[Part 1 of the Creating Good Jobs series]
Conventional wisdom tells us that if we want to create good jobs, the first thing we should do is drop the idea of interfering in the market by picking “winners and losers.” In 2007, Gene Sperling — who was the National Economic Adviser to the last Democratic president and is about to play the same role for Obama — summed it up with a little wit:
Unfortunately, what people most want from government–a plan to save specific jobs or to pinpoint where new ones are coming from–is where government is not the most competent. After all, it was not long ago that the U.S. government was convinced that one of the fastest-growing occupations in the new economy would be travel agents.
And yet in the next paragraph Sperling writes:
In the 1990s, with booming job creation, we focused on laying the foundation for job creation with smart long-term investments. This is what former Treasury Secretary Lawrence Summers and I used to joke was a public investment “Field of Dreams” strategy: If we build the right research facilities, have the right preschools and lifelong learning programs, and spread the reach of the Internet, they–middle-class jobs–would come.
Former investors in AOL, CompuServe etc. would be surprised to know that when the government deliberately “spread the reach of Internet” in the early 90s, when the Net was in its infancy, it was not picking winners and losers. Not only had the government funded the creation of the Internet, but under Clinton it kept aggressively supporting the Net even when private, market-based alternatives like AOL and CompuServe existed.
Put it this way: if the government hadn’t picked this winner, The Social Network wouldn’t be winning any awards right now because Facebook wouldn’t exist. Sure, there would have been some sucky, piece-of-crap tool AOL charged you to use. But no way would AOL have let two kids from Harvard build software on AOL’s network as smart as Facebook — and AOL certainly wouldn’t have let them give it away for free. Ditto for Google and most of the other Net companies we use. The government couldn’t have guessed in advance that Facebook or Google would’ve taken off, but an explosion of Internet jobs? That was a pretty good bet.
Mind you, none of this would’ve likely happened if the government hadn’t picked earlier winners by creating markets in electronics, computer chips, and software (e.g., some of the first modern relational databases, such as Oracle’s, were funded by the CIA and NSA). I don’t know who the losers were, but do we really care?
When it comes to agriculture, we might. Farmers who own small family farms that grow fruits and vegetables would be surprised to find out we don’t pick winners and losers — as would small family farms raising pigs and growing wheat who could no longer compete against massively government supported Big Agribusiness.
So would residential builders who build rentals rather than homes.
And folks trying to create renewable energy companies? Don’t tell them we don’t pick winners and losers. How fast they grow and what chance they have against their overseas competitors are tightly tied to whether our government changes the mix of its picks on oil & coal versus renewable energy.
Then there’s Wall Street – more on that later in the series.
Here’s another way of thinking about whether we pick winners and losers. Conservatives just swept into power in the House on the platform of rolling back Big Government. You’d figure patriots who want small government and a strong defense would be particularly interested in cleaning house in Defense. Defense is one of the most bloated, corrupt parts of the market because of the enormous role of Big Government, and Defense decisions are often made based on the jobs they create instead of protecting our country and the men and women who fight for us. It is Exhibit A of the dangers of trying to create good jobs by picking winners and losers. And yet it’s off the table.
Rabidly conservative House Republicans are also trying to see if they can push state governments into bankruptcy so they can gut state workers’ pensions and other benefits. What aren’t they going after? State and local economic development agencies that spend their time picking winners and losers and massively distorting the market. For example, sports teams and developers seeking sweet stadium deals — all done in the name of creating jobs — don’t have to worry local government will be forced to stop picking these winners.
You can argue that the government shouldn’t pick winners and losers. But regardless of who’s in power, it always does.
The real question isn’t whether we should pick winners and losers. The real question is, do we want to keep picking winners and losers while pretending we aren’t? Or should we do it in an open and honest debate?
Up next week: don’t high taxes kill jobs? Tell that to Norway.