Does “Make Work” Work?

As the economy contracts, calls are coming in for the government to create jobs.

In the ‘30s Keynes was puzzled by the sight of millions of job-seekers who couldn’t find work. The power of government spending fascinated him, and so he proposed that the Federal Government create jobs employ able-bodied laborers. The result was the NRA, CCC, and other alphabet agencies.

At its best, the job programs created valuable infrastructure: dams, roads, and schools. At its worst, it paid people to dig holes and then fill them up again.

Is there a difference? Sure. When economic resources are devoted to productive assets, everyone benefits. Think “Interstate Highway System.” But if money is spent producing something no one wants or can afford—like trophy homes in South Florida, or stupid tech start-ups—it gets wasted. And the people who built that useless stuff are really in a dead end. Something to think about as we walk down this stimulus road.

Douglas R. Tengdin, CFA
Chief Investment Officer
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