a recent column for The Wall Street Journal, Cypress Semiconductor President and CEO T.J. Rodgers tried to defend capitalists and in the process, showed that he really doesn’t understand how markets work at all.In
Rodgers’ editorial was pretty much your standard right-wing talking point piece about how important so-called “job-creators” are to the economy. Without rich people like him, he argued, there would be no investors, no businesses, and no jobs. Therefore, he argued, raising taxes on rich people like him is counterproductive because it sucks away capital from the people who can best use it.
To prove his point, Rodgers brought up an example from his own life. He wrote:
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“A couple of years ago, I decided to invest in my hometown of Oshkosh, Wis., by building a $1.2 million lakefront restaurant. That restaurant now permanently employs 65 people at an investment of $18,000 per job, a figure consistent with U.S. small businesses. If progressive taxation in the name of ‘fairness’ had taken my “extra” $1.2 million and spent it on a government stimulus program, would 65 jobs have been created?”
What Rodgers is saying is that he is responsible for the jobs created by his restaurant and that any attempt to raise taxes on wealthy individuals like him would take away the resources necessary to create more jobs.
This sort of argument has become so common, so ingrained in the right-wing meme machine in the 32 years since Reagan took office that it’s easy to forget how flawed it is.
Contrary to what Rodgers claims in his Wall Street Journal piece, business-owners don’t create successful businesses or the jobs they generate: consumers do.
Despite what you may hear from the talking heads on “Fox So-Called News” and CNBC, economies are driven from the ground up. They’re run on demand, by how much consumers actually want to buy goods or services. If a business doesn’t meet an existing demand in the marketplace, or create demand through innovation, it won’t succeed. It’s as simple as that.
I know this from firsthand experience. Back in the 1980s, my wife and I started a travel small agency down in Atlanta. I had very little money at the time and I used my $15,000 line of credit from American Express as our start-up capital. Like every entrepreneur, I took a risk. But what made that risk turn into a $6 million dollar a year business within a matter of years and gave our travel agency an edge over its competitors is the same thing that gave T.J. Rodgers’ business an edge over its competitors: we met a demand in the marketplace.
Unlike other travel agencies, ours identified a niche of smaller businesses or less frequent travelers to serve. The big travel agencies like American Express only wanted the business of big corporations and super frequent travelers. The small travel agencies only wanted to serve rich people who wanted cruises. There was nobody in our growing part of Atlanta that was serving the smaller business travelers. We were ahead of the curve and were rewarded for it both by making a lot of money and having our business featured on the front page of The Wall Street Journal.
Although much of it happened after we had sold in 1986, that little company we started on my line of credit went on to sell over $250 million worth of travel.
As long as our economy is based on some sort of free market system, businesses will succeed or fail based on market demand for their services. That’s why T.J. Rodgers’ argument that wealthy people are responsible for the jobs their businesses create is so wrong.
Even if the government did tax him so highly that he couldn’t use his own money to finance his restaurant, he still could have taken out a line of credit, like I did when I started my travel agency – like most small business do – and his restaurant still would have generated the jobs he brags about in his Wall Street Journal column. And it would have generated those jobs because it met a demand niche in the Oshkosh, Wisconsin marketplace.
The big secret right-wingers like T.J. Rodgers don’t want you to know is that you don’t even need a wealthy entrepreneur like him to make a business successful. Workers cooperatives work just as well.
A couple of years ago, I visited the town of Mondragon in the Basque Country of Spain, home of the great Mondragon Cooperative. The cooperative employs more than 90,000 people, includes more than 250 companies, and generates a yearly revenue of around $25 billion.
Like other good businesses, the Mondragon Cooperative satisfies a demand in the marketplace. The only difference between the cooperative and a big American corporation like Walmart, however, is that the cooperative is owned entirely by its employees and the most highly paid person earns less than six times the lowest paid person. Cooperative, worker-owned companies right here in the U.S., like the Madison, Wisconsin based Union Cab Company, have had similar success, all while flouting the traditional hierarchical model of capitalism.
Of course, the only downside to co-ops for someone like T.J.Rodgers is that they don’t let CEOs rake in the millions. For their workers, their customers, and their community, they’re a great deal.
The idea that wealthy business owners are the sole source of jobs in our economy is just one big lie. It’s time to put that lie to rest and start looking for alternatives to top-down capitalism, alternatives that offer the same benefits as businesses do today without enriching those at the top at the expense of everyone else. We really have nothing to lose but our chain stores.