Tuesday, September 16, 2008

McCain didn't create the BlackBerry, Obama can't create jobs.

The Washington Post takes its story cues from Barack Obama, or so it appears. The Post ran the headline: “McCain Didn’t Create BlackBerry, Despite Adviser’s Claim.” And they note that Obama had beat them to this accusation. Obama’s campaign said: the claim that [John McCain] invented the BlackBerry would have been the most preposterous thing said all week.”

The problem is this isn’t quite what was said at all. The Post contains the full comment but still claims: “John McCain did not invent the BlackBerry. Early this morning, his top economics adviser claimed that he did.” Well, no he didn’t. What he said isn’t exactly true but what he said isn’t exactly what Obama’s people and the Washington Post, as if there is a difference, said either.

Douglas Holtz-Eakin, McCain’s adviser, said: “Telecommunications of the United States is a premier innovation in the past 15 years -- comes right through the Commerce Committee -- so you’re looking at the miracle John McCain helped create and that’s what he did.”

If we dissect that for a second we will see that Obama and the Post are distorting the quote. And we will see that Holtz-Eakin has an entirely absurd view of entrepreneurship but one held by most political hacks.

Holtz-Eakin said that the Commerce Committee legislates on telecommunications and therefore John McCain “helped create” the innovations of telecommunications that we have seen. He didn’t say McCain invented the BlackBerry, that is merely an Obama/media distortion. What he claimed was that somehow the Commerce Committee helped create telecommunications innovations, and since McCain is on that committee, he “helped create” these innovations. That is quite a bit different from what the Obama/media people are claiming.

Not only is that different but it is the same sort of line we hear from politicians all the time. How many times have you heard a politician claim that he “created jobs” for the American public? Politicians regularly claim credit for things that other people do. This is par for the course. Democrats do it, Republicans do it, independents do it.

Holtz-Eakin is wrong, McCain didn’t even “help create” innovations in telecommunications. The major reason we had massive innovation in telecommunications is the deregulation that began 40 years ago. The Ma Bell monopoly, which was a legal monopoly not a technological one, was broken up. And suddenly consumers had choices. McCain wasn’t in the Senate when that happened, he was in prison in North Vietnam.

But more importantly no Senator “helped create” the technological innovations we see today. What happened was that politicians got out of the way. They didn’t invent, innovate of create. Nor did they help invent, innovate or create. They merely stopped hindering. Now some of those who worship at the altar of “great leaders” may argue that by getting out of the way politicians still “help create” good things. That is like a man claiming he helped heal his wife because he stopped hitting her with a 2 x 4.

Getting out of the way, so that others can create, is not helping. It is merely ceasing to hinder. The value that results is entirely the result of those who do the actual innovation.

The truth is that John McCain wasn’t even in the Senate when the deregulation, which allowed the innovation to take place, was passed. And, more importantly, no politician can take credit for what the private sector does.

The politician has only one tactic he can use -- that is force. Politics is not the art of consent or voluntary exchange. It is coercive manipulation of people. It can distort and destroy but it can’t create net value. It can only redirect value or redistribute it. But the redistribution of value is not the same thing as creating it.

Let us say that the political process puts some money in my pocket in the form of a subsidy. I then go out and use that money to put something of value into my life-- say a new television. Should the politician get create for creating some value? No. This is merely another version of the fallacy that Frederic Bastiat exposed almost two centuries ago in his essay “What is Seen and What is Not Seen”.

To give me a television, or the resources to buy a television, the politician must first take an equal amount, or more, of resources from others. The value that is created is my life exists only because it is first destroyed in the lives of others. No new net value is created. Existing value is merely redistributed and in the process of redistribution some of that value is consumed by the political process. The actual net result is a destruction of value.

The politician who claims his highway legislation creates jobs is equally concentrating on what we see while ignoring what we don’t see. We see the highway workers. And, if we look no further, we assume the legislation created jobs. What we don’t immediately see is how those workers are paid.

The income that they receive, thus “creating” the jobs, first comes from taxpayers. Those funds are no longer available for use in a manner that satisfies the taxpayer. He can’t spend the money where he wishes. For simplicity assume that there are merely two ways of spending that money -- one is on highway construction and the other is on shoes. Consumers get more highways but fewer shoes. The shoes they would have bought are never made, shoe sales are lower than they would have been had consumers been free to spend their own money, as they wished. The number of jobs in the shoe industry is lower than it would have been had the politicians stayed out of things.

The “creation” of jobs is an illusion. Yes, jobs now exist in highway construction that wouldn’t have existed before. But jobs that would have existed in the shoe industry are either destroyed, or prevented from coming into existence. What is given with the one hand is first taken with the other. And since, as the resources are moved from one hand to the other, a bit of them are put into the pocket of those doing the redistribution, the total value of jobs created is smaller than the value of jobs destroyed. The result is a net loss.

If a businessman took $1 million from the company account to run a division that produced $750,000 in income, everyone would see it as destroying $250,000 in value. But the politician is not so obvious because he isn’t taking the costs from the same account where the income is deposited. He is taking from the accounts of millions of people and showering it on a few select people. People see the millions showered on the favored few and tend to ignore the millions of petty thefts necessary to hand out this “generous” gift. By distributing the cost among millions of accounts the actual cost of the “benefits” is hidden from the public. And the politician gets away with pretending that he has actually created something.

John McCain didn’t “help create” the BlackBerry. No politician did. Barack Obama can’t “create jobs” as he promises to do. No politician can. The absurdity of the remark about telecommunications is precisely the same lie that the Obama camp tells about creating jobs. Of course, the Washington Post won’t run a story about that. While they don’t buy the BlackBerry illusion they do believe the jobs illusion. While they don’t think McCain can create telecommunication innovations they do think Obama can create jobs. So before they too loudly condemn the absurd remark by the McCain adviser they ought to first look in the mirror.

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