The "wealthy" do not create jobs.. *DEMAND* creates jobs

[scheming daemons]

When there is demand, then investment dollars follow to supply that demand.

It is why the Supply-Siders of the Reagan era had it EXACTLY backwards.


Wealth doesn't "trickle down"... it "flows up".


When you put money in the hands of the consumer, you create demand. And that demand creates new goods and services.... and those new goods and services create jobs.



Yes... a "rising tide lifts all boats".... but the consumers are the tide!



This is what needs to get hammered home... over and over and over. Trickle down didn't (and won't).


Jobs come from increased demand. Repeat it over and over.

[RUMMYisFROSTED]

1. Stop following the narrative.

:think:

[hughee99]

2. But "demand" doesn't front the money.

If someone doesn't put up the money to produce a product that might meet the demand, the "demand" doesn't get supplied. I'm not arguing for supply-side, but you seem to be glossing over a key component.

[louis-t]

6. Your statement does argue for supply-side.

Demand creates need, which requires investment, which creates jobs. The demand HAS to be there first. No one is going to invest in something because it "might" meet a demand that hasn't happened yet.

[hughee99]

9. Like the personal computer?

At the time, there was essentially no demand for it.

[kdschnitz]

10. Demand doesn't stand on its own...

Many inventors/companies/investors create products for which there is no current demand. They invest their knowledge and resources to create markets in an area in which no demand existed. Some fail spectacularly, others bring us things like the computer, the cell phone, the microwave. How do we reward rather than punish these creators of 'demand' that risked everything they own to bring a product to market? Oh yes, I forgot we call them the greedy rich and devise tax structures to 'punish' them.

[doc03]

12. The Demand is still the driving force, the reason those people

created a product was to make money. If the consumers didn't have the money to spend there would have been no demand for the product. You call taxing a businessman's income punishment. I f-----g worked all my life and was punished plenty, why should they get off free?

[unblock]

13. tax structures to "punish" them? you mean, like corporations, depreciation, and patent protection?

yeah, we're all about "punishing" anyone involved in bringing spectacularly successful new stuff to market.

that probably explains why bill gates and warren buffett are on welfare. they've really been punished hard.

[kentuck]

15. Which of those have been punished??

Some of the wealthiest people on earth have profited from those items you mention. I think they have been rewarded quite well. Perhaps you have other examples? Is it possible to have more money than you need or could ever spend??

[louis-t]

29. No, we must give them all of our money and hope

that some trickles down to us someday. I smell trolls.

[hootinholler]

34. Welcome to DU!

So what would you suggest we do?

Oh BTW, The computer? There was a huge demand for them. Made IBM a lot of money. Cell phones? Demanded by everyone who had a flat and had to walk to a pay phone to call for help. The Microwave? Google 'radar range' sometime.

Enjoy your stay.

-Hoot

[hughee99]

36. There was a huge demand for the personal computer?

Yes, YEARS after it first came to market.

http://www.blinkenlights.com/pc.shtml

The cellphone was commercially available in the 70's. The microwave oven was commercially available in the 50's. To suggest that the first person to market them was "meeting a demand" doesn't seem to make a lot of sense. These entrepreneurs were marketing their "supply" before there was a demand for the product. For everyone of these products that eventually found it's market, there are thousands that never did.

[hootinholler]

43. I wasn't talking about PCs, but since you bring it up...

Yes there was a demand for personal computers before the critical mass. There were companies employing people manufacturing things like S-100 boards, paper tape drives, card readers, etc. So yes, there was demand.

-Hoot

[hughee99]

44. The first "affordable" take-home PC is from 1950.

It sold 400 systems in the first decade. This isn't to say that corporate computing wasn't, to some degree, in demand for many years, but this system was created for home use LONG before there was any demand. A lot of systems came out and disappeared well before a market even existed starting around late 70's.

[w4rma]

38. The inventors don't tend to be very wealthy. The "greedy rich" get wealthier off them, however. nt

[Fumesucker]

60. Welcome to DU..

I hope you enjoy your stay..

[RaleighNCDUer]

8. If the demand is there, SOMEBODY will step in with the funding, because

that's how they make money. If that somebody is not a single rich entity it will be a mash up of lesser entities - like co-ops - that will see that demand is met.

