MIDDLECLASS CONSUMERS ARE THE JOBS CREATORS

By Farouk Martins Aresa
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By Farouk Martins Aresa

6/7/2012 10:57:37 PM -

Let us face it Wisconsin USA sent a powerful message to the world. Union took another beating that started with the decline in their members over the years. Liberals have to go back into their trenches to come up with another way to expand middleclass. African unions must come up with better ideas than monthly strikes. Africa suffers more from cyclical recessions in Europe and America where conservatives have exploited union fear.

Big businesses and private firms exist to create profits, not jobs. They want technologies to increase productivity and reduce payroll and production costs while working the rest of their employees to dust. Ideological differences usually block what may be logical solution in a recession or in depressed economy. Indeed, union workers as most wages, gave back or remained stagnant while productivity soar by breaking the back of union.

On the other hand, excessive profit in the hands of a few buried in mattresses, under the soil, in foreign banks and the rest to buy luxurious items while refusing to pay their fair share of taxes cannot generate enough jobs, because only a few can afford to buy those luxuries. The more money in the hands of working class consumers, the more jobs are created and the higher the confidence level in economy.

Remember that your spending is my income and your income is from my spending. The employment of teachers, police and firefighters mostly fall on governments and studies show that when governments build and maintain infrastructures, the economy is stimulated and spending by the employed consumers create more jobs. It has never been cheaper for the US Government that drives world economy to borrow, than now.

Once a country, a block like European Union or a continent as Africa lose the confidence and the ability of it consumers to lend money, build roads, transportation and houses, recessions generally occur from widespread drop in spending, that often follow an adverse supply shock or the bursting of economic activities. It is the government's duty to respond to economic decline by adopting expansionary macroeconomic policies, such as increase in money supply, increase in spending and increase taxation progressively.

The conservatives will never stop talking about cutting benefits and wages for the middleclass but statistics show that while the rich increased their wealth even through wars and recession, the working class lost ground between dipping below and flat, as far as wealth is concerned. Conservatives refused to accept that they have abused their old slogan as job creators. Yet, they preach the same solutions that got us world recession.

Before the crash of stock markets in 1987, investors and businessmen could do no wrong since they were looked upon as job creators and consumers at their mercies. African politicians double as businessmen and partners. However, big corporations started downsizing, cutting the power of the unions and transferred jobs across the globe where they could get the cheapest labor. Factories opened up in Asia and land grabs intensified later in Africa to grow what is dictated.

In 2008 the paper profit generated by manipulation of the stock market tumbled down and new lexicons of too big to fail were applied to bail out the financial houses. The whole world went into recession closer to the last depression of 1920s. It became clear that the amount of greed that drove big business and clever investors was simply unsustainable. They were inflating numbers. Tax payer consumers had to bail them out.

The profit were disproportionately concentrated in the hands of top executives. Privileged investors in stock markets where paper chase, financial sorcery, edge fund bets by high-tech stock traders generate high returns by leveraging long and short-term derivatives in both domestic and international market for the superrich replaced good old fashion way of making profit, based on hard commodities and products transaction.

No matter how brilliant you are, your factories will not increase production if there is no demand from consumers. We must respect and encourage ingenuity of businessmen in general but special dues must be given to the small businessmen. By the same token consumers as job creators come out of the majority of people, not few people at the top. Indeed, the only way to generate profit is to encourage more consumers.

The reason for progressive income distribution is to create demand of moderately and low priced items that can stimulate factory productions and create jobs. Both middle and working classes spend a higher proportion of their income on such goods and services than high income earners. Expensive goods and services cater to the rich whose number cannot generate as many jobs as middleclass consumers can create.

Debates on who are the real job creators credit investors more than consumers. No doubt some investors may start job creation but without consumers it is a wasted effort, idle plants and unwanted products. Countries complain about jobs shipped overseas but African consumers with high purchasing power create more jobs in mining, agricultural and manufacturing industries globally than they do in African countries.

Big corporations that used to provide good benefits were laying off workers leaving job creation to small businesses. The cut in wages reduced both the buying power and number of middleclass globally. As the number of middleclass decreases, with structural adjustments in Africa, purchasing power, security and confidence were lost.

While developed countries go into cyclical recessions, African countries are left in permanent recession and any other description is glorifying a dead horse. No matter which school of thought Africa follows or adapts in each country: as in monetarists policy favoring the use of monetary expansion or Keynesian economists that advocate increased government spending to spark economic growth or supply-side economists that favor tax cuts to promote business capital investment; it is for consumer's business.

A country like Nigeria could have benefited from foreign factories because of cheap labor but the cost demanded by politicians in bribes and excessive profit cancel out low cost of labor. It is cheaper to grab in the name of privatization of government industries like gold mine in Ghana, diamond mine in Congo or agricultural land grab in Malawi for 99 years lease than build manufacturing industrial plants like automobile or oil refineries.

While the IMF stated in September 2010 that the financial crisis would not end without a major decrease in unemployment as hundreds of millions of people were unemployed worldwide and urged governments to invest in skills training, expand social safety nets for the unemployed and create jobs even as they are under pressure to cut spending; it had recommended dilapidating SAP and crony privatization for Africa.

Disclaimer: "The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of Modern Ghana. The contents of this article are of sole responsibility of the author(s). Modern Ghana will not be responsible or liable for any inaccurate or incorrect statements contained in this article." © Farouk Martins Aresa.

Judge not and be not judge, for there is no sin greater than none.
By: kayasha