Henry Blodget, CEO of news website Business Insider, clears up the widespread myth that entrepreneurs such as himself are responsible for creating jobs for the rest of America. The often-told lie is simply a way to justify the immense inequality symptomatic of our dire economic climate. What’s more, Blodget writes, is that the notion that investors and entrepreneurs wouldn’t work as hard to build companies if taxes were higher is simply not true.
Blodget discusses what is needed to create employment in a piece for Business Insider:
So, if rich people do not create the jobs, what does? A healthy economic ecosystem—one in which most participants (the middle class) have plenty of money to spend. Over the last couple of years, a rich investor and entrepreneur named Nick Hanauer has annoyed all manner of rich investors and entrepreneurs by explaining this in detail. Hanauer was the founder of online advertising company aQuantive, which Microsoft bought for $6.4 billion. What creates a company’s jobs, Hanauer explains, is a healthy economic ecosystem surrounding the company, which starts with the company’s customers.
The company’s customers buy the company’s products. This, in turn, channels money to the company and creates the need for the company to hire employees to produce, sell, and service those products. If the company’s customers and potential customers go broke, the demand for the company’s products will collapse. And the jobs will disappear, regardless of what the entrepreneurs or investors do.
Now, again, entrepreneurs are an important part of the company-creation process. And so are investors, who risk capital in the hope of earning returns. But, ultimately, whether a new company continues growing and creates self-sustaining jobs is a function of the company’s customers’ ability and willingness to pay for the company’s products, not the entrepreneur or the investor capital. Therefore, as Hanauer argues, suggesting that rich entrepreneurs and investors create jobs is like suggesting that squirrels create evolution. ...
So, then, if what creates the jobs in our economy is, in part, “customers,” who are these customers? And what can we do to make sure these customers have more money to spend to create demand and, thus, jobs? The customers of most companies are ultimately American’s gigantic middle class—the hundreds of millions of Americans who currently take home a much smaller share of the national income than they did 30 years ago, before tax policy aimed at helping rich people get richer created an extreme of income and wealth inequality not seen since the 1920s.
America’s middle class has been pummeled, in part, by tax policies that reward “the 1 percent” at the expense of everyone else. It has also been pummeled by globalization and technology improvements, which are largely outside of any one country’s control. The prevailing story that justifies tax cuts for America’s entrepreneurs and investors is that the huge pots of gold they take home are supposed to “trickle down” to the middle class and thus benefit everyone. Unfortunately, that’s not the way it actually works….
America’s companies are currently being managed to share the least possible amount of their income with the employees who help create it. Corporate profit margins are at all-time highs, while wages are at an all-time low.
Blodget goes on to explain that what would create jobs is an equal distribution of wealth since the 1 percent tends to let most of its monetary assets sit in banks or investments, whereas, were the money spread evenly across all classes, it would be used to purchase goods. This would raise demand and thus stimulate the job market.
It’s time we give up this “rich people create jobs” hooey, Blodget concludes. What we need is a healthy economy and there’s nothing healthy about the gross income inequality and extreme poverty being perpetuated by the stories the rich tell us and themselves so they can sleep soundly at night.