One of the least understood attributes of capitalism — and one that even most business owners don’t understand — is that businesses don’t create jobs. Customers create jobs.
I had this argument with the owner of a furniture store chain. He said he took over a failing furniture store chain and saved 50 jobs. I shrugged, and said “if people want to buy furniture, they’ll buy furniture, and someone else will open furniture stores to sell furniture to them, so all you did was keep those 50 people from having to find jobs at other furniture stores.” He didn’t get it. He just saw his business, not the economy as a whole. But the reality is that any year X, Y people will want to buy furniture and will spend $Z buying furniture. And if this guy’s furniture store goes out of business and gets none of that $Z, then someone else’s furniture store will get that money — and have to hire more people in order to meet the additional demand — or someone else will see that there’s not enough furniture stores to meet demand, and will open their own furniture store.
Indeed, the whole point of capitalism is that if one business doesn’t meet the needs of customers, another business will arise to fill that need. Capitalism *requires* buggy whip makers to go out of business when automobiles replace buggies as daily transportation. The whole point of capitalism is to allow new businesses to arise to meet new customer demands that old businesses won’t or can’t meet, and old businesses that miss the innovation boat, like Eastman Kodak, go out of business. Otherwise we wouldn’t need capitalism — we could just go back to the old pre-capitalism economies, before stock markets and fractional reserve lending. But of course we’ve discovered that capitalism is the best way to meet consumer needs, because capitalism allows old businesses that don’t meet consumer needs to die, and funds new businesses that do meet consumer needs, and does this all in a successive approximation manner that, in a true capitalist system, keeps consumers the happiest with the goods available to them for purchase.
Apply this principle to the “too big to fail” banks, which continue the risky practices that led to their problems in the first place, and you’ll see exactly the *opposite* of capitalism. You will see banks that should be out of business, that aren’t. What you’re seeing isn’t capitalism. What you’re seeing is corporatism, which is entirely the opposite of capitalism because it refuses to let zombie businesses die, instead propping them up with bailouts and handouts long after they should be laid to rest and new, better businesses funded in their place. If the $2 *TRILLION* that the Federal Reserve used to re-capitalize the banking system had instead been used to create new banks, *better* banks, how much better off would we be today? A lot, I submit. Because the zombie banks simply aren’t doing their most fundamental job under capitalism — the funding of current capital improvements paid for by future profits produced by the future goods produced by those capital improvements — and instead are gambling with the money. Which isn’t capitalism, because in capitalism, JPMorgan Chase would be *GONE*.
– Badtux the Economics Penguin