Disbanding Troops and Bureaucrats and the Fetish of Full Employment

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Disbanding Troops and Bureaucrats and the Fetish of Full Employment

To the economically uniformed, nothing is more terrifying than millions of workers — whether they be troops after a war or bureaucrats after a department is shut down (if that ever happened) — suddenly being forced into unemployment. Although the market is not perfect and there will be a temporary adjustment period required to reintegrate these workers back into the structure of production, this process has happened with astounding speed during past historical episodes.

When we examine the root of the issue, it is easy to understand why the market can be so dynamic in the face of such a difficult task. If we were dealing with a balanced budget, “the government will cease to support the soldiers [and] the taxpayers will be allowed to retain the funds that were previously taken from them in order to support the soldiers.” Now the taxpayers, as is the case in the other instances previously examined, have the additional funds with which to spend or save as they please while industry expands into new profitable areas.

Additionally, assuming that the soldiers or department was no longer needed, their continued employment is 100% economic waste. Instead of taxpayers paying for idleness and tax consumption, these same taxpayers, now acting as consumers, have their purchasing power rise by “at least as much as the income and purchasing power of the former officeholders go down.” This means consumers will purchase the new products created by the formally disbanded members and total production in society will be vastly higher. Increased production leaves everyone will be better off.

Hazlitt humorously summarizes the issue by imagining a thief who steals your money. “After he takes your money he has more purchasing power. He supports with it bars, restaurants, night clubs, tailors, perhaps automobile workers. But for every job his spending provides, your own spending must provide one less, because you have that much less to spend.”

There are complications to this story when we consider these workers are often paid running unbalanced budgets. The full effects of the budget-deficit complication will be considered at a later time. Suffice it to say, however, that the fact that deficit financing exists does not change the scenario above, “for if we assume that there is any advantage in a budget deficit, then precisely the same budget deficit could be maintained as before by simply reducing taxes by the amount previously spent in supporting the wartime army.”

In the end, if “we can find no better argument for the retention of any group of officeholders than that of retaining their purchasing power, it is a sign that the time has come to get rid of them.”

Preserving jobs for the sake of preserving jobs has long been an aim of governments and unions everywhere. We can’t lose sight of the fact that jobs are a means to an end, “we cannot continuously have the fullest production without full employment. But we can very easily have full employment without full production.”  Full production means resources are being used effectively, as determined by the profit and loss test. Full employment could mean anything.

In fact, government directed full employment often means times of diminished standards of living . Public works programs may employ individuals during the government-caused Great Depression, but are they doing the most urgent job that needs to be addressed? Hitler provided full employment during World War II, did that armament program increase or decrease the wealth of Germans and the rest of the world?

Hazlitt concludes the point by arguing “the real question is not how many millions of jobs there will be in America ten years from now, but how much shall we produce, and what, in consequence, will be our standard of living?” Production is the focus, employment is the means.