Hillary Clinton’s speech at the New America Foundation on Friday, in which she discussed thoughts about reviving the economy, suggested that she does not understand how jobs are created.
She said she was trying to “encourage more companies to come off the sidelines and, frankly, for some to use some of that cash that is sitting there waiting to deploy.”
This echoes the naïve idea embraced by the Obama administration that economies are fueled by more borrowing and spending. But this is not how jobs are created.
Jobs are created when businesses deploy their cash savings in well thought-out, high-quality investments. It is always the quality of investment that counts, not the quantity. If high quality investment opportunities are lacking, often because of government interference in the economy, businesses actually help us all by refusing to waste their cash on projects that will blow up in short order and just create more unemployment in the long run.
Governments, especially this one, are incapable of restraining their spending, much less saving. They can only see as far as the next election, and it galls them to see businesses conserving their resources and waiting for the right moment and the right project in which to invest.
But, ask yourself: when this false recovery, fueled by all the wasteful spending, blows up, as it will eventually, what will pull us out of the next crash? It will be those businesses and individuals who have refused to play at the casino, who saved and put money away, who will be able to step in, invest, and start a genuine–not a phony–recovery process.
Clinton’s viewpoint is as crony capitalist as President Obama’s. They both complain that government has done favors for business and that business, in turn, must do favors for government. Favors start with campaign contributions, but they extend to more hiring, especially before an election. Who cares about quality of investment or long run results? “In the long run we are all dead,” as Lord Keynes, the godfather of crony capitalism, helpfully reminded us.
Mrs. Clinton further stated, “As secretary of state, I saw the way extreme inequality corrupted other societies.” This is a clever reversal of the truth. It is corruption–in particular, crony capitalist corruption–that creates the worst kind of inequality, in which the poor, the young, and the middle class fall further and further behind, while rich government cronies thrive.
Hunter Lewis is co-founder of AgainstCronyCapitalism.org, co-founder and former CEO of Cambridge Associates, a global investment firm, and author of two recent books, Free Prices Now!, about the Federal Reserve, and Crony Capitalism in America 2008-12.