I was reading through Ellen Brown’s “Web of Debt” site, which I first discovered when I saw that she – like me – had been the target of a rant by the same individual.

I like a lot of what Ellen is doing. I’m in favor of networks of individuals forming credit pools for investment or to create businesses. That already exists at higher economic levels – Angel Investing, for instance. And at the lower level there are organizations like the Grameen Bank. Or versions thereof, like Grama Vidiyal, Opportunity International, Islamic banking, and others mentioned in this piece.

[Note: Grameen Bank has come in for criticism on a number of grounds.]

Browsing through the comments on the site,  you realize that many people sense there’s something fundamentally wrong with the system.

Which there is.

And that they sense that language has been taken out of our mouths and used for propaganda.

Which it has.

But after that initial perception, the logic sometimes falls apart….

Here’s one comment, broken down line by line, with my response in brackets.

Comment:

“Just because everyone believes rich people create jobs, doesn’t make it true.”

LR:

1.  False.

Rich is a relative term. American working class people are much richer than people sleeping on roads and railway stations in Asia. When an American (even a working class American) goes to a poor country and sets up a business, he does create jobs. He is rich relatively speaking and his capital (such as it is) enables him to start a business. In that sense, riches (rather than rich people) can indeed create jobs.
Of course, they need not. Riches can also stagnate uneconomically if they’re not deployed correctly.

2. False

Everyone doesn’t believe rich people create jobs. A much larger group of people world-over believes that the government creates jobs. That’s why governments everywhere are tasked with that function  – which is unfortunate, because they don’t do it very successfully, usually.

What’s the only truth in the comment then? The statement that because every one believes something, that doesn’t make it true.

But the problem is that this truism should be applied not to the “rich people don’t create jobs” assertion, but to the much more common assumption behind the assertion – the assumption that the government creates jobs.

Comment: “Rich people don’t create jobs. Rich people can’t create jobs.”

LR:

1. The first part of this is a half-truth.

Rich people may (or may not) create jobs. It depends on their entrepreneurial ability.

The second part is just false. Rich people can and do create jobs.

Comment:

“Only DEMAND creates jobs. No demand = no production, period. Only demand can create and does create jobs.”

LR:

1. This would be hilarious if it weren’t so sad. Demand creates jobs? Obviously, the writer’s never been anywhere where there’s demand all year round for things that  can’t be found on the shelves of the stores. There’s plenty of demand, but where is the production?

2. The existence of demand is necessary to genuine economic activity, but not sufficient to create it. You can in fact have production without demand (for instance, state-mandated production in China). This is entirely wasteful and a dislocation, but it exists. And it exists because China has money..riches…not because it has people (Africa has people too). (June 28: I realized I had this backward and switched it around. I thought I’d corrected it before but apparently the ‘save’ function didn’t go through. Apologies).

Comment:

“Which means, as any rational person can see with a moment’s thought, that it is the people who create their own jobs. We create our own jobs.”

LR:

1. Another half-truth. People…some people… create jobs.

People with access to money, entrepreneurial ability, and supported by structures that defend economic activity and ownership. Without all that, production declines.

2.  Half-truth again. “We” is used to invoke emotion – populist emotion. But the populism obviously excludes “rich people.”

Whom does “we” represent then? Isn’t it the people who are “have-nots” – i.e. lack money, or credit, or skills? If so,  aren’t these just the people who do not create jobs, emotional appeals notwithstanding?

Comment:

“Fight the fog.”

Lila: Indeed. Starting at home.

Comment:

“Fact: capital formation is highest in the most egalitarian countries.”

Lila:

Not true. Capital formation is high in China (as high as 50% according to this report in 2007)* and India (savings rate of about 25-30%, with 29.2% in 2004-5 ).  Both are highly unequal societies (India more so than China) where households save a far greater percentage of their income than in America (about 2%).

Correction: the numbers above were rough averages computed from over the last several years. To be more specific, the US savings rate rose to 6.9% in May 2009 to from zero in April 2008 and less than 1% in 2005 (negative 0.5%), 2006, and 2007.

Other studies also measure the Chinese savings rate differently and return a figure of around 22% for the 2000-2004 period. and 30% in 2006.

America is also unequal – though less so –  but it has a much lower rate of capital formation.

This isn’t an endorsement of inequality. It’s merely a recitation of the facts.

Comment:

“We do not have to give away our money to wealthpower [sic] giants, to make it work for commerce.”

Lila:

I presume what the person is trying to say is that you don’t have to keep your money in banks owned by the banking conglomerates in order for business to flourish.

That’s perfectly true. Solution: don’t keep your money in the banks.

Keep it in the form of businesses, or farms, or bullion in vaults, or in guns, or in commodities or whatever else will retain some value during a time of universal monetary debasement.

But when you do that you are, by definition, a rich person (i.e. an asset-owning person). And it’s your riches – husbanded – that will create jobs.