Sunday, January 30, 2011

Why do businesses create jobs?

"When I give food to the poor, I'm called a saint. When I ask why they are poor, I'm called a communist." -Archbishop Dom Helder Camara.

The New York Times Week in Review section has a good piece pointing out that although corporate profits have been at record high levels recently, unemployment remains high.

There is a huge fallacy long pushed by Republicans (and now capitulated to by most 'mainstream' Democrats) that all you have to do is give corporations handouts and huge tax breaks and they will magically create jobs. This betrays a fundamental ignorance of basic economics.

Businesses don't create jobs just because they have money or as some sort of social program. They create jobs in order to meet increasing demand. If they get more money but demand is stagnant or decreasing, then they won't create jobs (here). They will either save that money or invest it abroad.

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