It’s Demand, Stupid!!

By Russell D. Longcore

(Editor’s Note: This posting is the 900th post here at DumpDC. Thanks to you readers.)

Hardly a day passes here in the ol’ USA that we don’t hear a politician talk about “creating jobs.” This presidential election will be decided on the state of the economy, and a high unemployment rate will have a direct effect on the final vote numbers. And here is today’s money quote: All of the people that talk about creating jobs have no practical understanding about economics and free enterprise.

Jobs will not be created here in The United States of America unless and until the US Congress controls government spending and rolls back regulations. US Corporations took their manufacturing offshore because of the Federal government’s interference in commerce. Manufacturing will not return to the USA, or grow organically in the USA, until Washington and its voluminous regulations are swept away. It is the US government that affects demand in a negative way. And there can be no job creation without creating demand FIRST.

This dreadful misunderstanding about jobs and demand offer a golden opportunity for secession. A new nation, freshly seceded from the USA, would have no onerous regulations and burdensome taxation. It would have an instant competitive advantage over the USA. With proper planning, that new nation/state could be a magnet for manufacturing. Imagine a US manufacturer that was seriously contemplating moving its operations to China. But that company sees a business-friendly environment in a New Texas nation here on the North American continent. It could save millions by moving operations a few hundred miles, as opposed to 10,000 miles. And many of its workers might jump at the chance to move with the company to a New Texas nation where individual liberty and property rights are protected.

“Demand” is “the desire to purchase, coupled with the power to do so.” Another definition is “the quantity of goods that buyers will take at a particular price.”

There is plenty of demand in the USA. Remember that even if the US unemployment rate is 25%, that means that 75% of the workforce is still working. Please don’t misunderstand me. I am not minimizing the plight of the unemployed. But even the unemployed still demand goods and services to survive. DC and the Fed want to return the American economy to a level of demand that was built upon a bubble. More about that later. This economy needs to return to a market-based economy, not one bloated and distorted by fiat money and zero percent interest rates.

Look at that first definition of demand. The underlined part is very important. A person may have desire to make a purchase, but have no power to do so. The two conditions combined are true demand. No entrepreneur ever made a dollar by creating a wonderful product that no one bought.

Curiously, no politicians talk about “creating demand.” They only talk about job creation. The word “job” has become a connotation word. It is used to manipulate the hearer by causing the hearer to associate that word with some societal memory of what the word USED TO MEAN. And because those same politicians control the numbers coming out of the various three-letter Federal agencies, they can make the job numbers look any way they choose.

The explanation of a “job” is so elementary that it should have been featured in Schoolhouse Rock back in the day…right along side “Elementary My Dear,” “I’m Just A Bill” and ”Conjunction Junction”.

The dictionary defines “job” as: “a post of employment, such as full-time or part-time.” But that doesn’t tell a very good story about the building block of a job, which is human labor.

One human being may enter into an agreement with another human being to perform a task in exchange for some form of value…or even with no remuneration. That is labor being used in a task.

There are all manner of variables that come into play. Intelligence, physical strength, agility, use of the five senses, and time are just a few. But each variable either increases or diminishes the value of any individual’s labor. For example, a man who qualifies to be a professional athlete may not qualify to teach particle physics, and vice versa.

An individual increases his value to an employer through training and experience. The more training and experience an individual possesses, the higher his or her value to any employer.

Now, let’s get into labor from the standpoint of the free market. Labor is one of the components of any product or service. Other components are raw materials, capital, overhead expenses and profit. At some point, when the product or service is priced for sale, all these components must be added in.

Every individual has expenses to maintain his existence. Most of the expenses are discretionary. Even expenses such as food, shelter and clothing…which seem on the surface to be life-essential…are discretionary, since the individual chooses the quality of food, shelter and clothing he or she will accept. And once the individual makes these choices, he/she gets to determine the value of their labor. Valuing labor might even come before choice about expenses. Most of us have to adjust our living expenses to our income.

It is the value of labor that is paramount here. An individual must trade his time for remuneration. He must trade enough time to earn enough remuneration to satisfy his budgeted expenses.

