I logged onto Jennifer Granholm’s personal website today searching for something to write about. Her homepage was plastered with announcements of all the new jobs she will be creating for Michigan. At first glance, this job creation would appear to generate positive results for Michigan’s economy. After some additional thinking, however, I drew much different conclusions.
First off, does anyone have the power to create jobs? Can Jennifer Granholm wave a magic wand, instantly creating over 40,000 new jobs that did not exist the moment before? I would argue that she can (whether it be through tax incentives, subsidies, etc…). She could even pass a law that forces 100% employment! The real question is whether or not the creation of jobs generates wealth. Wealth can be viewed as goods and services that people demand. Here an example: 100% of Michigan citizens are employed in a process of combining $2 of resources and $5 of labor to create an end product selling for $3. It is easy to see the longevity of this economy may not look too promising.
How can an economy create wealth? Entrepreneurs are the heart and soul of this business. They see opportunities for combining resources, labor, capital and technology to create goods and services to sell in the market and make a profit. Why isn’t the free market in Michigan venturing into the alternative energy industry? The answer is very simple – The costs of producing alternative energy are too great to compete with conventional energy production. Alternative energy will NOT create wealth. It will require more costly and scarce resources and sell at a higher prices, which people will not be willing to pay voluntarily. The burden of this misallocation of resources will be covered by tax dollars. In other words – citizens will be forced to pay for a process that is inefficient and not demanded.
How do we attract these entrepreneurs (wealth creators) to Michigan? Put yourself in the shoes of an entrepreneur. What would you be looking for? Good infrastructure, cheap resources, low taxes, and low regulation are probably near the top of their list (I wonder why Michigan has a poorly functioning economy with high unemployment). If Granholm is already using tax incentives to bring select industries to Michigan, why not lower taxes for everyone? Do we really believe that Granholm is smarter than all the entrepreneurs of the world combined? What is so special about the specific industries that Granholm chooses?
The next time you see articles related to job creation, you may want to question whether or not those jobs will benefit anyone other than the few individuals who are being employed.