Quote:
Originally Posted by glatt
Stormie is correct. The myth that the Republicans are pushing this election is that small businesses are the job creators. That's not true. Businesses are reactionary. They get busy and they hire more help. They get busy when the consumers start buying their product or service more. Consumers buy more when they have more money to spend, (or feel like they have more money to spend and are willing to charge it.)
Sure, businesses always want to grow and expand. But if they are in a mature field, that growth is always through taking market share from other companies. That does not create jobs. If company A has 20 employees and competitor B has 20 employees, and they both are selling widgets, then for company A to grow and expand to 30 employees, competitor B will have to lose customers and lay off 10 employees. Net job gain zero. In fact, to take market share, often a company does it through being more efficient and offering a product at a lower price. "More efficient" usually means fewer employees. So you actually end up with fewer jobs total.
The only way to get the entire pie to be larger is to get new customers who weren't buying widgets before. The only way to do that is to invent a new widget (like an iPhone) or make the widget so cheaply that not only do you take market share from competitors, you get customers who were sitting on the sidelines previously.
The most effective way to stimulate the economy is to get consumers to start spending.
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Agreed. Both supply (companies investing) and demand (customers spending) are important but I would argue that the supply side is not as widely recognized today so needs to be emphasized more.
I do want to make the point that in response to an increase in demand, companies can increase supply in two ways: hiring more workers or making their current workers more efficient. Historically, technology moved slow enough that increasing productivity wasn't an option but I think we are approaching the threshold where it may be cheaper (in general) for companies to increase supply by simply increasing productivity, not the amount of workers. I think this, along with technology allowing lower skilled workers to replace higher skilled workers (think manager positions), explains much of our current economic "recovery".
Honestly, my generation will have to deal with a lot of problems (national debt, rising inequality, global competition, climate change), but automation and increases in productivity may be the hardest hitting since nothing else can be solved without a strong economy. Also, it seems economists have their heads in the ground and scream "neo-luddite" every time someone suggest the problem.