You know, that's the origin of banks - hundreds of little investors whose combined money funds things that make all of them just a little bit wealthier (and the bank owner a lot wealthier). If the banks stop sending that money back out again as loans, nobody makes any money. Not even the bank owner.

[hughee99]

33. The problem is that it's easier to find a few rich entities

than separately line up dozens of lesser entities. Some companies will fail not on the concept, but because of their lack of ability to line up a sufficient amount of investment money. Banks are certainly not in the business of lending money to anyone who has a product they THINK will meet a demand. Banks can make plenty of money making loans only to established businesses rather than taking a gamble on a new product. In today's environment, a bank would prefer to lend money to a corporation to buy a start-up rather than loan that same money to a start-up. They might get a better rate on the start-up's loan, but the corporation's loan is a safer bet.

[RaleighNCDUer]

40. You are only looking at it from the business side - which is the problem.

There are two aspects to 'demand' - a need for the product and the capability to purchase the product. The home entertainment industry was revolutionized by the VCR - by 1995 it was a rare household that didn't have a VCR. So the 'demand' was there when the product was introduced - but Sony got cut out because their version, the Betamax, cost 4x the price of the normal VHS. It was WORTH the price - only Beta offered 4-head players, freeze-frame capability, fast re-wind, and high-quality heavy-duty cassettes that could take a lot of daily punishment - but the demand was not there for a machine that cost 4x as much which only afficianados appreciated.

Demand is not only for product, but the public's capacity to pay. Henry Ford created demand for his vehicles by pricing them so they'd be affordable to his own workers. He knew that if the people did not have the money, or enough money, that they wouldn't buy.

That's what is insidious about off-shoring. When American workers' wages are depressed for lack of jobs, there is no impetus for them to buy - they restrict their buying to necessities. With them restraining their buying for lack of funds, the producers stop producing because there is no 'demand' for their product. Everybody loses. Banks are not going to lend to business that have no customers. But if the money went to the customers FIRST, if there was money out there waiting to be spent, somebody is going to come up with a product to get that money. It starts with the people having money, not with the banks having money.

[hughee99]

42. Yes, the home entertainment industry was revolutionized by the VCR

Sony first introduced a "similar" VTR in 1964 and sold about 200 systems. VHS came about in 1977, but still took 5 or 6 years to really take off. It's not just a matter of having a good product or even being able to price it competitively, sometimes it's also a matter of being sufficiently funded until the demand can take off. Sony didn't have an issue here, but if this was the John Smith video company running on a personal or small business loan from 1975, it wouldn't have survived. John Smith would have either had to find a small number of big investors or a large number of small investors. If John Smith's "thing" was electronics, he may not have had the kind of personality that would enable him to court a large number of small investors.

[guruoo]

16. Banks front the money. Why?

Demand.

[taupe]

17. Demand is the last thing that happens

Interesting discussion. Of course, there must be consumer demand for a product. But demand is the LAST thing that happens in the chain. The customer purchasing the product is the FINAL act. The first is that an entrepreneur gets the idea for a product, develops a prototype, raises money either from friends and family or investors. Then he builds the product, advertises the product and finally, sells the product.

It is the imaginations of entrepreneurs that get this process going, not demand.

Think about the future. We will "demand" all kinds of things that have yet to be invented. The ipad is a good example. People did not "demand" it, Apple invented it because they know what people like and so they designed and produced them. I would have liked and iPad about 20 years ago, but my wanting it, my demand for it, did not produce it. I even had the money to purchase it. So, demand does not start the productive proces, it is the last step in the process.

[louis-t]

31. You're completely leaving out existing products and

services. If demand increases for an existing product, the company can then expand. But just giving them money and tax breaks will not cause them to expand. And yes, it is interesting.

[Raineyb]

20. You are arguing for supply side and you have it backward.

People don't go into business to produce good because they have some money in their pocket burning a hole in it. People go into business because they see a need (demand) and think they can make money filling it. The investment comes when bigger money people see a business that's making money and want to make some off what was already started. NO new business entity comes about because someone had a whim and decided to dump money into it.

