There is an ongoing debate in America about who, what, and where “job creators” really are. To boil it down simply, the debate is about whether government should get out of the way of these job creators or should work harder to ensure that they are creating jobs in a way that is socially constructive and positive. Who do we put our faith in? As our economy continues to sluggishly move into the new year, author Nick Hanauer explains why capitalism may not be the villain in this story in The Gardens of Democracy: A New American Story of Citizenship, the Economy, and the Role of Government.
When a capitalist claims to be a job creator, what exactly substantiates that claim? There are capitalist entrepreneurs that run five, ten, maybe twenty businesses, all with a substantial financial stake in the American economy. As some fail, others rise, and with each of those employees come and go. Is the effort for personal material growth and gain really going to spur our economy?
“Once you understand the economy as an ecosystem, you realize that it’s characterized by feedback loops that, in fact, jobs are a consequence of of a feedback loop between middle class customers and businesses. Businesspeople devote themselves to two things: the first is trying to create more sales in every possible way. But the second, equally important thing is how to contain costs,” Hanauer explains.
The effort to contain costs will often mean less production, which in turn means less employees. And thus we have the status claim made by big business that they are the greatest source of job creators in the market. That when they are restricted, so is the national economy.
“This is the only way we can end up in a democracy with a situation in which middle class taxpayers pay a tax rate 233% more than capitalists like me. This is the only way you can create a culture in which it’s okay for capitalists who earn dividend income, capital gains income, and carried interest income and are taxed at 15%.”
It’s not that capitalism is inherently bad, Hanauer continues, but rather that we have allowed ourselves to get trapped in this dialogue that ignores the rest of the ecosystem. For the whole interview:
Nick Hanauer is the author of The Gardens of Democracy: A New American Story of Citizenship, the Economy, and the Role of Government. This segment was produced by Nicholas Tuths.