Here’s an example. We have two people who need $500 per week to live (no taxes figured in this example). Both people have identical amounts of time, which is 168 hours per week (24 hrs/day x 7 days). Person A is an 18-year-old high school graduate with no job skills or job training. He probably qualifies for a minimum wage entry level job, which would pay him $7.25 per hour. At that rate, he would need to work 69 hours to earn $500. Person B is a 22-year-old college graduate with no skills or job training. Yet because of his education, B qualifies for a job that pays him $25.00 per hour. Person B can earn his $500 in 20 hours.

What happens to A if his employer will only allow him to work 40 per week? He would have to get a second job to reach his requirement of 69 hours.

Both employers priced their product to make a profit. In the example of A, the employer could make a profit on A’s labor at $7.25 per hour. In B’s situation, the employer was profitable at $25/hour.

This works the same way if persons A and B are self employed. Labor is labor. It is not a job.

Our government educational system…and even most of the private schools, who teach students much the same drivel…has done a masterful job over the past 75 years of leaving students economically retarded by omitting this basic information about the free market. Over the years, most of the population has come to believe that a job should provide them with this mystical notion of a “living wage.” That economic fallacy is exactly why the US Congress passed minimum wage laws so many years ago.

Most people I’ve met believe that they should only have to get one job…or one business. The wealthy leverage their time and money and develop multiple streams of income.

Very few entrepreneurs go into business with the goal in mind of putting people to work. Most entrepreneurs start businesses to earn a living for themselves and their families, and/or a return on investment for their investors. Most entrepreneurs see an opportunity to fill a demand. Employing others is a by-product of creating a product or service that someone will pay for.

And that leads us back to the title of this book. “It’s Demand, Stupid.”

Either a politician is lying about job creation, or that politician has no understanding of the simplest explanation of business. Politicians love to brag about the numbers of jobs THEY created. First, they didn’t create DICK. Second, all jobs are not equal. As we’ve seen in our example above, jobs vary wildly in value for a variety of reasons. So the crude number of jobs is irrelevant. In very recent numbers that came out of the Obama Administration, they crowed about job creation, but a very large percentage of those jobs were low-paying jobs in the Service sector.

Friends, job creation is a fool’s errand. The only thing that matters is creating demand and the power to make purchases to fulfill the demand.

Thanks to the Washington crowd, demand will probably not return to the United States. It certainly will not return to pre-recession levels of economic activity. Remember that much of the demand that our nation has experienced over the last 50 years came from government policies that created FALSE demand…or “bubbles.” The mortgage bubble, the S&L bubble, the Tech bubble, the real estate bubble…all created by Congressional edicts. And now we are in the debt bubble and just about to enter the hyperinflation bubble. And have you noticed what happened to all those bubbles? THEY ALL BURST and left misery for us all.

The re-creation of demand is yet another reason that Secession is the only hope for mankind to enjoy individual liberty and property rights in North America.

DumpDC. Six Letters That Can Change History.

Copyright 2012 Russell D. Longcore. Permission to reprint in whole or in part is gladly given, provided full credit is given.

9 Responses to It’s Demand, Stupid!!

  1. Another Anon says:

    You are halfways there at least, demand is a big issue.

    However its not excess regulation that cuts into it but reduced wages, The thing is no matter what concessions are made, no business will ever raise wages unless there no other choice.

    There are two reasons for this

    #1 Status. Simply, if people are better off “capital” is not. This isn’t a physical thing (a person can only enjoy so much wealth) but a social one, status is a zero sum game. Thus unless labor is treated badly, for many in that set at least sunconciously capital can’t be truly rich.

    The reason we had a break from this from the late 30’s to the 70’s was a rare confluence of economic events (we were THE economy) and a real fear that social unrest would be worse. Sure Roosevelt was a bit of a Commie but there were other powers ready willing and able to take over who made him look like a Robber Baron

    #2 The ability to do so.

    Labor is an increasingly unimportant subset of well everything, automation and computers and where the human is needed, outosurcing allow enormous wage downwardpressure.

    In the past we had unions to push labor strikes, government pressure and an actual demand for unskilled labor. Now? We’ll hey five billion other people willing to undercut you. Thats great for employers at least until social unrest or lack of demand bites them in the bum.

    A last bit, there isn’t any real low hanging fruit out there business wise, at least not one anyone has thought of. A lot of modern goods have short supply chains compared the past since they exist as bits. In addition a lot of areas that we were expecting as breakthroughs, simply haven’t happened because they are hard. A lot of medical studies are fradualent for example

    I concur that long regualtory cycles have an impact but there many thing (medicine, GMO anything , nuclear others) where the risk of mass harm is too high. Speed is simply not possible and big new dev events (like the computer revolution) that create lots of good jobs in many spectrums will never happen either.

    So reigniting the economy of the past while technically possible (we can make lots of goods) is socially impossible.

    This is important in terms of the blogs core idea . Simply any putative seperated state won’t remain stable unless they have a working economy, Too many Libertarian models simply end up Oligarchal and for a lot of Americans, especially those whose sense of folks customs is weak that true Freedom (the right to be ruled by your own people and customs) and Negative Liberty is not enough and the rot we have with some Positive Liberty or hope for redress on this lines is still preferable to starving.

    And yes some kind of hyper infationary collapse is plausible. It will not end up in any Libertarian States. If the Uncle implodes, it will probably be a three way race war with the warlords, the military (and police) and the Bloombergs of the world each one forming a little despotism. Libertarian States require more stablity and economic intergrity that can be mnaintained in such circumstances

  2. […] Russell dissects some of the fallacies in .gov’s efforts to “stimulate” the econom…. […]

  3. tyroneb says:

    Our elites know we have bad stuff coming and don’t give a damn about the rest of us.
    Why do you think .gov is spending like crazy?
    They know it’s not going to be paid back

  4. RICHARD says:

    The grand American lifestyle remains, a tissue thin shadow of its former glory, but it remains. As such it creates a smoke screen in the minds of the American public and leadership. It can’t be THAT BAD they say. There’s still hope they say. In what I ask.

    In truth, nothing whatsoever remains of cultural, political or moral savvy – the bedrock of the old republic, which is also gone. Wisdom has fled our shores and fools rule.

    In order for secession to stand as a legitimate option for the future it must have a cultural base, legitimate dedicated leadership and a popular following. None of these things exist in 2012.

    No populist movement in history ever began or succeeded without these pillars of social movement. Notice that I didn’t include education in the list. That’s because the undeducated will follow leaders they trust. Without effective and legitimate leadership, secession is little more than an imaginary life boat for the sinking ship of state. The culture doesn’t support it, there is no popular following and no leadership worthy of mention.

    We need leaders. Who will step up?

    but that’s just me, hollering from the choir loft…

    • dumpdc says:

      Richard-

      All true…FOR NOW. When the American economy collapses, and the SHTF, the cultural base you seek will ascend. It will be the liberty lovers who are willing to fight. Remember that only about three percent of the Colonists picked up muskets and fought King George and his Redcoats.

      That’s me…speaking softly at the podium…

  5. b.wood says:

    The natural state of humans during most of human existence is to fit into closely knit bands of beings. Now that has been perverted by larger and larger organizations to where any feelings between members has become more confrontational than cooperative.

    Regardless, the suggestion of smaller (political) entities brings fearful visions. Sure, when prevailing control over any group of people is eliminated, the subjects may go wild. Just leave a party of teen agers to their own devices and note immature reactions. However, secession will hopefully appeal more in terms of mature actions than in anger related to loss of collective-based benefits.

    Certainly, most of us would subscribe to social contracts in entities where everyone could know everyone else. That is, we humans are tribal animals who indeed have a capacity for charity for those with whom we come in contact. To organize for larger and larger welfare activities results in larger and larger holocausts for which the 20th century is a hall mark.

    So, yes, secession will not be a “walk in the park”. On the other hand, mankind’s experience in mega-size political entities has been disastrous. In fact, one could conclude that continuation on that road will lead directly into hell.

    • dumpdc says:

      Dear B. Wood- Kvetch, Kvetch, Kvetch. I don’t disagree with your statements. But I note that you don’t offer a better idea than secession. States are not mega-sized political entities. That is why smaller is better. Thanks for writing. Russ

      • Another Anon says:

        I can’t speak for B. wood but as far as I can tell there really isn’t one.

        The best solution seems to be the largest possible homogenious fairly self sufficient state with either a fairly extreme measures for defense or some kind of cooporation arrangments that allow resources to be pooled against larger, more powerful outside threats.

        How small it needs to be or how big it can be is a question I can’t answer but certainly the current arrangements are failing.

        Now the powerful will not let go easily but as the USSR showed, even the mighty can fall.

  6. David Snyder says:

    Truer words have rarely been written.One of the best ways to fix the economy would be abolish the Marxist income tax

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