There was an article a week back by Henry Blodget on a rich American destroying the Fiction that Rich people create the Jobs http://finance.yahoo.com/blogs/daily-ticker/finally-rich-american-destroys-fiction-rich-people-create-152949393.html The Rich american he quotes is Nick Hanauer. "Suggesting that "rich entrepreneurs and investors" create the jobs,
therefore, Hanauer observes, is like suggesting that squirrels create
evolution." The whole article is based on a wrong premise. Job creation has nothing to do with the rich, middle class or the poor. Job creation happens when there is more exchange of goods and services between people (read economic growth) and when this higher activity of exchange needs more people to support the exchange. The whole eco system surrounding an economy matters - it is not just entrepreneurs or the customers or the govt that is solely responsible for job creation. Everything must work together to keep the economic machine (of goods and services exchange) running smoothly.
Entrepreneurs play their part by thinking up new products or services that people may be interested in exchanging and those new products or services are necessary for the economy to grow. The people involved in the exchange must have productive skills to make the exchange happen. We all earn a certain amount of money based on the skills we possess and that money is used to exchange for products or services with other people. If I need to afford to buy an iPhone, I must have provided sufficient skilled work in the economy to be able to afford the iPhone. Ultimately the economic growth and job creating power of a nation comes down to the productivity of the people in the economy. Productivity is measured in the amount of resources needed to create a certain product or service. The Productivity increases as we learn to use lower amount of resources to create the same product or service - this raises the standard of living of a nation. The reason I can't sell an iPhone to an average Bangladeshi is because that average person in Bangladesh is not productive enough to sell a service or product in exchange for an iPhone.
We need to tax the Rich more, not because of their inability/ability to create jobs but because the lower taxes is creating a govt deficit and it may also be creating certain structural inequalities in the society that is impeding the exchange of goods and services. We break up monopolies because of this same reason - too much power in the market that impedes product innovation by others. and we are seeing some evidence of the power of the Rich (or powerful companies aka Big Banks) through their extreme ability to lobby the govt to get laws passed in their favor. Tax policies are not just for funding normal govt running but also one of the tools in decreasing social inequality. This doesn't mean a Robinhood approach - Rob the rich and distribute it to the poor - that will only lead to decline in economic growth. This means providing people with some limited help in enhancing their skills that are needed in the market for exchange of goods and services. The educational sector plays a big part in helping the population enhance its economic skills. Technological advances have made global outsourcing of work much more easier and so we have to compete on a global level for using our economic skills. Good infrastructure and good governance keeps the economic machine well oiled.
Entrepreneurs play their part by thinking up new products or services that people may be interested in exchanging and those new products or services are necessary for the economy to grow. The people involved in the exchange must have productive skills to make the exchange happen. We all earn a certain amount of money based on the skills we possess and that money is used to exchange for products or services with other people. If I need to afford to buy an iPhone, I must have provided sufficient skilled work in the economy to be able to afford the iPhone. Ultimately the economic growth and job creating power of a nation comes down to the productivity of the people in the economy. Productivity is measured in the amount of resources needed to create a certain product or service. The Productivity increases as we learn to use lower amount of resources to create the same product or service - this raises the standard of living of a nation. The reason I can't sell an iPhone to an average Bangladeshi is because that average person in Bangladesh is not productive enough to sell a service or product in exchange for an iPhone.
We need to tax the Rich more, not because of their inability/ability to create jobs but because the lower taxes is creating a govt deficit and it may also be creating certain structural inequalities in the society that is impeding the exchange of goods and services. We break up monopolies because of this same reason - too much power in the market that impedes product innovation by others. and we are seeing some evidence of the power of the Rich (or powerful companies aka Big Banks) through their extreme ability to lobby the govt to get laws passed in their favor. Tax policies are not just for funding normal govt running but also one of the tools in decreasing social inequality. This doesn't mean a Robinhood approach - Rob the rich and distribute it to the poor - that will only lead to decline in economic growth. This means providing people with some limited help in enhancing their skills that are needed in the market for exchange of goods and services. The educational sector plays a big part in helping the population enhance its economic skills. Technological advances have made global outsourcing of work much more easier and so we have to compete on a global level for using our economic skills. Good infrastructure and good governance keeps the economic machine well oiled.
No comments:
Post a Comment