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August 11th 2013 print

Peter Smith

Claims about job creation are a mug’s game

Politicians on both sides crow about the jobs they intend to create, but the best thing they could do is get government out of the way

Anarchy in the sense of a free-spirited and self-reliant society without central government sounds good, but inevitably thugs would take over or it would be invaded and subjugated by a ruthless and despotic foreign power. Such is the realty of human life. So some wise men got together, with maybe some women, though I doubt it in those less enlightened times, and invented democracy. Democracy is designed to meld the advantages of anarchy with the necessity of government. Unfortunately, things aren’t quite working out as planned. Coveting thy neighbour’s ass is having its wicked way.

In days of yore monarchs were given gifts by their subjects in the hope they would gain favour over their fellows. The more things have changed the more they have progressively become the same. Numbers of people and special interests have increasingly realised, as Alexis de Tocqueville presciently suggested they would, that democratically-elected governments can bestow favours. Sucking up to governments, with the gift of votes in hand, has become the defining feature of today’s democracy.

Most of us are susceptible to flattery. Democratic governments have proved to be the most susceptible of all. This shows itself in much self-congratulation for past achievements and in delusions of near God-like omnipotence. President Obama, for example, said ‘yes we can’ to having clean water flowing throughout all rural regions of the developing world. This very special grandiosity aside, all modern democratic governments share the defining characteristic of being self-styled job creators. By this they don’t just mean hiring thousands upon thousands of additional public servants. That they can do with aplomb.

The current government claims to have created one million jobs since it came into office in November, 2007. Tony Abbott claims he will create one million jobs in the next five years if he becomes PM. Sometimes politicians have moments of clarity. Here is Mr Hockey a little time ago: ”Governments don’t create jobs, business creates jobs. Employers employ people, not governments.” But this seldom happens and when it does it’s usually described as a gaff.

Governments have the power to undermine free markets and self-reliance by spending vast sums of taxpayers’ money on whatever they choose and by giving away vast sums of money to whoever they choose. They can destroy jobs by creating oceans of strangulating legislation and regulation. What they can’t do is create jobs. What they can do is to get out of the way and let capitalism create jobs.

For the sake of the record, the historical evidence is consistent with Howard and Costello getting out of the way more than Rudd, Gillard and Swan managed to do. The more stable trend figures produced by the ABS show that jobs numbers grew by 962,000 between November 2007 (when Rudd came to office) and July 2013. Hence the one million jobs claim. However, between March 1996 (when Howard came to office) and November 2007, job numbers grew by 2,373,000.

To put these figures on a comparable basis, jobs increased by an average annual rate of 1.53% under the Labour Governments but by 2.17% under the Coalition. This is a material difference. Using the current employment level as a base, it translates into 74,000 extra jobs a year. Moreover, the Coalition did a little better again than did Labor in getting out of the way of fulltime job growth as a proportion of the whole; though the difference is relatively small.

Putting the record in correct perspective is important. It reveals vacuous claims. Listen to this by Bill Shorten: "We’ve got more Australian men, more Australian women, working full-time than ever in the history of Australia."(Lateline, 9 May 2013) What, you mean that the economy now is even bigger than it was in the boom years of the 1920s? The problem with Shorten’s statement, and those like it, is not just that it’s ridiculous but that it takes us all for mugs.

In forming judgements about which political party is likely to preside over more job growth, getting the record straight is half of the matter. The other half has nothing to do with empty political promises about government creating millions of jobs. Quite simply no-one knows or can control how many jobs will be created in the private sector in the next one, two, five or ten years. The best that governments can do is to reduce over-spending and regulation to give maximum scope for the private sector to grow and develop.

Good team coaches don’t talk about how many championships they are going to win. They talk about doing the right things to give their team the maximum opportunity to shine. Would-be prime ministers should take a lesson from team coaches. We are not mugs in voterland (or at least most of us aren’t).

Peter Smith, a frequent Quadrant Online contributor, is the author of Bad Economics

Peter Smith, a frequent Quadrant Online contributor, is the author of Bad Economics