Consumers are not the job creators

Many commentators claim that consumers, and not business leaders, are the real job creators. For instance, Robert Reich—Chancellor’s Professor of public policy at the University of California at Berkeley—writes:

[Some believe] that the captains of industry are the real job creators. But businesses need consumers in order to prosper and grow. Consumers in the middle class and below are the real job creators. In the United States, 70 percent of economic activity is personal consumption. Unless the vast middle class, and everyone seeking to join it, have enough money in their pockets — and share sufficiently in the gains from growth — businesses cannot possibly do well. [emphasis added]

What do you think of that reasoning? We’re told that businesses need customers in order to prosper and grow. Therefore, the customers are really responsible for growing the businesses and creating the jobs. By this same logic we could say that because Michael Phelps needed a pool filled with water to win his Olympic gold medals, the guys who put the water in the pool are the real medal winners.

It is certainly true that businessmen need customers in order to make money, and that no businessman can stay in business, let alone continue to employ anyone, if he does not get enough people to buy his products. But this does not change the fact that he is running his business, he is the one who hires employees, and he is the one who is ultimately responsible for ensuring that his employees are all working towards producing a product that will keep them in business, versus one that won’t.

Creating and running a profitable business, especially one with many employees, is not easy. Only a small number of individuals are willing to take the substantial financial risks that entrepreneurs take. Only a small number of individuals are willing to put in the grueling hours that many business owners work. Only a small number of individuals have a great idea for a business, have a realistic plan for turning that idea into a money-making enterprise, and can competently execute that plan. The real job creators are the minority of individuals who are able to start or grow businesses that are profitable and lasting.

Reich presents job creation, not as something that results from the hard work of growing a healthy business, but as something closer to planting magic beans—all consumers need to do is put money in the economy and then businesses and jobs will effortlessly sprout up somehow. This isn’t remotely true.

But people like Reich want to diminish the achievements of businessmen and entrepreneurs by telling the American public that these producers are not really creating their businesses and they are not really responsible for the many employment opportunities that they create along the way. (E.g., “You didn’t build that.”) If the achievements of businessmen and entrepreneurs are diminished in the eyes of the public, then it is easier for these pundits to demand that we impose crushing new tax and regulatory burdens on them.

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