SA government destroys 224,000 jobs

From the Business Day today:

“According to the latest verified figures tabled, government has thus far created a total of 223,568 work opportunities through its expanded public works programme” from April 1 to August 31 .

He [public works minister Geoff Doidge] said the latest figures showed the results of collective efforts to ensure that “line function departments and municipalities” accelerate their creation of work opportunities as well as accurately report such opportunities .

He said the figures were a “solid” foundation to create 4,5-million work opportunities by 2014.”

It is unfortunate that our political leaders believe an economic fallacy such as this. The government is a capital consumer, it can only tax and redistribute wealth, inefficiently to say the least. The government is already getting so large that it is becoming increasingly burdensome for the private sector to support its spending binge. If you don’t notice it today, it will in the very near future become more obvious. Public spending as a percentage of GDP has risen from 26% of GDP in ‘06/07 to 35% of GDP in ‘09/10. The government cannot create jobs by taxing its citizens. It can at best only divert jobs, and worse, it has no idea which jobs are deemed most important to its citizens - and as a result these projects will likely end in failure.  What happens when we reach the point where everybody works for the government? Who pays taxes then? I will let Henry Hazlitt explain those effects that are unseen.

“A certain amount of public spending is necessary to perform essential government functions. With such public works, necessary for their own sake, and defended on that ground alone, I am not here concerned. I am here concerned with public works considered as a means of “providing employment” or of adding wealth to the community that it would not otherwise have had.

A bridge is built. If it is built to meet an insistent public demand, if it solves a traffic problem or a transportation problem otherwise insoluble, there can be no objection. But a bridge built primarily “to provide employment” is a different kind of bridge. When providing employment becomes the end, need becomes a subordinate consideration. “Projects” have to be invented. Instead of thinking only of where bridges must be built the government spenders begin to ask themselves where bridges can be built. Can they think of plausible reasons why an additional bridge should connect Easton and Weston? It soon becomes absolutely essential. Those who doubt the necessity are dismissed as obstructionists and reactionaries. [ed note. do those two italicised words sound familiar?]

Two arguments are put forward for the bridge, one of which is mainly heard before it is built, the other of which is mainly heard after it has been completed. The first argument is that it will provide employment. It will provide, say, 500 jobs for a year. The implication is that these are jobs that would not otherwise have come into existence.

This is what is immediately seen. But if we have trained ourselves to look beyond immediate to secondary consequences, and beyond those who are directly benefited by a government project to others who are indirectly affected, a different picture presents itself. It is true that a particular group of bridgeworkers may receive more employment than otherwise. But the bridge has to be paid for out of taxes. For every dollar that is spent on the bridge a dollar will be taken away from taxpayers. If the bridge costs $10 million the taxpayers will lose $10 million. They will have that much taken away from them which they would otherwise have spent on the things they needed most.

Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $10 million taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project. More bridge builders; fewer automobile workers, television technicians, clothing workers, farmers.

But then we come to the second argument. The bridge exists. It is, let us suppose, a beautiful and not an ugly bridge. It has come into being through the magic of government spending. Where would it have been if the obstructionists and the reactionaries had had their way? There would have been no bridge. The country would have been just that much poorer. Here again the government spenders have the better of the argument with all those who cannot see beyond the immediate range of their physical eyes. They can see the bridge. But if they have taught themselves to look for indirect as well as direct consequences they can once more see in the eye of imagination the possibilities that have never been allowed to come into existence. They can see the unbuilt homes, the unmade cars and washing machines, the unmade dresses and coats, perhaps the ungrown and unsold foodstuffs. To see these uncreated things requires a kind of imagination that not many people have. We can think of these nonexistent objects once, perhaps, but we cannot keep them before our minds as we can the bridge that we pass every working day. What has happened is merely that one thing has been created instead of others.”

I have deleted certain sections of the passage for brevity’s sake, but the meaning remains unchanged. Find the entire passage here.