There is a fascinating battle taking place in many countries between how best to grow private-sector employment. Shockingly some of the politicians who are cited by the media for their incredible intelligence imply that inequality in wages can be fixed by increasing taxes on the companies and people who are using their income to grow, invest in and start businesses.
Moreover, there are complaints surfacing in areas of tech wealth like San Francisco because wealthy people who have limited time, pay top dollar for homes which ease their commutes. This has driven the prices up in such places which in-turn has increased resentment of tech workers. I touched on this last week when I explained how tech wealth actually helps society - it doesn't hurt it.
The fact that a single person could make a statement about how society should buy less iPods and instead spend this money on helping the poor shows that there seems to be a lack of awareness of how capitalism has lifted more people out of poverty than any other system ever created. Thankfully, even Bono is acknowledging this obvious fact - that only capitalism can end poverty. For someone who once was held up as a poster-child for ideas such as utilizing wealth redistribution to assist the poor, this change is quite refreshing.
Since the concept of supply and demand is well-understood it is obvious that when there is more demand for workers than supply, wages increase. Moreover, it is well-known that the only way to increase private sector jobs is with private sector capital. One might even say “private sector capital” is roughly equivalent to job creation potential.
In other words, higher taxes = less private sector capital = less jobs.
I’ve discussed this many times before both here and with friends and colleagues but I have to say that I haven’t seen the ideas I espouse more succinctly summed up than by T.J. Rodgers the CEO of Cypress Semiconductor. Here are some key portions from a recent Wall Street Journal opinion piece and I suggest you read the whole thing:
How much more do I need? How many more jobs do you want?
Even European socialist democracies are starting to understand that tax-and-spend policies kill jobs. For example, both Italy and Spain have repealed their incentive programs for solar energy (along with their "green jobs") because the countries have calculated that for every job created by government investment in green energy, somewhere between 4.8 jobs (Italy) and 2.2 jobs (Spain) are lost because of the reciprocal cuts in private investment. I am aware of these figures because from 2002-11 I was a major investor in and chairman of SunPower, the world's second-largest solar-energy company, also based in Silicon Valley.
Silicon Valley is today's brightest example of the traditional American dream still at work. The investments for most startup companies must come from individuals who can wait 10 years to get a return on investment. Only very wealthy Americans can afford that.
This is an age where the IRS admitted to and apologized for going after groups supporting the exact ideas being discussed here and further cited the Fifth Amendment when questioned about these incidents by congress. Furthermore, this is a time when the NSA has been shown to be monitoring virtually all the communications they can – whether lawful or not. Under such circumstances, Mr. Rodgers should be lauded for being courageous – as well as for creating so many jobs.
Finally, he deserves a lot of credit for reminding us all that a healthy private sector is a key to creating and maintaining private sector jobs.