The Job Creation Myth

As Bastiat points out, Napoleon himself believed that putting people to work digging holes and filling them back in was beneficial to society. Over 180 years after Napoleon’s death, politicians still love to pretend that they can “create” jobs. Take, for example, this recent story in the Toledo Blade. It begins innocent enough:

There’s a 14-block neighborhood north of downtown in the state capital that has a look and feel unlike anything in northwest Ohio.

Known as the Short North, this mile-long strip of galleries, pubs, restaurants, condominiums, and independently owned shops is strung together with wide tree-lined sidewalks and an art-infused atmosphere. It draws thousands of visitors a week and has become city leaders’ bourgeois-bohemian showpiece for attracting talented and creative people to live and work in Columbus.

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Not so long ago the Short North was a place many in Columbus avoided. The neighborhood became known for crime, prostitution, and drugs during the 1970s and part of the 1980s.

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Yet the early 1980s also saw the beginnings of the district’s revival, a phenomenon generally traced to the efforts of some business owners as well as individuals who started buying cheap houses in the area and started fixing them up.

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The once-sagging land values rebounded as the neighborhood became a more desirable place to live and do business. Property owners rehabilitated their buildings, then found higher-income tenants to rent them. And prices haven’t stopped rising.

The story is a modern marvel of free market achievement by young entrepreneurs that used their own capital and ingenuity in the face of great risk to create something that they believed would be successful. Naturally, however, the story takes a turn for the worse as opportunistic politicians seek to capitalize on an idea that has worked elsewhere:

For Ben Konop, a successful arts district would give Toledo more than just a cool place to hang out.

During a recent interview in his Government Center office, the Lucas County commissioner pointed to a news article on his desk that appeared Aug. 5 in the Columbus Dispatch.
The story told how Columbus has become home to several giants in the educational-publishing industry, McGraw-Hill, Pearson Education, and Highlights for Children. These types of publishing firms were once based primarily in cities such as New York City and Boston. Publishing executives were quoted complimenting Columbus as an attractive place to live and for possessing a “rich talent pool.”

Setting the article down, Mr. Konop declared, “This is why you have to invest in cultural amenities — it’s a job creator.”

The difference between the success of the arts district in Columbus and the pre-supposed success of the arts district in Toledo is the means of capital investment. In the case of Columbus, the investment came from lenders and entrepreneurs. By contrast, the investment proposed in Toledo would come from the government and therefore from each taxpayer. It therefore follows that the politicians in Toledo that favor an investment in an arts district favor government planning over human ingenuity and the entrepreneurial spirit.

Equally reprehensible is the myth that government investment in the fine arts somehow “creates” jobs. While it is true that those who work in the new arts districts will have a job that was previously unavailable, this is only what is seen. What is not seen, are the dollars that taxpayers would have used elsewhere under their own volition that are forcibly taken away by the government.

Over 150 years ago, Frederic Bastiat famously wrote in regards to the arts:

Will it be said that for one kind of gratification, and one kind of labor, it substitutes more urgent, more moral, more reasonable gratifications and labor? I might dispute this; I might say, by taking 60,000 francs from the taxpayers, you diminish the wages of laborers, drainers, carpenters, blacksmiths, and increase in proportion those of the singers.

There is nothing to prove that this latter class calls for more sympathy than the former.

If this is such a great idea, why don’t the politicians put their own capital at risk to start such a project?

The government planners in Toledo would do well to read a little Bastiat:

— Frederic Bastiat. “That Which is Seen and That Which is Not Seen: Theatres and Fine Arts”

— Frederic Bastiat. “That Which is Seen and That Which is Not Seen: Public Works”