The Talk That Was Too Hot for TED: “Who Are the Job Creators?”

by Joey deVilla on May 17, 2012

They’re calling venture capitalist Nick Hanauer’s TED presentation too controversial to put on their site. In his presentation titled Who Are The Job Creators?, he says that income inequality is a problem and that it’s the middle class, not the rich and especially not the super-rich, who are the job creators. In fact, he suggests that the coinage “job creators” is not just a fiction created by plutocrats — it’s self-deification.

This is unusual for TED, who normally publish videos of their talks. If you’ve never seen a TED talk, go to their site, look through the list and pick one that interests you. I think you’ll find them interesting and enlightening.

Even though TED is breaking with their standard practice and refusing to publish the video of his presentation, you can still get the gist of Hanauer’s presentation. I’ve published the text and slides for Who Are the Job Creators? below. Read, and if you feel like it, comment.

Who Are the Job Creators?

It is astounding how significantly one idea can shape a society and its policies.  Consider this one: If taxes on the rich go up, job creation will go down.

This idea is an article of faith for republicans and seldom challenged by democrats and has shaped much of today’s economic landscape.

But sometimes the ideas that we know to be true are dead wrong. For thousands of years people were sure that earth was at the center of the universe.  It’s not, and an astronomer who still believed that it was, would do some lousy astronomy.

In the same way, a policy maker who believed that the rich and businesses are “job creators” and therefore should not be taxed, would make equally bad policy.

I have started or helped start, dozens of businesses and initially hired lots of people. But if no one could have afforded to buy what we had to sell, my businesses would all have failed and all those jobs would have evaporated.

That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is a “circle of life” like feedback loop between customers and businesses. And only consumers can set in motion this virtuous cycle of increasing demand and hiring. In this sense, an ordinary middle-class consumer is far more of a job creator than a capitalist like me.

So when businesspeople take credit for creating jobs, it’s a little like squirrels taking credit for creating evolution. In fact, it’s the other way around.

Anyone who’s ever run a business knows that hiring more people is a capitalists course of last resort, something we do only when increasing customer demand requires it.  In this sense, calling ourselves job creators isn’t just inaccurate, it’s disingenuous.

That’s why our current policies are so upside down. When you have a tax system in which most of the exemptions and the lowest rates benefit the richest, all in the name of job creation, all that happens is that the rich get richer.

Since 1980 the share of income for the richest Americans has more than tripled while effective tax rates have declined by close to 50%.

If it were true that lower tax rates and more wealth for the wealthy  would lead to more job creation, then today we would be drowning in jobs.  And yet unemployment and under-employment is at record highs.

Another reason this idea is so wrong-headed is that there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the median American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, we go out to eat with friends and family only occasionally.

I can’t buy enough of anything to make up for the fact that millions of unemployed and underemployed Americans can’t buy any new clothes or cars or enjoy any meals out. Or to make up for the decreasing consumption of the vast majority of American families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.

Here’s an incredible fact.  If the typical American family still got today the same share of income they earned in 1980, they would earn about 25% more and have an astounding $13,000 more a year. Where would the economy be if that were the case?

Significant privileges have come to capitalists like me for being perceived as “job creators” at the center of the economic universe, and the language and metaphors we use to defend the fairness of the current social and economic arrangements is telling. For instance, it is a small step from “job creator” to “The Creator”. We did not accidentally choose this language. It is only honest to admit that calling oneself a “job creator” is both an assertion about how economics works and the a claim on status and privileges.

The extraordinary differential between a 15% tax rate on capital gains, dividends, and carried interest for capitalists, and the 35% top marginal rate on work for ordinary Americans is a privilege that is hard to justify without just a touch of deification.

We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Rather they are a consequence of an eco-systemic  feedback loop animated by middle-class consumers, and when they thrive, businesses grow and hire, and owners profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.

So here’s an idea worth spreading.

In a capitalist economy, the true job creators are consumers, the middle class.  And taxing the rich to make investments that grow the middle class, is the single smartest thing we can do for the middle class, the poor and the rich.

Thank You.

{ 4 comments… read them below or add one }

Anne Onimos May 17, 2012 at 11:02 am

Bizarre. Why would TED view this as too controversial? It seems like a good fit for TED. But, even if it were controversial, does TED tend to shy away from debate?

I think it says a lot about politics in the USA, that the rather mild assertion that wealth and jobs are created not by the rich, and that therefore the rich should pay taxes commensurate to their wealth, is considered too hot. (And considered so by an organization whose very raison-d’etre is the discussion of ideas.)

Perhaps

Ann May 17, 2012 at 2:52 pm

I’m not sure what is controversial about that. It’s something I remember learning in Grade 13 Economics, and also something I remember talking about at dinner. But Dad was an Economics major at UWaterloo, so that might have just been my family…

Mark Jaquith May 17, 2012 at 3:42 pm

And only consumers can set in motion this virtuous cycle of increasing demand and hiring.

That’s not quite right. Take the iPhone. The iPhone was a product we didn’t know we wanted. We didn’t even know it was possible. While consumers validated Apple’s investment, we didn’t “set in motion” anything. We reacted.

All Hanauer is really saying is that producers are limited by the realities of consumer demand. Yes, that’s true. Cue the epic TED music and applause. But that doesn’t make middle class consumers “job creators”. They are merely “job validators”. They provide data to the people who do the hiring and the firing.

It’s all part of an interconnected system. You can’t have producers or jobs without consumers, nor vice versa. We should optimize around fairness, un-gameability, and easing upward mobility. “Tax the rich people and give their money to the middle class” is as facile an argument as “rich people create jobs; lower their taxes”.

Kaleberg May 19, 2012 at 11:22 pm

The iPhone would have been a flop if no one could afford to buy it. Our current economic theory has nothing about the creation of demand. It’s exclusively supply side. In truth, it is much harder to create demand than supply, because it involves challenging societal shibboleths that keep the wealthy in power.

If you heard anything about creating consumers in school, it was probably a hold over from the New Deal. Back in the 1930s and into the 1970s it was completely obvious and accepted that a company needed people who could buy its products if it wanted to make money. Business magazines even included statistics pages on state by state and regional personal income so that businessmen could look for opportunities to make more money.

Then came a concerted campaign to replace a working economic system with something more friendly to the billionaires who resented having to put a penny in the pot before they could scrape out millions. It’s good to see a few holes in this very effective suppression scheme.

Leave a Comment

{ 2 trackbacks }

Previous post:

Next post: