Sep 102011

I was recently asked: “What is the Freedom Party’s plan for creating jobs?” It’s a question commonly asked of all parties. What follows is one of my answers.

The truth of the matter is that government is an organization that does not create wealth. I’m not saying that’s a bad thing: the same is true of all law enforcement, including the military, the judiciary, etc.. My point is that none of those organizations performs the role of creating wealth. A government primarily stops people from doing things…preferably, only from doing bad things. Specifically, a government, when it is doing its job well, prevents anyone from taking your life, your liberty, or your property without your consent.

In truth, government is capable only of decreasing the number of jobs that people create: it is capable of job destruction. Government can destroy jobs in either of two ways: using its influence when it shouldn’t, or failing to use its influence when it should. In other words: governmental errors and omissions destroy jobs.

Government errors include (but are not necessarily limited to):

  • preventing some people from competing with others (e.g., monopolies, licences, professional guilds, closed-shop unions, limits on school enrolments)
  • taking from producers some of the wealth they create (e.g., taxes and fees)
  • forcing people to follow irrational rules concerning the production or delivery of goods/services (e.g., regulations based on the precautionary principle)

A purely hypothetical example: Imagine there is a shortage of electricity, such that there is a market for more power generation (that is not currently the case in Ontario, but it will be once our current facilities wear out). The government outlaws any form of power generation that uses coal as fuel, because coal is unpopular and unpopular things prevent elections and re-elections. The government taxes the population, and gives one company the tax revenues so that the company can afford to build trendy wind turbines that cannot produce electricity at a profit. The government also passes laws requiring people to buy wind-generated electricity at very high (higher than market) prices.

Had those taxes not been collected, and had the government not arranged for wind turbines to be built, and had the law not prohibited people from building, for example, a coal gasification plant (which has exceptionally clean exhaust), then – if the coal gasification plant could have sold inexpensive electricity at a profit the jobs that were created in building wind turbines would instead be jobs created in building and operating a coal gasification plant. In other words, the government did not, by paying for wind turbines, create jobs that would not otherwise have been created.

Had the government not erroneously backed wind and shunned competitors, people would have been able to spend less on electricity, and more on goods and services. With the government’s wind project, fewer goods and services will be purchased. Fewer purchases means there will be less demand for employees to make those goods and provide those services. There will be fewer jobs in the provision of those goods and services.

Imagine, also, that a school teacher gets on the radio and says children at her school arrive happy, and leave feeling sick, or tired, or blue. Not willing to think that maybe that has something to do with how the children are being taught, she assumes that the school’s wireless router is emitting radiation that is making the children ill (and it’s also making bored little Jimmy put gum in Sally’s hair). The public are frightened. No, it’s not that there is any science to prove that wireless routers turn happy healthy children into sickened, mischievous people. It’s that “we just don’t know that the radiation is not causing children to get sick and to misbehave”. In the absence of knowledge, the government passes workplace legislation requiring the turbine company to provide all of their workers with special $2,000 suits that prevent wifi radiation from hitting their bodies (there’s no demand for such suits in the market, so the government subsidizes a company to make them). There are 200 employees, so that is going to cost the turbine company a cool $400,000.00. The company will now have to raise its prices (such that energy consumers will have less left-over money to buy other goods/services), or pay its workers less (leaving those employees with less money to buy goods/services), or lay off some workers. All three options involve a decrease in employment.

The law gives unions a monopoly on the provision of labour. The turbine workers form a union and go on strike for higher wages. The turbine company is prohibited, by law, from hiring non-union employees who are willing to do the work for less. While on strike, the worker’s aren’t being paid (in effect, they lack a job). The strike, and the law against hiring non-union employees, in effect means temporarily job losses and a temporary bar against employment. The company agrees to pay more. It then either hikes electricity prices, or reduces its work force. See above for how that decreases other employment in the provision of other goods/services.

I could go on and on with the ramifications, but you get the picture. Government cannot create jobs. At best, its errors in the use of government force can merely have the effect of picking winners and losers. At worst, it can destroy jobs.

Government omissions include (but are not necessarily limited to):

  • failing to police violations of individual’s property rights (e.g., failing to prevent/punish trespass on land, copyright violations, theft, vandalism, etc).
  • failing to defend individuals’ liberty (e.g., failing to clear the way for vehicles or individuals who are trying to enter a workplace to work, when they are being occluded by protestors; imposing laws that punish people for engaging in the peaceful trade of goods or services even when such trade, goods, or services do not involve the violation of a person’s life, liberty, or property)

A purely hypothetical example: A band of thugs begin terrorizing a suburb. They burn down or vandalize houses. At gunpoint, they force people in the neighbourhood to pay “tolls” to drive out of their driveways and onto the road. Back at thug headquarters, they make knock-offs of popular blu-ray movie disks, which they then sell at 20% of the cost of the real thing. They do mandatory “pat-downs” on women who venture out of their houses. The police do nothing about any of this.

The houses in the neighbourhood become worthless: nobody can sell them, so there is no need for moving trucks, classified ads, real estate agents, etc.. The population is afraid to go to and from work: after a few late arrivals or no-shows, they lose their jobs.

The thugs become quite successful at their knock-off business. The movie company cannot make any money on its movie because nobody is buying its disks. The movie company goes out of business. The artists have no work. The *legitimate* disc manufacturer lays everyone off and eventually has to close. The truckers who took those disks to video stores are no longer needed. The video stores – unable to get people to buy their disks at 500% of the cost of that charged by the thugs – lay everyone off and likewise go out of business. All of those people – the artists, the disc manufacturers, the truckers, the video store employees – have no money with which to buy goods or services. Other goods and services providers sell less, make less…and hire less.

The Answer: Govern Correctly

The government can stop causing job losses by governing correctly. Specifically, it can lower taxes, it can eliminate monopolies and special advantages that it grants to some players and not to others. It can also do a better job of recognizing and protect property rights.

Some of these improvements to governance can be seen in Freedom Party of Ontario’s 2011 election platform. As examples:

  • The government can lower taxes (e.g., the health premium, the beer tax, the gasoline tax) so that people have more money to spend on jobs-creating goods and services;
  • The government can make price and free market competition – rather than fighting global warming with subsidies to business and Green Energy Act fiascos – top priority in the provision of clean electricity, so that people have more money to spend on jobs-creating goods and services;
  • The government can eliminate subsidies and monopolies (e.g., the LCBO/Beer Store monopoly) so that prices can come down, so that jobs in competing businesses can be created, and so that people can have more money to spend on jobs-creating goods and services;
  • The government can do a better job of defending every individual’s property rights (e.g., by refusing to allow international political events like the G20 from being held in places like downtown Toronto, where the inevitable result will be vandalism (i.e., the violation of property rights, which devalues property), the shutting down of businesses (which negatively impacts employment, and traffic congestion (which, similarly, has a negative impact on employment).

If you want to say that such improvements to governance “creates jobs”, that’s fine for electoral purposes, but it is technically incorrect, and an inversion of the truth. As difficult as it may be for people to understand or believe, the truth is that such improvements are simply ways for the government to stop killing jobs.