Monday, June 6, 2011

Creating Jobs vs Creating Wealth

In this article I explore assumptions people have about “solutions” for making life better for black Americans. I explore several assumptions about creating jobs as opposed to creating wealth, stimulating the economy artificially, and “a rising tide raises all boats.” The information provided is designed to question underlying assumptions. It is provided to help readers think critically and participate in an online dialogue. We all want effective programs that truly help black Americans, but successful programs have to be based on valid assumptions. Programs based on invalid assumptions will not achieve desired results.

Dr. Watkins wrote the following in “Why Black Men Continue to Suffer, and Why It Must End Now” that was published in Your Black World on June 1, 2011. “… the state of black male existence and employment is at a 40-year low. But this 40-year low is preceded by a 400-year old problem. If we continue to address the problem in the same ways we have in the past, we will continue to reach the same conclusions and find the same faulty solutions. It’s time for a new day in black male America and that day must come right now.”

I couldn’t agree more. Since Lyndon Johnson in the mid-1960’s we have applied the same “solutions” that have either partially worked, not worked, or made things worse. Too many activists campaign for more of the same programs that have not accomplished desired goals. And we have continued to allow financial practices that result in dramatic swings in the economy. Every time it goes down, like right now, black Americans suffer the most.

We can explore destructive welfare programs later, but suffice to say, like those in Europe, American versions provide sops for those not taking part in the mainstream economy. The sops are supposed to placate the poor while others make billions.

When the economy has been artificially stimulated, the media makes much of the supposed-improved lot of black Americans who temporarily have more jobs, make more money, etc. And this is when we hear “a rising tide raises all ships.” All this reinforces continuing to do the same things, allowing a few to put billions in their personal accounts while temporarily creating jobs that are not based on creation of wealth. Of course, this financial house of cards always falls and many black Americans lose their jobs and their homes. And media and government focus is on rebuilding the same house of cards so we can do the same thing all over again.

There are a number of ways to artificially create jobs without creating wealth. The most recent fiasco is a good example. As our American population grew people needed a place to live. People designed rental property or houses, other people built them, other people sold them, and other people made loans to those desiring to purchase. All of this created wealth as long as the renters and purchasers could pay their rent or make mortgage payments. In the past banks held the mortgages until they were paid off, making their money from interest.

But Wall Streeters and bankers are full of creative ways to make money for their personal accounts that create no additional wealth for the rest of us. Their questionable financial practices result in dramatic swings in the economy. These practices need to be examined and changed so that we can stabilize the economy and focus on the systematic problems that cause black Americans to be at the bottom of the heap. Until this is done, the economic swings and welfare sops will continue and many black Americans will continue “in their place.”

As is often the case, a Wall Streeter/banker “gimmick product” got us into our current mess. Instead of continuing the time-tested practice of bankers holding onto mortgages until paid off, they came up with the idea of packaging various types of mortgages and selling them on the market as separate products. These “products” were divorced from the wealth associated with houses and loans. Selling those produced fees used for Wall Streeters’ and bankers’ salaries and bonuses but created no additional wealth. The huge salaries and bonuses resulted in some of this “funny money” flowing into the economy, artificially stimulating the economy and artificially creating jobs. But all of this was divorced from the original wealth created through building rental buildings and houses.

Today stocks and other gimmick products are owned for seconds instead of being owned for years. This is true of your 401 (k) retirement package, which allows those handling your retirement money to buy and sell “things” as much as they want. This generates more and more fees that generated higher Wall Streeters’ and bankers’ salaries and bonuses.

As everyone knows there are other issues in the black world that need to be examined and addressed. But it will be extremely difficult to do so as long as we experience artificial economic stimulation, “boom or bust” economic swings, and a few making billions. Joseph L. Bass, Ed.D.

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