Nick Hanauer’s TED talk—the one that apparently was “banned” (i.e., not immediately released on the TED site but available on YouTube)—makes the argument that middle class consumers, not businesses, create jobs. Consumo ergo sum, as Fr. Robert Sirico describes the general attitude in his new book, Defending the Free Market: The Moral Case for a Free Economy. Hanauer says it is “disingenuous” to attribute job creation to the wealthy when in fact it is the middle class, armed with sufficient spending power (i.e., wealth taken from the rich and redistributed), that drives up demand for products and thus creates jobs. Creating new jobs, Hanauer points out, is the “last resort” of businesses—only when demand outpaces production capacity will a business hire new workers.
Though roughly stated, Hanauer’s talk offers nothing very new or surprising. Other than his partisan indictment of Republicans and non-Keynesians more generally, there is certainly nothing incendiary or even particularly provocative about his ideas. Besides, Hanauer is an entrepreneur, not an economist, and his talk was only five minutes long. It would be unfair, then, to impugn him for failing to point out that Americans have already cracked the code of affluence and now enjoy an abundance of it. Tyler Cowen explains that America picked all the “low hanging fruit” in the decades following World War II. Compared to 1950, we expend half as much labor for a gallon of milk, a third as much for a kilowatt of electricity, a quarter as much for an hour of air travel, a fifth as much for a refrigerator, a seventh for a three-pound chicken, a tenth for a home air conditioner, and a fiftieth for the cost of a coast-to-coast phone call. We “have access to penicillin, air travel, good cheap food, the Internet and virtually all of the technical innovations that [Bill] Gates does,” Cowen observes. We have so much affluence, in fact, that John Kenneth Galbraith complained that man’s desires were “no longer even evident to him,” and that modern Americans “needed an adman to tell them what they wanted.”
Like Hanauer, I’m not qualified to challenge an entire school of economic thought, but let me pose this question: If Galbraith was right and modern Americans by and large are free from poverty classically understood (though not free from the modern liberal recasting of poverty as that “new and deeper searing” that arises with “envy of his neighbor’s new car”), then what meaningful economic progress is yet to be made? The modern economic problem, in my humble estimation, is precisely that, without continued innovation and entrepreneurial risk-taking, we would be left to conclude that the project of economic innovation and production is substantially done and that what’s left is to proceed with divvying up the loot. That is, Hanauer seems to suggest the fact that demand is high has nothing to do with the fact of innovation and entrepreneurial risk-taking—as if there was a demand for tablet computers before Steve Jobs created the iPad. While further prosperity is left to be had, Cowen points out, it will come only with increased investments of skill, capital, risk, and innovation. If there is merit to Keynesian theory, certainly it reached its peak in the mid-20th century when America was flooded with supply—the “low hanging fruit” which Cowen says we’ve gotten sick on. The need to incentivize new kinds of products and services, it seems to me, can only increase in an affluent society where the routine necessities of life—as well as a lot of really cool toys—are cheap and abundant.