This week’s video helps us understand that there is a significant difference between creating value, which leads to wealth accumulation, and creating jobs, which may actually destroy wealth and create dependencies.
It’s easy to believe that we can support a government job creation program to solve the real need for jobs. However, these jobs come at a cost and often put an overwhelming burden on the private sector. This actually costs us future jobs and opportunities.
Wealth is the accumulation of capital. It gives us command over resources which we can use to make life more enjoyable.
Wealth is different from income. Income is the monetary return on labor or investments. One can potentially have a high level of income without having much wealth. For example, someone who has a large monthly salary but has excessive debt is not wealthy.
Economist Henry Hazlitt says,
[Wealth] consists in what is produced and consumed: the food we eat, the clothes we wear, the houses we live in. It is railways and roads and motor cars; ships and planes and factories; schools and churches and theaters; pianos, paintings and hooks. Yet so powerful is the verbal ambiguity that confuses money with wealth, that even those who at times recognize the confusion will slide back into it in the course of their reasoning.
We accumulate capital by making smart investments. First and foremost, these include investments of time, but they also include resource and monetary investment returns. In a market setting, we can only create wealth by creating value for others.
Wealth creation is consistent with biblical principles, because it is the result of good stewardship. Scripture, however, does not guarantee that we will have vast amounts of wealth, or any at all.
For whoever has will be given more, and they will have abundance. Whoever does not have, even what they have will be taken from them. And throw that worthless servant outside, into the darkness, where there will be weeping and gnashing of teeth.
We are not to hoard what we are given, even if we don’t think what we have is valuable. All good things are from God. The gifts, talents, and skills that he gave us are the raw materials that we must steward to grow his creation.
It is easy to get caught up in the hype when government programs tout how many jobs they are creating. It’s important to remember, though, that governments can’t create wealth.
The government is not a business that sells things. It only “produces” or provides goods and services by generating revenue, often through taxation and currency inflation. This imposes a tradeoff, or the cost of other foregone opportunities.
When a business does not provide goods or services that people demand at the price they are willing to pay, it incurs losses. These losses, while difficult to endure, are important feedback mechanisms. They help correct inefficient behavior, allowing the business to better steward scarce resources.
Governments do not operate under profits and losses, so it is difficult for them to know whether they are being effective stewards of our scarce resources.
Economist Dwight Lee explains it this way:
Because people tend to think of jobs as ends rather than means, they are easily fooled into supporting government programs on grounds that jobs will be created. We have all heard people argue in favor of military bases, highway construction, and environmental regulations on business on these grounds…The relevant question is not whether a government project creates jobs, but whether the workers in those jobs will create more wealth than they would in other jobs.
Think of the massive growth that has occurred in the United States over the past two hundred years. That growth came because we had a robust market that fostered value creation and wealth accumulation.
Markets bring jobs, new specialties, and fields of expertise that didn’t exist even a century ago. Jobs created through market competition are much more likely than government jobs to foster entrepreneurial thinking, discoveries, and the products and services which make people’s lives better at increasingly lower costs. This is not because government jobs are filled with bad or lazy people, but because the government does not operate under the strict discipline that the profit and loss mechanism enforces.
Christians must strive to create value for others through their work and do their job well. Our focus needs to be on wealth creation and flourishing, not just job creation. The more we seek to serve the needs of others, the better we will be at creating jobs that are fulfilling for people and provide value for others.
How can we change our thinking to focus on value creation rather than job creation?