Nick Hanauer explodes the myth of the capitalist ‘job creator’

Especially when it comes to economic policy, too many politicians are motivated by myths more than by facts. A prime example: the myth of the job creators.

Republicans, such as Speaker of the House John Boehner, talk of job creators in reverent, worshipful terms. In their vision of how the world works, it is these brave titans of capitalism who, with no help from anyone else, build the companies that create jobs for American workers. To Boehner and his party, anything that inhibits job creators in their endeavors — taxes, environmental laws, financial regulations — is a job killer.

This is economic theory at its most simplistic and has been proven erroneous, over and over again. A dramatic example: The financial debacle of 2008 that killed millions of jobs was, in large part, the result of bankers and financiers being liberated from federal regulations that had once served as a check on free-market excesses. Nevertheless, conservative members of Congress cling to the myth and continue to call for lower taxes and fewer regulations.

An alternative economic vision is being promoted on the left from an unexpected source. Nick Hanauer is part of the wealthy 1%. He is chairman of a family-owned manufacturing company in Seattle, a venture capitalist who has made hundreds of millions of dollars through smart investments and owner of a private jet and five luxurious homes.

A lot of his money came from being an early investor in Amazon. But Hanauer does not think this makes him a job creator. “Amazon didn’t create any jobs,” Hanauer said in a recent Seattle Times interview. “Amazon probably destroyed a million jobs in our economy.”

The way Hanauer sees it, leaders in our capitalist democracy need to account for the employment-killing side of the modern market where new technologies and efficiencies have eliminated old jobs and not created nearly enough new ones to replace them. In a controversial TED talk in 2012, Hanauer castigated policymakers who subscribe to the false faith that rich people and businesses will provide all the jobs we need, if only they do not have to pay much in taxes.

“I have started or helped start, dozens of businesses and initially hired lots of people,” Hanauer said in his presentation. “But if no one could have afforded to buy what we had to sell, my businesses would all have failed and all those jobs would have evaporated.

“That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is a circle-of-life-like feedback loop between customers and businesses. And only consumers can set in motion this virtuous cycle of increasing demand and hiring. In this sense, an ordinary middle-class consumer is far more of a job creator than a capitalist like me.”

As a result, Hanauer believes rich people like him should pay more taxes that will fund investments in education and infrastructure that will boost the earning power of the currently beleaguered middle class. He is a particular fan of the $15 dollar minimum wage that, he contends, would increase business activity by putting more money in the hands of consumers.

“Since 1980, the share of income for the richest Americans has more than tripled while effective tax rates have declined by close to 50%,” Hanauer said. “If it were true that lower tax rates and more wealth for the wealthy would lead to more job creation, then today we would be drowning in jobs. And yet unemployment and under-employment is at record highs. ...

“So here’s an idea worth spreading. In a capitalist economy, the true job creators are consumers, the middle class. And taxing the rich to make investments that grow the middle class is the single smartest thing we can do for the middle class, the poor and the rich.”

When Hanauer made these remarks two years ago, they went against the prevailing narrative, but many Democrats are seizing on his vision as an alternative to the GOP job-creator myth. In a country where economic ignorance is pervasive, it would not be a bad thing if these competing ideas become the focus of the 2014 election debate.