The headline-grabbing public opinion polls that document the decline in public esteem of our legislative bodies, both nationally and locally, speak of Congress as a whole, or the Legislature as a whole. “Public confidence in Legislature falls again” or “Public rating of Congress falls to all-time low,” they scream.
Closer observers of the political scene speak less in terms of the bodies as a whole and more in terms of their composition. They speak less of the numbers of Democrats and Republicans than of old-timers and newcomers. They note the increasingly gerrymandered districts and the loss of institutional memory. They think more about the makeup and turnover in the assembled body of politicians than about overall measures of the institution.
Much the same division exists in thinking about “The Economy.” The headlines scream about single numbers: “Unemployment rate falls,” “Business sector fails to create enough jobs,” “Inequality rises as top 1 percent grabs greater share of income.” As with broad-brush characterizations of “The Legislature” or “The Congress,” such crude generalizations about “The Economy,” while technically true, are of little value in shedding light on how “The Economy” actually works or what public policy will best achieve the goals we want.
Nowhere is this more evident than in policies toward “The Business Sector.” Business is not a monolith that does or does produce goods and services, does or does not create jobs, does or does not pay “its fair share.”
Business is millions of distinct enterprises, each responding to its unique set of circumstances. Every day, some start up while others close; some expand while others contract. “The Business Sector” is simply the unplanned, uncoordinated aggregate of all the individual openings, closings, expansions and contractions. Just like “The Legislature” and “The Congress” are the unplanned, uncoordinated aggregation of voting results across the state and the nation.
To make effective public policy, therefore, we must drill down beneath the simple aggregate numbers that scream from the headlines and look at their component parts. As an example, during the second quarter of 2008 – just as the Great Recession was picking up steam – Maine lost 2,702 jobs. But this net (and very serious) loss masked a wide variation of experience. During that same quarter, 8,048 businesses expanded – adding 29,636 jobs. And another 2,262 businesses opened, adding another 8,440 jobs. Clearly, the recession was not a time of uniform pessimism and decline.
The problem was that these positive moves were more than offset by the 8,747 businesses that cut 30,468 jobs and the 2,683 businesses that closed, costing 10,310 workers their jobs. The second quarter of 2008 was a bad quarter for “The Economy” not because things were uniformly bad, but because the bad things outweighed the good things in the final, single number.
Similarly, the second quarter of 2013 – during which Maine added a net of 598 businesses and 8,110 jobs – was good not because everything was good but because in that quarter the good outweighed the bad. Even though we had 8,070 businesses that contracted operations, costing the state 25,412 jobs, and another 1,974 businesses that closed, costing us another 5,727 jobs, others found reason to start and expand. Nearly 2,400 new businesses started and another 8,300 expanded creating a gross total of 39,249 new jobs, far more than enough to offset the job losses.
My central point in all this is to emphasize the underlying dynamism within what we not very usefully call “The Economy.” If we are to understand and help grow this dynamic organism to meet our goals of job creation and have the wherewithal to support needed public infrastructure and public services, we must move away from the simplistic, stick-figure, “See Dick run,” sort of models for understanding the way our social system operates.
We must embrace the complex churn of contradictory activities that is our economic reality and seek ways not to control them but to encourage some and discourage others, knowing that we cannot control outcomes with assurance but that we can, if we pay careful attention to the facts, feel our way carefully forward.
Charles Lawton is chief economist for Planning Decisions Inc. He can be reached at: