Unshackle The Job Creators
As the jobless rate threatens to invade double-digit territory, people are understandably demanding answers to urgent questions: What's the cure? What will it take to generate more jobs for Americans?
As a longtime banking CEO, I know first-hand and with certainty how jobs are created — and it's not by government bureaucrats waving magic wands. Jobs are created by private businesses, from the large multinational corporation down to the sole proprietor who mows grass and spreads mulch.
Jobs are created so businesses can develop new products and services — and improve existing ones — and expand into new markets — and increase the quantities produced, and the efficiency of that production.
In today's economy, entrepreneurs and business leaders are eager to ramp up production, launch new products, open new branches and create new jobs. But what's standing in the way of translating that eagerness into paychecks? Government policies that undermine the rule of law, create destructive boom-and-bust cycles, and generate massive deficits.
Under the rule of law, the legal system specifically defines unlawful behavior and gives fair warning of the punishment for wrongdoing. Instead, we suffer under the rule of regulators.
Every year, Congress and state legislatures concoct new schemes to clamp down on business freedom. Using real wrongdoers as a pretext, they declare the entire business world guilty without a trial and pass a sentence of perpetual supervision by an army of bureaucrats who halt progress until they get around to doling out licenses, permits, inspections and new rules.
The result is that businessmen live in perpetual fear of government reprisals.
In this connection, remember that jobs created by businesses in a free market are productive — they help create profits, and if the profits stop, the jobs disappear.
By contrast, government programs that fasten controls on business destroy jobs. We would never tolerate a government bureau that hires a thousand thugs to go around breaking people's arms. But we tolerate monstrosities like Sarbanes Oxley, which operates the same way in principle — crippling innocent businesses with onerous accounting controls on the pretext of catching the next Enron or WorldCom in the act.
Of course, we need government to punish crimes and frauds, and to remedy breaches of contract and negligence. But "innocent until proven guilty" is an American ideal that should not be restricted to criminals. Because jobs are investments, the more needless costs are imposed by government on businesses, the fewer investments those businesses can make, in jobs.
What was it that our Founding Fathers said about King George III in the Declaration of Independence? "He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people and eat out their substance."
Job creation also suffers because of economic uncertainty. We have a Federal Reserve that prints money according to its own intuitions, causing prices to fluctuate unpredictably, so that a profit-seeking business can't project the costs of its raw materials five days into the future, much less five years. The result? An unfortunate reluctance to launch new projects, based on inability to project future profits.
Of course, the future is always uncertain even in a free market. But when government allows the economy to operate without interference, an underlying predictability emerges from the fact that malinvestment is quickly identified, prices readjusted, and labor and capital shifted, so that the market bottoms out and growth begins anew.
Look at what happened with the subprime loan debacle. First, government generated an artificial housing boom with tax breaks for home ownership, bureaucratic requirements to fund unqualified buyers, a ready market for bad loans provided by Fannie Mae and Freddie Mac, and virtually free money for speculation furnished by the Fed.
But once the boom gave way to an inevitable bust, the government blamed it on too much capitalism and too little regulation. So instead of allowing the government-created mess to bottom out, our political leaders employed classic methods to distort the market — bailouts, price props and foreclosure interference, to name a few.
Meanwhile, all sorts of jobs held by developers, mortgage brokers, construction workers and real estate attorneys dried up, leaving the people who held those jobs lagging behind in the skills needed to compete in other sectors.
Today, unfortunately, jobs are not being created fast enough to return to a sound economic environment because an out-of-control government is strangling the freedom businessmen need to carry out the kinds of plans that create jobs.
Let's free up business, and watch how far they can take us, and how fast.
• Allison is former chairman and CEO of BB&T Corp. and a leader of Job Creators Alliance, a group of current and retired CEOs and entrepreneurs who have come together to preserve the free enterprise system for succeeding generations.