Government Job Creation Programs Destroy Jobs

Every few months the auditor general takes to documenting in detail how Human Resources Development Canada squanders its spoils. While he assures the public there’s no evidence of outright theft, he says HRDC is deluged by a “widespread lack of due regard to probity in spending public funds and to achieving desired results.”

The moral maneuverability of Jane Stewart, the minister in charge, is becoming legendary. The lanky Stewart, whose department has been entrusted with huge sums — $60 billion between 1999 and 2000 — has demonstrated “almost no evidence that financial or activity monitoring had been carried out” under her administration, says Denis Desautels. Yet Stewart continues to stare down the public from her vertiginous height, never once offering at the very least a resignation.

The problems that beset this department have been a fixture throughout the 1990s. The $3-billion job creation programs recently audited were fraught with violations, not least of which were, according to Desautels: “inadequate project selection, breaches of authority, payments made improperly,” and no documented project results. Ironically, this tale of corruption is only a decoy for the real issue: No government can create jobs; only economic growth in the private sector can create employment opportunities.

This footnote, omitted from the AG’s report, was also not well articulated by the Opposition. It is also the subject of convenient Alzheimer’s among lickspittle economists, who know this as sure as they know the Law of Opportunity Cost. For job creation schemes, explains economist Thomas J. DiLorenzo in “The Myth of Government Job Creation,” government must tax, borrow or inflate the money supply. DiLorenzo, whose work in documenting government racketeering has been described as “path breaking,” notes that such programs are politically popular because they are visible. A basic understanding of economics, however, is necessary to grasp that there is no free lunch. For every job “created” by government, an unidentifiable job will, tit-for-tat, be destroyed in the private sector.

The images of earnest men and women put to work allegedly by HRDC flood the propagandist CBC. The multitudes thrown out of work because private economic activity has been crowded out by taxing or borrowing to finance job programs remain invisible. So, too, does the destruction of jobs and reduction in investments, purchasing and overall wealth that ensues when money is taxed away from Canadians and funnelled to the HRDC’s patronage playground. Investors suffer the same fate and are much less likely to take employment-generating risks with their capital. Government borrowing simply serves to reduce capital available to the private sector. A further diminution of assets occurs when government expands the money supply and causes inflation in order to finance job creation schemes.

Creating good long-lasting employment lies in producing goods or services for which there is a legitimate consumer demand. A rise in consumer demand for a product, reflected in relative higher prices, galvanizes business to hire more workers and produce more of the commodity. Hence jobs in the private sector are real jobs because they are sustained by consumer preferences. Unsustainable government make-work schemes merely usurp the wishes and needs of consumers, and substitute them with the wishes of bureaucrats who are beholden to their political masters.

There is an ethical dimension to job creation in the private sector — it is a voluntary agreement into which both parties enter with a view to mutual benefit. Government job creation, however, involves bureaucrats and job recipients in a beneficial and voluntary exchange but leaves out of the loop those who pay for the programs through taxes or through unemployment in their neck of the woods.

On the eve of an election, not enough can be said about the perverse nature of government-run enterprise. The reason government job programs destroy jobs also lies in the fact that much of the money extracted from taxpayers does not go to the wages of job recipients, but to the elaborate bureaucracy of consultants and planners who administer the programs. This is a problem not addressed in the AG’s report. On the contrary, Desautels states that “decisions to downsize HRDC” were factors in the breakdown of “financial monitoring.” If Stewart’s Six-Step Action Recovery Plan is a harbinger of the AG’s recommendations, then it amounts to little more than the creation of a parallel bureaucracy.

Opposition leader Stockwell Day and MP Diane Ablonczy, if indeed they intend to bring an ethical dimension to the table, should quit laboring to make a disorganized criminal organization better organized. Call for the abolition of all government job creation, and demand that Stewart be read her rights.
 

©2000 By Ilana Mercer
The Calgary Herald
October 26