With the summer employment season upon us, millions of high school and college students are pounding the pavement, looking for “help wanted” signs in the windows of local businesses. Unfortunately, many will find that there are too many applicants for too few jobs—the unemployment rate among 16-19 year olds remains almost 20%.
The Obama Administration’s solution is to make these jobs even more scarce by pushing for a massive increase in the minimum wage, from $7.25 to $10.10 per hour. In essence, the Administration is deliberately transferring wealth from less employable teens to more employable ones, creating a smaller group of better paid teens (and others) at the expense of a larger group of unpaid teens (and others). If successful, their artificial intervention into the job market (adding to the already artificial conditions created by the existing minimum wage) will mean that some larger number of teens will miss out on the experience, habits, and discipline summer work inculcates—of much more long-term value to most than a relatively little extra savings or spending money.
The unfortunate lesson for the attentive teenager is that what happens in Washington is as important to their employment status as what happens on Main Street. Many of their elders have, of course, already learned this lesson and adjusted their behavior accordingly—none more so than those at the head of the largest American corporations.
As Doug Bandow recently documented, the impending expiration of the federal Export-Import Bank has many of the biggest American businesses lobbying for an extension of the life of this corporate welfare dispenser. The Bank claims to have created hundreds of thousands of jobs, but in reality it has simply shifted jobs to the Bank’s favored clients (led by Boeing) from those companies that would otherwise have received loans in an open market–almost certainly at an overall net loss to the economy. Its impact on the credit market is equally predictable: subsidizing the loans of the too-big-to-fail banking giants while ignoring the often more financially responsible local and regional banks, a gratuitous insult on top of the great injury that the post-financial crisis regulatory regime (especially Dodd-Frank) has done to the small banks that had little or nothing to do with it, while perversely subsidizing those that did.
A few more brief examples might complete this survey of the contemporary (government) road to wealth. To date, some $5 billion has been appropriated by the government to fund Obamacare-related state health care exchanges. The well-documented results have often been disastrous. Oregon, at the head of the fraud, waste, and abuse line, spent $305 million to enroll . . . no one. Meanwhile, an anonymous whistleblower revealed last week that a federal Obamacare enrollment center in Missouri, funded by a $1.2 billion federal grant, is filled with data entry workers who spend the day refreshing their computer screens every ten minutes while waiting for the two or fewer applications each processes per month to come in.
Writing in the late 1800s, the Yale political scientist William Graham Sumner lamented the rise of “jobbery”—the “constantly apparent effort to win wealth, not by honest and independent production, but by some sort of a scheme for extorting other people’s product from them.” Unfortunately, he noted, “a large part of our legislation consists in making a job for somebody.”
Though the expansion of government power in the post-Civil War era created new opportunities for the jobbers—as the successive waves of Progressive-era expansion have continued to do so in the years since—the problem is as old as the American republic.
Defending the Constitution’s Article I, Section 9 prohibitions on state ex post facto laws, bills of attainder, and laws impairing the enforcement of contracts in Federalist 44, James Madison argued:
The sober people of America are weary of the fluctuating policy which has directed the public councils. They have seen with regret and indignation that sudden changes and legislative interferences, in cases affecting personal rights, become jobs in the hands of enterprising and influential speculators, and snares to the more-industrious and less-informed part of the community. They have seen, too, that one legislative interference is but the first link of a long chain of repetitions, every subsequent interference being naturally produced by the effects of the preceding. They very rightly infer, therefore, that some thorough reform is wanting, which will banish speculations on public measures, inspire a general prudence and industry, and give a regular course to the business of society.
What the Americans of the founding era needed, Madison argued, was relief from the “fluctuating policy” that had artificially privileged “enterprising and influential speculators” at the expense of the “more-industrious and less-informed part of the community.” This is the essence of the corporate welfare, crony capitalist state: a system where the easiest path to wealth does not come through enterprise, but through bending the law to one’s advantage.
There are at least three insidious consequences of such a system–in Madison’s day or in ours.
First, it creates a zero-sum competition for government-sanctioned advantage. As Albert Jay Nock famously noted in his early 20th century work Our Enemy the State, gaining wealth by political means is very different from truly earning it in economic exchange. Voluntary free exchange creates value on both sides of the transaction, but, as in the case of the Export-Import Bank, “legislative interference” just diverts wealth from one channel to another: one party’s gain is another party’s loss. And the general public loses in either case as tax dollars or regulatory privileges prop up one otherwise inefficient enterprise or another.
Second, such a system redirects the energy of the community away from “general prudence and industry” toward “speculations on public measures,” as Madison puts it. Why put in the long hours required to build a successful business, with all the risks of failure that attend the effort, when less effort can lead to much quicker and more spectacular success in the political sphere? A nation of political lottery-players is not the natural material of a self-governing community.
Third, as Madison notes, once the political lottery comes to town, it generates an infinite variety of new scratch tickets: a constantly churning legal system in which one “job” begets another, so that the solid, hard-working citizen comes to the justifiable conclusion that he is playing the sucker for the well-connected. It can’t be good for anyone to spend the day idly refreshing a computer screen—it must be difficult to feel the satisfaction of earning one’s living by honest labor in such a case—but this is merely an extreme example of a much larger phenomenon: the privileging of public or publicly-subsidized employment over the real wealth-producing efforts of those in the private sector. And sometimes, the results are worse than wasteful: witness what appears to be the criminal–even homicidal–abuse of veterans in the emerging VA scandal.
The authors of The Federalist argued that the remedy for jobbery, like so many political ills within a popular government, is the genius of republican liberty as given life by the American people. If the people do not demand an accounting of the improper administration of political affairs, no one else will. In the midst of the 2014 primary and general election season, the American people would do well to visit the excellent websites (here, here, here, and here) that track the unjust activities of the jobber barons and their political enablers. If these folks have your elected representatives in their back pocket, you would do well to help them join the unemployment line come the start of the 114th Congress.
David Corbin is a Professor of Politics and Matthew Parks an Assistant Professor of Politics at The King’s College, New York City. They are co-authors of “Keeping Our Republic: Principles for a Political Reformation” (2011). You can follow their work on Twitter or Facebook.