Terence Corcoran endorses a neologism from Bob Hoye, which seems to perfectly capture the current notions about the role of government in the economy:
In the economic culture of our time, in which government is seen as the engine of growth and prosperity, maybe it is too much to expect anything more. We live in what veteran Vancouver investment advisor Bob Hoye has called a jukebox economy. “Jukebox economics,” he wrote recently, “is a suitable description of the notion that the economy can only be kept going if the government feeds it quarters.”
So long as jukebox economics is the dominant economic ideology in Canada and elsewhere, the orthodoxy that guides our politicians and the conventional wisdom our media feeds off, we will continue to get budgets like the one Mr. Flaherty delivered on Thursday. In his speech he kept pumping quarters into the machine, calling the spending “investments” and describing the outcome as “jobs.”
Quarters in, jobs out. “We are in the middle of the largest federal investment in infrastructure in over 60 years. We are putting Canadians to work.” Are these good investments producing worthy jobs? Will they boost productivity and real economic gains that will actually generate what Canada desperately needs, which is greater wealth and progress that actually increases the standard of living for Canadians?
Nobody’s really counting. The word “productivity” didn’t cross Mr. Flaherty’s lips, even though it is universally acknowledged as Canada’s single greatest weakness. Even in the best of times, Canada falls behind. In the 424-page official Budget 2010 document assembled by scores of economic experts, the productivity problem is studiously avoided. The case is never made that the massive multi-year spending plans could really generate productivity gains, most likely because Finance Canada officials know they don’t exist. Of about 15 mentions of productivity gains, most are associated with a few tax cuts and the tariff reduction on manufacturing equipment imports — one of the few worthy measures in the budget.
It’s become a common notion that the government has a tap, marked “jobs” which they can easily turn on and off. This is why so many journalists demand that the government “create” jobs — they think that not only is it the government’s role, but that it’s a unique one. Individuals and firms don’t create jobs, in this mental model, unless the government prods them into doing so.
It’s another example of cargo cult thinking . . . that by some form of sympathetic magic, the government can induce the sky gods to produce the required manna on demand.
