The Broader Market

by Jordan Eizenga

In response to yesterday’s post, I have received some comments that public directed spending artificially props up jobs in industries with structural unemployment at the expense of “organic growth” that creates lasting jobs. In this context, the implied meaning of organic growth is market led growth, independent of state directed funding. Along this line of reasoning, organic growth is synonymous with sustainable growth. This argument is persuasive and one I, in the long run, support. For industries and companies to succeed, they must ultimately be able to do so through successful business practices that are not reliant on government financing.

However, there are a couple points that this argument neglects. First, in the context of abnormally high unemployment, it essentially makes trivial what will happen to the unemployed. Surely, there must be some moral argument for helping out the marginalized. Second, I am not convinced that the market recognizes and moves capital to sustainable growth industries. Indeed, over the past decade, the market was left to its own devices and pushed capital to very inefficient activities. It is hard to see how purposeful state-directed spending can be any worse at creating jobs than the direction the market has recently taken. It is also hard to argue that the market created long term sustainable jobs. Third, it simply is not true that the stimulus package pushed money to non-innovative industries, incapable of producing long term, sustainable job growth. If you examine the stimulus package, you will notice a significant amount of money has been invested in green technologies and much needed infrastructure projects – projects that have certainly not been adequately funded by the private market.

The market will, of course, play a central role in job creation and the stimulus will not solve everything. However, without it, millions of Americans will stay unemployed and lose much needed skills. Without these skills, it is hard to see how we will ever create the innovative economy necessary to produce this so called “organic growth.”