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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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The great stabilizer was discovered during WWII – public employment and public expenditures.

The chart below looks at total government spending as a percent of the entire economy (GDP). You can see the spikes in spending during the two world wars, and the jump up starting during the Depression to provide the support needed to sustain a high overall level of economic growth and employment. There’s just no way around it: Modern capitalism needs robust government spending to fill the employment hole created by ever rising productivity and economic dislocations.

Free Enterprise and Freedom

Free enterprise creates the illusion of operating entirely on its own. It doesn’t seem to need tax dollars to function, at least not directly. It is disciplined by markets, not by political functionaries. Money appears to change hands without very much interference by the state. And it provides a vast array of choices. Overall, the ideological right has successfully argued that private enterprise is the antidote to totalitarianism – the way to prevent total control of our lives by state power.

There is truth to the argument that free-enterprise can promote openness and freedom. But it doesn’t guarantee it. Capitalism had little difficulty conforming to Nazi rule and it seems to thrive in China where factory workers are virtually imprisoned. It’s also the case that the freest markets are inherently unstable and often abusive to those at the bottom. That’s precisely why we’ve learned to combine free enterprise with regulations, public employment and public expenditures. When we pretended that free enterprise would police Wall Street on its own, we returned to the chaos of 1929. And if it weren’t for government spending and employment, we would be living through another monstrous depression.

So, we should value public sector employment not only because these workers provide valuable services that the private sector can’t or won’t provide. We also must recognize that government spending keeps the entire system afloat. Anyone who claims that free-enterprise can do it all is talking theology, not economics.

Because so many wear blinders, we’ll be facing battle after battle pitting private sector workers against public sector workers, deficit hawks against those who wish to preserve our safety net. Not only are these battles unproductive, they are self-destructive. The more public workers we lay off, the longer the Great Recession will last.

I’m still waiting for a politician with the guts to say that it’s time to offer every unemployed worker a publically funded job until the private sector recovers from the Wall Street crash. (And while we’re at it, let’s pay for those government jobs with a financial transaction tax on Wall Street.)

Wouldn’t it be uplifting to see our people back at work, teaching our children, repairing our roads and bridges, building mass transit, weatherizing our homes, and caring for our sick and disabled?  

Les Leopold is the executive director of the Labor Institute in New York, and author of How to Make a Million Dollars an Hour: Why Hedge Funds Get Away with Siphoning Off America's Wealth (J. Wiley and Sons, 2013).


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