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Well-Respected Economist: Government Creates Jobs

In a must-read blog post, respected economist Timothy Bartik takes down the pernicious myth that “government doesn’t create jobs.”

This myth, Bartik writes, is based on a “profound misunderstanding” of how the economy works.  That it’s commonly held by policymakers contributes to misguided economic policies that fail to take into account the important role that government investments and services play in the economy.

But a more perceptive analysis recognizes that all sectors of the economy ideally can provide productive goods and services that can help contribute to greater well-being. Our economy is interdependent. The value of what we produce, and the number and quality of jobs, can be affected by all sectors of the economy… This includes the government.

[snip]

But more importantly, if government provides productive services, it helps support the private economy. These supports include a legal system of property rights, a criminal justice system that preserves public order, roads and other transportation infrastructure that facilitate commerce, and human capital development programs that develop the skills of the labor force.

Bartik’s words are strongly supported by the evidence from a considerable body of research demonstrating how many public investments do indeed create jobs and strengthen the economy.  It’s only when there’s widespread recognition that “at any given point in time, the path to greater prosperity potentially may be found in any sector of the economy” will we be able to focus on developing and implementing cost-effective policies to create jobs and promote shared prosperity.  And oftentimes, particularly when unemployment is high, the sector with the greatest social and economic return on the next investment dollar is the public sector.

5 Comments

  1. frances

    November 10, 2011 at 5:04 pm

    Greece and Italy

  2. Alex

    November 10, 2011 at 5:32 pm

    You are exactly right Frances- too many government jobs, too much welfare, too many unions, and a lazy work ethic. Unfortunately, it sounds pretty familiar here also. Government is now absorbing 25 % of our GDP. We are already experiencing the symptoms in states and municipalities- Detroit, Flint, Harrisburg. and now Jefferson County Alabama, and there will be more. I’ve said this before- we cannot sustain the pensions and benefits that have been negotiated in many localities by greedy politicians.

  3. Rob Schofield

    November 11, 2011 at 8:40 am

    Frances and “Alex:: Please quit embarrassing yourselves. There are obviously innumerable countries with far more robust and better funded public services and structures than the U.S. that are doing fine. By such crude and simplistic “logic” as the two of you attempt to employ, several stateless African countries ought to have become economic juggernauts by now.

    The truth that is well-evidenced by Bartik’s piece (and, indeed, confirmed by many reputable conservative economists) is that building and maintaining a healthy market economy is a complicated business — much more complicated than simply tossing out troubled places (some of which were done in by corporate greed — think Flint, Michigan) and claiming that they are failing because of “welfare” and “government jobs.” Good, grief, even Milton Friedman would have conceded this.

  4. Eunice

    November 11, 2011 at 9:10 am

    I would love to know Rob the countries that you speak of with such a robust public sector that are doing so well other than a few small Scandinavian countries that are taxed to death and spend nothing on defense.As for African countries, over -population and political corruption doom all of them to failure. What do you attribute to the economic failure of the PIGS ?

  5. Ed McLenaghan

    November 11, 2011 at 10:08 am

    Paul Krugman put together a decent post on the rise of this nonsensical meme the other day, see here:

    http://krugman.blogs.nytimes.com/2011/11/10/its-not-about-welfare-states/

    “So, just to say what should be obvious, the countries in trouble are not in any way marked out by having especially generous welfare states.”