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Congress is Holding Back the Free Market from Creating Jobs

By: Steve Johnson

10/26/2009 - 20 Comments

The new jobs need to be created from real consumer demand, but until congress quits pumping money into the economy, who know what real consumer demand is?

When a small business builds a business on phony consumer demand based on expanded credit from easy money that the government creates, it can only exist as long as the easy money keeps flowing.

When the consumer credit that is driving the purchasing power behind the customers is removed, the sales drop and the business cannot survive.

This is why the auto, retail, airline and many other industries are hurting so badly right now.  They were all build on a phony consumer demand, based on expanded consumer credit which is now coming to an end and the only businesses that will survive are the businesses that sell to real consumer demands – based on current wages.

Entrepreneurs Struggle to Envision the Future

Until the government stops flooding the market with money, it’s very difficult to determine which industries are phony and which are real. What are consumers going to purchase after the government stops printing money? 

If an entrepreneur builds’ a business today, for example a construction business based on the high demand to rebuild the roads the bridges, the entire business is bases on government stimulus money. The owners of the business are completely at the mercy of the government’s willingness to continue to borrow and spend money on rebuilding the roads and bridges. 

This is not a good business model because it does not depend on the free market and therefore the business owners cannot control the risk of loss to their business.

Therefore, small businesses are not able to see which industry is going to be viable in the future, because they cannot control which industry the government continues to create competitive advantages for with policies and easy money. 

Government policy is the biggest risk. If the government was not part of the risk, it would be much easier for a business to manage the risks that they need to take. 

Risk management is a large part of the decision that small business owners are constantly planning for and government intervention in the economy drastically increase their uncontrollable risks.

Big businesses manage government policy risks with lobby groups, campaign contributions and social activists, but small businesses don’t have these options.

The result of the current government intervention is that entrepreneurs are unable to make a calculated risk based on supply and demand of the free market and therefore unwilling to invest in new markets and add jobs. 

This is why small business (and jobs) thrives when we have a smaller government and why we are unlikely to see any real job growth for several years, perhaps longer. 

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