September 4, 2011

Move the Cheese: When Do Businesses Really Create Jobs.

It's a strongly entrenched meme now that a Business creates jobs when it does well, and cuts when it is doing badly. This is reverse causality conjured up by armchair economists and academics that have hardly run or even worked for a Real Business.

Businesses don't create jobs when incremental profits are handed down to them by Gov as reduced taxes and/or purchasing what they make....Pray, what's the need? The only few jobs when Gov "improves the returns from a Business" are a few clerical and administrative assistent sort of jobs. Gov as a big brother profit booster and these file pushing jobs are actually more harmful to a nation's economic vibrancy than useful. When the money is being sprinkled on the top by the Gov, you only beget business organizations evolve into feudal, bureaucratic, procedure driven entities where money is handed out from top to bottom for a pretense of work, while showing loyalty and niceties correctly upwards, all in the name of Corporate diplomacy and etiquette.

Businesses create Real jobs when there is an incremental business out there to win, from new customers or deepening the footprint with the old. The top down, trickle down money sprinkle on businesses is counter business vibrancy and should not be done in the miscoceived zeal to create jobs. In fact, the need is to cut Gov financing of Corporate profits, to rationalize taxes, and spend part of these savings into languishing items of public services like Education and Infrastructure. A side benefit of it will be new jobs and introduction of money at the bottom, existing businesses will have to hire workers to win this spending power for themselves. Another portion of the cuts and tax rationalization (including plugging loopholes) can be used to reduce Individual tax rates for all, which will further boost the quantum of business out there to win. The final portion will help reduce the debt/GDP, which is also important - to keep the currency meaningful. For a more drastic correction of debt/GDP, a Sovereign default (Quantum slashing of Treasury Debt and Entitlements) is not practically or morally infeasible: More on this one in my next post.
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1 comment:

  1. I agree completely, instead of creating more government jobs, it is beneficial to give Business more importance.