People On the Land: The Role of Government in Job Creation
Contrary to campaign promises, the federal government has little power to directly create jobs. State and local governments, however, have a few more cards to play.
From its earliest beginnings, the United States has been a divided nation, often struggling to balance its differing ideals in changing times. Centralized and decentralized government; rural and urban; agrarian and industrial; and liberal and conservative are all part of our tangled experiment with an uneasy relationship between egalitarian representative government and an economy rooted in the rights and privileges of private property.
On November 8, the experiment in democracy American-style experienced an earthquake triggered by populist demands for change. The anger at Washington’s status quo might have come as a surprise to some pundits in the nation’s capital, but if they had been listening to what was happening out yonder, they might have had a different understanding. In short, the pundits missed the point in big ways and, in fact, still miss it when they continue to describe Donald Trump’s victory as stunning.
In all of the hundreds of thousands of words written about the election, anger has been described across geographic, cultural, social, racial, and economic facets of the country’s complex web of relationships. Whatever gains the overall national economy has made since the 2007 crash, especially in the past year or so, people in many rural areas still feel left out. The anger before the election was palpable, fed by simplistic phrases that captured essences of frustration with cultural conditions, a deadlocked political system, and a trail of broken promises that stretches back decades.
Whatever the elements of candidates’ personalities, religion, education, racism, xenophobia, and other facets of our fragmented, fearful, and angry society—and believe me they played a crucial role in this election—the economy was important in rural areas, basically because job growth and opportunities have lagged so much in so many places. Many rural folks have watched their communities slip over the past generation or so, and they are unhappy about it.
Watching the election process and results helped me formulate questions that I do not think have been asked as much as they could have been, if they have been asked at all. The questions have to do with the role of government in job creation. Do presidents and the Congress create jobs? Do governors and legislators create jobs? They certainly claim that they do. They run on business friendly platforms that promise new and expanded commerce and industries and new jobs.
In the United States, supporting the development of commerce has been central since the earliest days. Besides a political experiment in democratic processes, the nation was an economic experiment in wealth creation, creating sometimes destructive policies to tap into an incredibly rich natural resource base that launched fortunes for some and provided work for everyone else.
State governments became more involved in business attraction after World War I. During the mid-1920s, Maine, Florida, Alabama, and North Carolina set up statewide government agencies for industrial development and attraction. The crisis of the Great Depression spurred the federal government to become deeply involved in economic development and job creation in its New Deal efforts to counter deep unemployment and poverty with massive funding for infrastructure development, organizing industrial sectors, and seeking national policies to promote “full employment.”
State-level business attraction activities expanded rapidly in the post-World War II years. By the early 1960s, economic development competition among states was well underway. Governors played an increasingly important role in economic development, as promises of job creation became part of their political campaigns. By the 1960s, with the War on Poverty, the federal government, with promises of economic opportunity, began to move toward engagement in job creation in the public and private sectors.
After the optimistic 1960s, domestic and global forces created growing friction for economic development, including the energy crisis and so-called stagflation of the 1970s; the incredibly deep recession and Farm Crisis of the 1980s; the flight of industrial jobs across the country and offshore after the 1970s, accompanied by technologies that minimized the need for lower-skilled labor; a continuing decline in the number of farms and stagnant or declining rural population in many areas. The list goes on and on, but the main point is that rural areas have generally suffered, and, despite some recent gains, the 2007 global economic calamity again left many rural areas worse off than they were before.
In the longer-run context of a dynamic and often unstable economy, campaign promises from government officials about job creation might ring hollow for some rural residents. As I suggested in my 2015 book, Selling the State: Economic Development Policy in Kentucky, the policies have yielded mixed results. While they may have helped lower poverty rates, they have not succeeded in lessening the effects of uneven development and creation of secure employment. Kentucky’s legacy of job creation policies—which were broadened over the years to include virtually every economic sector and were largely financed by a regressive tax system that granted generous exemptions to businesses—is one of partly unfulfilled government promises, especially in impoverished rural and urban areas.
(In Kentucky’s case, Toyota’s decision to locate a manufacturing plant in Georgetown, in the heart of the state’s richest region, helped stave off a major economic disaster after 1985. Without Toyota’s operations, as well as related automotive parts plants, conditions would have been much worse. This is an example of tax breaks and other incentives that paid off for workers.)
For several decades now, government officials have cultivated the promise that their economic policies create jobs. It’s time to put these policies and promises into perspective, especially for rural areas.
First, government officials do not create jobs in the private sector and fall into a deep trap when they try to take credit for them. State and federal policies might—or might not—assist in job creation, depending on the situation.
The decision to create, maintain, move, or eliminate jobs is in the purview of the business owners and managers, not state officials.
Second, by offering business incentives, a project started with the idea of providing paid work for the greatest good, governments have become enmeshed in a lopsided relationship with businesses that has skewed power relationships and left “the people” begging for jobs at any cost, including low wages and unfair taxes. It also has left states with regressive tax systems that burden workers more than corporations.
Third, the dynamics of global politics and business are far beyond the power of state governments, unstable for national governments, and laden with risks for corporations. Global competition mutes the impacts of incentives on companies and makes government at all levels, especially communities, vulnerable to corporate decisions over which they have no control.
The 2016 elections marked an attack on politics as usual. Government credibility has suffered for decades at multiple levels, undermined by its own flaws and by attacks, many of them over simplified and exaggerated, that provoked widespread anger and demands for change. The inability of the economy since 2007 to create more widespread prosperity was visible for some economic sectors, but did not receive its share of discussion in the personality-driven general election campaign.
Economic insecurity was present for many rural families and communities, part of the larger pattern of broken government promises. The trouble is, the anger, in this case at least, is largely misplaced.
I repeat. Government does not create private sector jobs. Any and all ire at the lack of rural employment opportunities needs to be directed at the businesses that have neglected rural communities and focused their capital in a few metropolitan areas.
Timothy Collins is an independent writer, editor, and consultant and proprietor of Then and Now Media. From 2005 to 2016, he was assistant director for research, policy, outreach, and sustainability at the Illinois Institute for Rural Affairs at Western Illinois University in Macomb. He is the author of a newly released fantasy book, Memories of Santa Claus.