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Barack Obama and Mitt Romney Both Believe Crazy Idea That Government Doesn't Create Jobs

Citizens of a modern democracy demand the work the public sector performs.

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But Wait, Isn’t Our Government Much Too Big?

Not on this planet. We are not overtaxed, nor is our government too large when compared with other developed nations. That most of us think we suffer from big government shows the power of ideology over reality.

 

2011

Taxes as $ of GDP

Gov’t Spending as % of GDP

Denmark

49.0%

51.8%

France

44.6

52.8

Germany

40.6

43.7

UK

38.9

47.3

Canada

32.2

39.7

Japan

28.3

37.1

US

26.9

38.9

Let’s focus on Germany, an economic powerhouse with low unemployment. Its government expenditures are more than 40 percent of its entire economic output and its relative tax burden is nearly twice as high as ours. Germany uses that money to invest heavily in education, training and physical infrastructure. It even provides generous stipends to cultural workers. (Big Bird, are you listening?) When unemployment increases, the government subsidizes employers to keep workers on the job. In short, Germany understands fully that government and private employment are codependent.

The Enduring Myth of Rugged Individualism

American ideologues – the Paul Ryan-Ayn Rand fetishists in particular – really believe that the economy is all about them. They credit their good fortune to being independent entrepreneurs who are dependent on no one for their prosperity. It tarnishes their self-image to admit that public servants and public support had anything at all to do with their success. That’s why Romney used that “47 percent” line on his wealthy donors. He knew they wanted to hear about the alleged divide between themselves – the “wealth creators” --- and the “dependent” government-supported no-accounts who lacked “self-respect.” They, the wealthy, are the modern captains of industry (or at least croupiers in our financial casinos). They are the drivers of the economy, the independent elites who earn and deserve all the riches they can command. The rest of us are government lackeys or worse.

Here’s the Dirty Little Secret: Capitalism Needs “Big Government”

Before the Great Depression, public sector employment was severely limited. Our military was small (except for a short time during World War I) and government provided virtually no social services. Public education was frail, and higher education was primarily for the well-to-do. In effect, we lived by social Darwinist principles – the strong shall rule. Not only were poverty and disease widespread, but the economy suffered periodic “panics” – deep recessions that included notorious bank runs and multiple corporate failures. As you can see from the left portion of the chart below, the number of government employees per million Americans from 1900 to 1930 was modest.

Then the rugged capitalism of the previous 200 years imploded into the Great Depression. This time the “panic” was so widespread and so deep that the entire notion of free enterprise was up for grabs. The new Soviet Union with its planned economy seemed to glide through the world depression unscathed. Western capitalist nations faced mounting internal threats, especially in Europe where Communists and Fascists battled for supremacy. The democracies that endured realized that free enterprise could only survive by expanding government's role in the economy. From that point on, government employment (both civilian and military) rose significantly, and was credited not only with pulling the world out of the Great Depression, but also for maintaining high levels of employment ever since.

Ever Rising Capitalist Productivity Creates More Job Dislocation

The core problem of capitalism stems directly from its enormous productivity: it creates and deploys technology again and again to replace human labor power. Like no other economic system ever created, free enterprise produces more and more products and services with fewer hours of labor. This incessant march to higher and higher levels of productivity is why we have such a cornucopia of goods and services. But, this enormous productive capacity also creates an inherent employment problem. How are we to make up for all the jobs that are continually displaced? How do we cope with vibrant, free enterprise “creative destruction” that demolishes corporations and entire industries?

 
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