[taupe]

21. Where do you find this demand?

Almost every entrepreneur starts his business with what you call a whim. He has an idea and he starts a business. I work with entrepreneurs so I know this for a fact. They are not "dumping money in it." They are doing what they think is a smart investment. Many entrepreneurs fail. That is because demand was NOT there. If you take what you are saying as true, entrepreneurs would never fail. They do.

Recognizing a need is very different thing from demand. Different entrepreneurs will have very different ideas about what the demand is for a product. There is no right answer. People demand everything. Who would not like a better car? a nicer house? new clothes? dinner at a better restaurant? People have unlimited demands.

In addition, true demand depends on the price of something. The cheaper something becomes the more demand. Look at the price of televisions or cell phones. The cheaper they become, the more demand. So there is no true number for demand.


The entrepreneur starts the process, not demand.

[provis99]

25. they are building something because they think there will be a demand for it.

How did your thinking get so bizarre?

[taupe]

30. Exactly. Because they THINK there will be demand for it.

And different people, different entrepreneurs, have different ideas about what the demand will be for some new product.
So there is no objective answer. It is subjective. Demand can be proven AFTER a product has been invented and produced, not before. And as I stated earlier, demand depends on price.

You make it sound like it is totally obvious what new products to produce. The smart or lucky entrepreneurs succeed and the not so smart ones go out of business.

[Raineyb]

46. Wrong, wrong, wrong. You still have it backwards. And an econ 101 class would tell you this.

Demand starts the process. Supply fills the need. Businesses fail because the demand is not there in sufficient numbers to sustain their business at the price that the supplier is trying to get. I have never made the argument that entrepreneurs would never fail because the demand is always there. That's ridiculous and does not comport with the laws of supply and demand. There will always be people willing to buy things at a very high price, and a lot of suppliers will go into the business thinking they will make a lot of money, but the number of people who will want to buy at the high price is very low. But the demand is still there. For example, when the PC first came out for home use there were very few people who wanted it because it was very expensive and not worth the expenditure at the time. But as the manufacturing process innovated to the point where the parts became a lot cheaper, and the suppliers could put out more and it shifted the supply curve so that the price dropped to a point where there was more demand for it. The suppliers didn't create this demand it was always there just not at the price that they wanted at the time. Suppliers never generated that demand. They STILL don't generate that demand and putting into place policies that prop up supply without doing anything to increase demand will not help the economy because demand depends on how much money is available to spend. And if the money is tight, the buyer may want something but will either go without or substitute another item that's less costly.

Recognizing a need is noticing the DEMAND for something. Now there are plenty of entrepreneurs who go out there thinking there is a demand for something they can offer, and it's possible that the amount of demand that is out there isn't enough to sustain his business at that time. But entrepreneurs DO NOT create demand. Giving suppliers a bunch of cash to put out more product doesn't do a damn thing if those who buy are dealing with less money to buy things with.

You seem to be making the argument that we need to increase supply without taking into consideration that there has to be a commiserate increase in the amount of demand. It's a supply side argument and the current mess that is the economy proves that supply side economics doesn't work. What you're arguing will create a glut in the market where there's excess capacity because the suppliers are putting out more stuff than there are people who will buy it.

Entrepreneurs don't create a damn thing demand wise. And anyone who goes into business without knowing whether or not the market can absorb what he puts out in a way that makes profit is doomed to failure. No one made the argument that entrepreneurs can't ever fail. A very, very basic understanding of supply and demand would tell people that.

[kentuck]

3. and then labor creates more wealth...

and the owners of the capital then keep an unfair amount of that wealth created by labor as if they risk more than the folks that do the labor.

And greed being what it is, they whine if they are asked to contribute more, in the form of taxes, to our society.

But you are right, the supply-siders have it exactly opposite. Giving more money to the wealthy does not create jobs. Only the demand for their products will create more jobs.

[stray cat]

4. but not a demand for jobs - demand for supplies!

[elleng]

5. right, and demand arises when people have money to spend,

as we already have needs.

[OnlinePoker]

11. And yet, numerous times on this site it's been said we need to reduce consumption to save the planet

Reduced consumption=less demand=less capital available=less investment=less jobs=less consumption, a vicious cycle.

