You really have to laugh

I just read an article from INC. magazine that breathlessly reports that the drivers of job growth in the US economy are no longer startup companies less than a year old, but existing growth companies. The article then talks of how the government can tailor its policies to help those companies. the sad thing is that the author is serious. It just makes me laugh.

Here is a bit of truth with regard to jobs. Every business in the country can be the source of new employment. The businesses that create jobs are those that are growing or those that expect to grow. If business is declining, management does not increase costs with new positions. Declining businesses will replace those who leave their jobs (usually) but new positions will be few and far between. There is no need for studies to show this; it is just common sense and the inevitable force of economics. In other words, the place where job growth takes place is the area of the economy where business growth is happening. Again, there is no need for a study to show this.

This truth also means that there is no need for detailed government plans to determine how to help sector A of the economy while not helping sector B. In fact, plans like that are doomed to fail since they may cause sector B to contract and lay off workers while sector A is growing. America needs policies that will cause ALL sectors to grow.

Policy wonks from the government and the pro-government party will no doubt lament this basic fact since it means that the government will not be able to favor one sector over another. In their view, in the absence of wise oversight from the government, the economy cannot grow properly. Nevertheless, here is another bit of economic wisdom that these same policy wonks should keep in mind: for the last 200 years, the economy has managed to grow just fine (for the most part) without determinations from the government as to which sectors should grow the fastest. This process is called the market, and it works just fine. Indeed, the market is a far better determinant of which sectors of the economy should grow the fastest than the government.

In his speech tomorrow, president Obama ought to push for policies that help the entire economy. We do not need yet another push for green jobs or high speed rail. These targeted initiatives have already failed the test of the market place.

Let's hope that for once, Obama actually does the right thing.

PS Don't hold you breath waiting for it to happen.