MILLIONAIRE’S ISLAND: A Simple Example of Why ‘Rich People’ Don’t Create Jobs (And What Galt’s Gulch Would Look Like)
As everyone in this country keeps blaming everyone else for our high unemployment rate, one assertion gets repeated so often that it is now regarded as fact:
Rich people create jobs.
Specifically, the argument goes, entrepreneurs and investors create jobs.
So if we want to create more jobs, the argument continues, we need to cut taxes on entrepreneurs and investors—to increase their incentive to create jobs.
Now, I’m an entrepreneur, and Business Insider employs about 75 people, up from zero four years ago. So if this assertion were true, I’d happily espouse it. It would make me feel great, believing that I had created all those jobs. And it would make me feel perfectly justified in paying historically low tax rates. (After all, I created these jobs!).
Unfortunately, as I explained in detail here, this assertion is wrong: Entrepreneurs and investors actually don’t create jobs, at least not by themselves. What creates jobs is a healthy economic ecosystem, of which entrepreneurs and investors are only parts. The more important part of the job-creation engine is a huge base of people and companies with plentiful disposable income. Specifically, millions upon millions of customers with money to spend.
Without our generous readers and sponsors and dedicated team, all the jobs I “created” at BI would immediately cease to exist (including mine). I’m patient and determined, but I’m not Sisyphus. And our investors are good people, but they’re also, justifiably, impatient (they, too, have clients to serve and jobs to keep). And I certainly couldn’t produce BI by myself. So if BI hadn’t quickly gained traction with readers and sponsors and hired a great team, my investors and I would have switched the lights off. And all those jobs would have gone “poof.”
Read more: businessinsider.com