The fact that consumption does occur does not mean that jobs will be created in the States. As we see on every jobs report, the manufacturing base of the country is imploding. China has already used the hammer of U.S. debt holdings to keep protectionists at bay. Now might be time to just go and tell them to pound sand by imposing import duties and take the lumps that come. It will only get worse when they've bled every decent job from the west, but by then it will be too late...we'll have forgotten how to put anything together harder than pizzas.

[elleng]

26. it is true that consumption as it has occurred has damaged the environment.

What is consumed and how it is made are important matters. See our new batteries, encouraged by Prez O.

Rules to encourage U.S. jobs important, possibly import quotas, surely export encouragement. Don't tell anyone 'to pound sand,' it is after all a small world, smaller by the day.

[Ikonoklast]

51. Over 45% of the gross revenue of the S&P 500 is derived from exports.

They would suffer in a import duty war, and the resulting job loss would be tremendous.


We are still the largest manufacturing economy on this planet.

[dkf]

62. Our way of life depends on population growth and excess consumption.

This is what enables retirement also, the more workers for each retiree the better the retirement benefit.

[Vehl]

7. yep, trickle up, not trickle down

you hit the nail on the head!

[EOTE]

14. This SHOULD be common sense. Sadly, it's not.

I can't understand how any Laissez Faire capitalist can EVER suggest the wealthy need more money to stimulate any down-turned economy. That is suggesting that the wealthy are capable of creating jobs, they just don't have enough money to do so. What is insanely ridiculous about this assertion is that IF these wealthy people could create jobs profitably, they WOULD do so because they like money. If demand doesn't exist, there's no reason for those wealthy people to create jobs, after all, who would buy their product? If you create demand, the wealthy would WANT to create jobs because they know that people will be around to buy their extra product. It is so incredibly obvious that you need to work on demand first. But enough people buy the voodoo economic swill that this debate has to come up every few years. It's ridiculous.

[kentuck]

18. case in point...

They are sitting on $1.8 trillion dollars right now and are not creating any jobs.

[Brigid]

24. And meanwhile . . .

millions of us are struggling with debt because of the job-poor economy. All in that boat raise your hands . . .

[taupe]

22. The wealthy do not create jobs, entrepreneurs do.

And sometimes entrepreneurs get wealthy. That is how it works.

[EOTE]

28. Nobody creates jobs if demand doesn't exist.

And demand can't exist if people can't afford to buy a product.

[taupe]

32. Right. I agree. But what starts this process is the entrepreneur

developing a product, not some phantom "demand". People want everything. Everyone wants a good car, good clothes, etc. So there is unlimited demand for almost everything.

[EOTE]

35. The demand starts the process, not the entrepreneur.

At least, in economies like this, that is. I understand what you're saying, that a good entrepreneur can "create" a demand where one had not existed before. But if demand does not exist, such that people can actually not afford to buy this product, regardless of their want for it, then the entrepreneur is kind of out of luck no matter how special his product is.

[taupe]

37. Yes, that is right. But if demand starts the process, please

explain how that works. How does demand exactly start this process?

My opinion is that the entrepreneur starts the process and I have explained how I think that works.

[EOTE]

45. How can it be any more clear?

The entrepreneur won't even bother to market his product if there could possibly be no demand for it. The demand has to exist first. Without demand, the economy crumbles.

On edit: I think you may be confused as to exactly what demand is. It's not merely that someone "wants" something, it's that a person is willing to buy something at a particular price. To increase demand, money must go toward people with a high marginal utility of the dollar, and that's the middle and lower classes.

[taupe]

47. If what you say is true, there would be no entrepreneurs who

go out of business. They would all be successful because demand is there. Many entrepreneurs fail because the demand is not there.

Of course, the entrepreneur will not market a product if he thinks there is no demand for it.....well, duh!! The issue is that different people have different opinions about what demand there may or may not be for a product. They THINK the demand is there so they move forward.

Here is a question for you: Where does the entrepreneur go look to see if there is demand for something? You make it sound like it is easy or obvious.
Does the entrepreneur do a survey? A market study? If so, then the process begins with entrepreneur as I have been saying all along.

[EOTE]

48. Once again, you're proving my point.

If an entrepreneur thinks that no demand exists for a product, he won't try to make it. If an entrepreneur thinks that demand for a product, but that demand doesn't exist, the entrepreneur will go out of business. Either way, the demand needs to exist first in order to be successful.

