Honolulu Advertiser Second Opinion column by Cliff Slater

December 23, 2002



Government cannot create jobs

Let’s understand one thing. Government cannot create jobs in the private sector. It can hire government workers, it can fund make-work projects but that is far different from creating private sector, wealth-creating jobs.

That is because free economies have a life of their own, virtually immune to attempts at positive government action but very much prey to the negative effects of high taxes, heavy regulation and capricious legal actions.

For example, take tourism, the backbone of our economy. Think of the major boosts to tourism over the years: Statehood in 1959, the first regular jet service in the early 1960s, the nationally broadcast Hawaii 5-0 from 1969 on followed up by Magnum P.I., the introduction of the 747 in the early 1970s, lower air fares due to airline deregulation from 1978 on, the effects of the Japanese “Bubble Economy” in the 1980s and, of course, the general increase in affluence in both the U.S. and Asia throughout this time. These were the primary events that boosted Hawaiian tourism up to 1990 and from which time tourism has been flat.

Note that the State government’s impact on all this was near zip.

Or take military spending in Hawaii. The driving forces here are the positive ones of Hawaii’s strategic location and the seniority of our senior senator, and the negative one of the higher cost of maintaining a military force here. The state’s actions can only tinker at the edges of this part of our economy.

Or agriculture. The driving forces are global agricultural production, Hawaii’s shipping costs, and the worldwide trend in dismantling tariff barriers. State government could not stop the implosion of our once great sugar and pineapple businesses.

These are all part and parcel of the general tide of economic events over which we have little control. As the German statesman, Bismarck, was fond of saying, “Man cannot create the current of events. He can only float with it and steer.”

Yes, government can create jobs with public works projects but, while these jobs can be economically worthwhile, many are just make-work.

Some highway projects are economically viable, but not the likes of the $1.5 billion H-3, the “Highway to Nowhere” (if you have any doubts, view the state’s H-3 webcams during rush hour). Most new libraries are worthwhile, but not before we have the money to stock them with books. Most new school buildings are worthwhile, but not before the existing ones have been properly maintained, the students have textbooks and the restrooms are usable.

Building projects that have little economic justification are just make-work projects on a par with digging large holes in the ground and then filling them back up. All we do is create temporary jobs but are then left with the debt hangover resulting from the project’s cost and little or no residual benefit.

What government can do best is prepare the business climate with the same care that farmers take preparing their soil prior to planting. Just as it is near worthless planting crops in barren soil, so it is near worthless to expect business to thrive in the nation’s fourth highest taxed state with a legislature that is generally anti-business and, seemingly, a community failing to comprehend that well-compensated employers must necessarily precede well-compensated employees.

This will all have to change if we are to have a fertile crop of businesses—the necessary precursor to getting our kids back home.

Cliff Slater is a regular columnist whose footnoted columns are at www.lava.net/cslater