Private Sector Needs More Understanding

In 1974, when inflation was just starting to get out of control but before it became the dread combination most establishment economists thought was impossible — inflation combined with economic stagnation, or "stagflation" — President Gerald Ford convened a Whip Inflation Now summit meeting. Stern speeches were given, and Whip Inflation Now (WIN) buttons were handed out. People were exhorted to save more and spend less and be good citizens.

If brave words and good intentions could have done the job, inflation might just have been whipped then. Unfortunately, the administration had little or no clue that inflation is a monetary phenomenon — too many dollars chasing too few goods and services — so they didn't know how to fix it. The WIN campaign became a national punch line. Inflation was finally brought under control (for a while) under Ronald Reagan's inherited Federal Reserve chairman, Paul Volcker, but not without paying the price of a recession.

President Barack Obama's jobs summit Thursday couldn't help but bring to mind that sorry WIN episode. Nobody likes it when unemployment is at 10.2 percent — or more like 17 percent, when you count in the underemployed holding part-time jobs who would prefer full-time and those who have given up looking for work. Public officials facing reelection next year get particularly nervous. Since they seem to have no inclination to review public policies that might actually be contributing to holding back employer hiring, they indulge in symbolic gestures to try to send the message that they really, really care.

It was a little curious that neither the Chamber of Commerce nor the National Association of Manufacturers nor the National Federation of Independent Businesses, whose members actually create jobs, were invited.

President Obama himself demonstrated that he knows some of the words but he seems to have no idea about the music.

"While I believe that government has a critical role in creating the conditions for economic growth," he told the audience, "ultimately, true economic recovery is only going to come from the private sector."

The trouble is, this president and his advisers don't seem to have a clue how the private sector works. They seem to think that it springs into action only when the government prods, pokes, manages, mandates or "stimulates" it. He doesn't seem to know that the private sector responds to consumer demand and works best and creates the largest number of decent jobs when the government gets out of the way.

A sustainable job is one in which a person produces (or participates in a process that produces) something of greater value than what he or she is paid, measured by other people being willing to pay for that product or service. Reduce taxes, reduce onerous regulations, sign trade agreements that will facilitate exports, and put ambitious new government programs on hold, and we'll see such jobs created.

Otherwise, it's all hot air.

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