didn’t you know that people start businesses out of a weird need to be secret social workers?
nobody ever starts a business b/c they want to get rich, just help the less fortunate.
“business” and business owner’’ or even “small business owner” is now equated with being a venerable Mother Theresa
I think John Steinbeck said it best:
“Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.” - John Steinbeck
Yep, and if the consumers don’t have money because the businesses are cash hoarding, then the economy doesn’t grow.
I don’t see why this is a mystery.
Most of American has had the same or less income for the past few years. Therefore, they cannot afford new things, and since inflation exists and credit is harder to come by, they can afford fewer things.
Good advertising can certainly make you want something that you previously didn’t think you wanted. But there’s a limit. When times are hard and money is short people are much less susceptible to that approach. If you’re out of a job or deep in debt, you’re not going to buy a new tablet computer no matter how much the TV ad makes you want it.
Here’s the thing–you can only create demand in consumers who have the ability to buy something. We’re in a recession where businesses are hoarding cash–if they instead started paying out more raises to the bottom rung workers, you’d see demand rise for whatever those guys buy. Those industries then could afford to expand or pay more, repeat cycle.
Because they have more work than their current employees can handle.
Jesus, it’s like the Republican Party has never run a small business. You hire people when your current employees are overworked. Or because you see an unmet demand somewhere. You don’t hire people just for the hell of it because you have extra money lying around.
I can’t tell if you are being rhetorical or serious anymore…
If you are being serious, the “rich people and corporations” stopped “creating jobs” because the demand for their products and services is not strong enough to encourage expansion (among, no doubt, numerous other reasons). You don’t increase production when you are sitting on large inventory and don’t have buyers. You don’t build more homes when you can’t sell the ones you’ve already built. You don’t open another store when you don’t have enough clients for the first one. Etc, etc.
Conversely, if your business is booming you don’t decide not to open that new store just because your taxes are 3% higher than they were last year. You grow your business as fast as the market will bear.
This is completely backwards. The first thing any big business does when they are deciding whether or not to start on a new product is do a market analysis. And the reason they do the market analysis is to try and figure out what the demand is for that new product. I find it extremely doubtful that Apple decided to launch iPhones without being fairly confident that there was enough of a demand for them to recover their investment costs. This is simply not the way MBAs think. I’ve proposed new product launches at a number of major companies, and if the market analysis didn’t come back extremely positive, the products went nowhere.
They can come up with a new product that will generate demand. But that is rather rare and not a good business model. Generally they react too demand. They hire when they can not keep up with demand with the present staff. They build new facilities when they can not keep up.
That is why putting more and more money at the top is a waste. The rich are sitting on almost trillion dollars. The financial pros are begging them to invest. But the stock market is a casino now. It does not reflect business of the future any more.
It’s correct that consumer demand is what creates jobs, but we tend to misidentify the type of consumer demand that truly fuels job creation here. The consumer demand we need is not for Joe Schmoe to go buy a TV, but for Schmoe Associates to come up with products and services that Acme, Inc. and Amalgamated Industries need to help fulfill the increased demand for their products and services worldwide, and for that demand to spawn a flurry of activity from subcontractors and niche providers to get in on the action and so on, and then for the financial industry to see a good thing happening and be encouraged to provide financing for expansion of these activities. When that action gets going, there will be jobs. Government can do some things to help facilitate this, but it’s not going to create the situation.
What you’ve described is business demand, not consumer demand. And the government can most certainly directly create both, either through direct contracts to businesses or to direct payments to consumer (through directly employing them or through transfer payments). Government can also incentivize both types of demand through tax modifications or regulatory changes, although this is an indirect type of creation rather than a direct one.
I didn’t mean to be cryptic. Demand can be driven by business in the case of popular products. But people have limited purchasing capacity, and when that diminishes demand centers around necessities. So business can increase demand to some degree, and create economic growth around that by creating jobs. But you may notice that many jobs created by demand of any kind end up in some other country. I don’t think demand is really that much of a factor, or even job creation when the jobs are being created somewhere else.
Companies like Apple will pursue potential demand, while most companies seek to take a share of an existing market. Going for potential demand is risky though (see Zune). But a market analysis doesn’t approach demand strictly from a point of measuring existing, known, demand for a product.
The reasoning is circular. We do not have jobs because there is no demand. We do not have demand because people do not have money, they do not have money because they have no jobs.
What is missing is a theory of where jobs come from. Jobs come from many different people trying to explore and find out what people want. Very few people a decade ago would have thought there was a huge unfulfilled want for cupcakes. Yet, a few greedy people thought there might be a demand for cupcakes and started bakeries. The demand for cupcakes was there and the greedy people created jobs to meet the demand for cupcakes. Other greedy people thought there would be demand for Chi Chi’s brand of mexican food. That idea turned out to be wrong. Society was saying more cupcakes and less Chi chi’s. Resources had to be moved from Chi Chi’s to cupcakes because that is what the public wants. During the period between finding out that the public wants less Chi Chi’s and more cupcakes, resources are idled. People are laid off and suffer for a time. There is no way around this because the only real way to find out what the public wants is trial and error. This is constantly happening.
Sometimes the trial and error process takes longer than other times. In the past 10 years there was a massive miscalculation about the demand for housing and mortgages. There has been a large run up in the price of gasoline. There has been a massive destabilization of the Euro. The Fed went from loose money to tight money. Every shock makes it harder for the greedy people to find what the public wants and to create jobs. Yet if the jobs are going to come back they are going to come from the job creators. There is no other possible place for them to come from. People still want things, greedy people still want money they just have to find each other.
So… We’re currently mired in a jobless recession because the consumer has changed their demands for products, and the “job creators” are currently idled while they try to figure out where the demand is via a process of trial and error?
I must admit, this theory has the benefit of being novel…
That’s exactly what it does. It doesn’t go out and measure demand for an “iphone” per-se, but it does go out and measure demand for phones which allow you to run applications and text and do other things that a smart phone does. I have never run across anybody at a big company (or an angel investor or a VC) who doesn’t expect this kind of analysis. It’s not a science, so there’s guesswork and extrapolation involved (as your Zune example shows), but if Apple didn’t think the demand existed, they wouldn’t have produced the iPhone.
Is this a structural employment argument? If so, what is your evidence that we are having structural issues right now?
Yes, so one suggestion would be to have something outside the system spur one or the other: either create jobs that don’t rely on demand, or create demand that doesn’t rely on jobs.
That’s one way jobs can be created, but is it really the most effective, or most likely to occur when the economy is already bad?
Another way to create jobs would be for the government to hire people to work on infrastructure projects that benefit lots of people. I’m not saying that’s necessarily the best course of action, but it’s a lot more direct than waiting for random investors to create new products that people might want, assuming they had the money to pay for it.
Soooo… we’re trying to figure out how to create jobs in order to push the unemployment rate from 9% =/- to 5% +/-, is that correct?
Exactly why should employers, in general, add to their current staff when they’ve learned through cutting and cutting, and trimming and trimming, that they can meet demands of the market/customers with fewer people and less salary?
Because business owners are all noble saints that want to do nothing else but create jobs but can’t because of their crushing tax burden. Haven’t you been paying attention?
They shouldn’t.
You’ll get more jobs as
Demand increases, which in fact it will, and
More businesses are created and grow to compete with existing businesses.
No, it’s the economy that’s circular. It’s all about people selling things to each other. So naturally any explanation of the economy tends to be full of loops.
Did I just say that economics is loopy?