Subsidiarity and the Social Doctrine

"The problem with socialism is that eventually you run out of other people's money [to spend]." Margaret Thatcher

“Too much capitalism does not mean too many capitalists, but too few capitalists.” G. K. Chesterton

Subsidiarity in the Gospels

Friday, February 26, 2010

When FDR's Solidairity trumps Subsidiarity

While the truth about the impact of FDR's policies is complex to calculate, please be aware that one cannot unreservedly state "FDR created jobs" as you seem to be saying. Any job created by FDR's programs was funded by tax money, taken from taxpayers, who would have done something else with that money had they kept it.

Taxpayers whose money is not taken do not, as a rule, stuff it in a mattress. They generally do three things with it: (1.) Spend it, (2.) Save it, (3.) Give it to church and charity.

Therefore every job FDR "created" was generated at the expense of someone's spending, someone's saving, or someone's charitable giving.

Someone's spending generally contributes to the private-sector economy; as spending increases more jobs are generated to accommodate the need for increased production to match higher demand. As spending decreases jobs are lost as the private-sector economy contracts to match lower demand.

Consequently, whenever we credit a public-sector job to FDR and his programs, we must also ask, "What was the cost of creating that job in terms of private-sector jobs?" It may be that every public-sector job created cost the country exactly one private-sector job. In that case FDR did not "create jobs"; he merely transferred them.

Or it may be that every public sector job created cost 1.5 private sector jobs. In that case FDR's job creation was a net job destruction...which would go a long way to explaining how the Great Depression lasted so darned long.

But it may yet be that every public sector job created cost less than one private sector job. Only in that case can one claim net job creation: But not nearly as many jobs as one thinks, if one only looks at the public sector increase. In the meantime, consider that there was also a cost in savings and charity. Setting aside savings for the moment, consider for a moment what it means to cut into charitable giving during an economic downturn. Was the Great Depression the best time to cut into donations, making it more difficult for churches and charitable organizations to afford to operate? Probably not.

At any rate, the uncertainty created in the business environment is another issue. When the future is uncertain, business owners don't expand and entrepreneurs don't start things up. And Amity Shlaes makes a good case that until FDR's tinkering started to taper off, business owners and entrepreneurs stayed out of the market: Jobs which otherwise might have been created, weren't. The folks who would have created them were waiting for calmer seas before setting sail.

Add to that the taxation effect on spending and giving, and you see how very uncertain it is that a "government created job" in any era can ever constitute a net benefit for blue-collar workers. It may have come at the cost of 0.7 private sector jobs which were lost through reduced consumer spending, plus 0.4 private sector jobs which were lost because businessmen weren't willing to risk capital in such a hostile and uncertain environment. In that case, for every thousand jobs FDR "created" he destroyed eleven hundred.

But those are just numbers picked out of a hat. Perhaps the correct numbers are 0.3 and 0.2: In which case for every thousand jobs FDR created, he destroyed five hundred. In that case, what he did was beneficial, but a heck of a lot less beneficial than you might have thought.

And indeed, if what FDR did was beneficial, why did improvement take so long to appear, coming only after the start of the war? It's more likely that, whatever the correct numbers may have been, the net impact was either negative or close to zero. That has more explanatory power, for the longevity of the Depression remains a mystery unless you account for it through such arguments.

At any rate, the idea that FDR "did IN FACT" create jobs is very much open to question. All those happy blue-collar workers were quite grateful to FDR for their shiny new government jobs.

But that may have only been because they had no idea of what those jobs had cost them.
Written by R.C.

No comments:

Post a Comment