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Friday, January 27, 2012

Paul Krugman: Jobs, Jobs, and Cars

Industrial clusters are more important than "heroic entrepreneurs":

Jobs, Jobs and Cars, by Paul Krugman, Commentary, NY Times: Mitch Daniels,... Indiana’s governor, made the Republicans’ reply to President Obama’s State of the Union address. ... Mr. Daniels first berated the president for his “constant disparagement of people in business,” which happens to be a complete fabrication. ... He went on: “The late Steve Jobs — what a fitting name he had — created more of them than all those stimulus dollars the president borrowed and blew.” ...
But ... Apple employs very few people in this country..., only 43,000..., and ... it’s not just about low wages. China also derives big advantages from the fact that so much of the supply chain is already there. A former Apple executive explained: “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away.”
This is familiar territory to students of economic geography..., companies that make a large contribution to a nation’s economy ... don’t exist in isolation. Prosperity depends on the synergy between companies, on the cluster, not the individual entrepreneur.
But... From the G.O.P.’s perspective, it’s all about the heroic entrepreneur, the John Galt, I mean Steve Jobs-type “job creator” who showers benefits on the rest of us and who must, of course, be rewarded with tax rates lower than those paid by many middle-class workers.
And this vision helps explain why Republicans were so furiously opposed to the single most successful policy initiative of recent years: the auto industry bailout.
The case for this bailout ... rested crucially on the notion that the survival of any one firm ... depended on the survival of the broader ... cluster of producers and suppliers in America’s industrial heartland. If G.M. and Chrysler had been allowed to go under, they would probably have taken much of the supply chain with them — and Ford would have gone the same way.
Fortunately, the Obama administration didn’t let that happen... And the details aside, much of Mr. Obama’s State of the Union address can be read as an attempt to apply the lessons of that success more broadly.
So ... Mr. Daniels ... got his facts wrong, but he did, unintentionally, manage to highlight an important philosophical difference between the parties. One side believes that economies succeed solely thanks to heroic entrepreneurs; the other has nothing against entrepreneurs, but believes that entrepreneurs need a supportive environment, and that sometimes government has to help create or sustain that supportive environment.
And the view that it takes more than business heroes is the one that fits the facts.

    Posted by on Friday, January 27, 2012 at 12:34 AM in Economics | Permalink  Comments (81)


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