor-market flexibility allowed for a much faster rebound. France lost 500,000 jobs in that period, while German unemployment “remained stable,” in part because businesses could cut working hours when growth slowed. [Note: this is called market flexibility in the face of inevitable change.]

With French President François Hollande pushing older workers into retirement to “make room” for the jobless young, we hope he pays attention to Mr. Noyer’s words on jobs: “Public policies are often overly concerned with preserving the jobs of the past, at times to the detriment of future job creation.” He adds: “Today’s jobs are not the same as those of yesterday and, likewise, those of tomorrow will be different from the jobs that exist today.” [And nobody in government or the private sector really knows what tomorrow will bring. I doubt it will be a Tesla in every garage.]

Mr. Noyer’s third truth concerns government spending, which is 55% of GDP. “For the past ten years,” he writes, “France has had one of the highest levels of public spending in the world. Over a certain threshold, which our country has probably crossed, any increase in public spending and debt has extremely negative effects on confidence” (our emphasis). For this reason, trying to stimulate growth through a spending binge is bound to be counterproductive. Businesses and households, anticipating higher future taxes to pay for the binge, will cut back, offsetting any boost from deficit spending.

Mr. Hollande has in recent months led the charge for new German-financed spending to bring Europe out of recession. Mr. Noyer has hit on a better cure: less government spending, more flexible labor markets, and more competitive private firms able to create the jobs of the future. If only the President would listen.