Primarily, the entrepreneur will look at the state of the economy to see if demand exists. That's why entrepreneurs flourish in good economies. Either way, demand needs to exist first. It doesn't matter what the entrepreneur does to survey for demand, a market study, whatever. If demand doesn't exist, he either won't set up shop or won't be successful. It's rather self apparent.

[taupe]

49. You keep saying if demand exists. Where does one look

to see if demand is there? Look at the state of the economy? This is a little vague. So please answer my question -- where does the entrepreneur look to see if demand is there? You keep saying it is all about demand, so where does an entrepreneur look?

Of course the demand must exist for any business to be successful. That is not the point. The point is that this process STARTS with the entrepreneur thinking up an idea for a product and then bringing it to market. I am not arguing that demand must exist. OF COURSE IT MUST!

[EOTE]

50. I've answered your question in my response to it.

I suggest you go back and read it again.

Listen, this is rather easy. You have three people in the room: 1) An entrepreneur with an idea for a product. 2) A potential consumer with no money. And 3) The government with money to provide to stimulate the economy.

If the government wants to stimulate the economy, where will the money go? Will it go to the entrepreneur to help market his product? Or will it go to the consumer who can actually BUY the product? This is really economics 101. In a recession or depression, everything starts with money towards those with the highest marginal utility of the dollar. Otherwise, you're not doing anything to stimulate the economy, you receive no multiplier effect. What about this is so hard to understand?

As you say "OF COURSE IT MUST!" Yes, the demand must exist first.

Once again, without demand existing first, you have one of two options:

1) A foolish entrepreneur brings out a product which bankrupts him.
or
2) The entrepreneur never brings out a product to begin with.

Please try to use some semblance of logic when responding.

[taupe]

52. I was a math major and am as logical a person as you will find.

Plus, I have studied economics extensively. I have been an entrepreneur for 27 years and I work with entrepreneurs. I know a lot about entrepreneurship.

Your example is bogus. You keep saying it all starts with demand and you never give me a clear explanation of how.
Economies do not develop because the government gives people money. Is this how America developed? America is the economic engine of the world and we got that way because of entrepreneurship, not the government giving money to potential customers. Entrepreneurs drive innovation and it increases in our standard of living.

This is how the process works: An entrepreneur gets an idea for a product. He taps into his savings to develop a prototype. He shows the prototype to friends and/or investors and raises some capital in order to get started. He builds the first production run. He then advertises, markets and sells his products. Customers buy the products.

The customer buying the product is the last step in the process. The entrepreneur coming up with an idea was the first step. You even acknowledge that in your example. There is no demand for a product prior to it being invented because the product did not exist. How can there be demand for products that do not exist?

On the other hand, there is unlimited demand for all products. People always want stuff.

And another thing, businesses compete with each other to offer consumers a better value. If an entrepreneur invents a better electric car at a good price, consumers will stop buying Prius's and purchase the new car because it is a better value. The government did not have to give them any money to do this.

[EOTE]

53. You seem to have very little ability to grasp the current state of the economy.

Tell me this, oh wise entrepreneur. How does an entrepreneur create demand when the great bulk of the customer base can afford nothing but essentials? Tell me this one thing, how does an entrepreneur create demand out of whole cloth?

And once again, you demonstrate that you don't know what demand really is. You say there is unlimited demand for all products because people always want stuff. Well, that demonstrates how little you know about this issue. Demand is not simply the "want" of a product, it's the want combined with the desire to purchase a product at a given price.

The demand must exist first, otherwise there is no money to purchase a product. The state of the economy is explicitly linked to demand. Of course, an idea for a product CAN exist prior to demand, but without that demand, it can never be marketed.

Have you been paying attention even the slightest these past few years? Ever hear of this thing being touted as "the credit crunch"? Do you know what has brought this about? Do you think it's because entrepreneurs don't have enough money to market their wares?

And your final paragraph truly demonstrates your penchant for the unrealistic. You truly believe that a superior product will always beat out an inferior one regardless of the entrepreneur's ability to market? Regardless of the company's name recognition? For you, capitalism exists in this perfect vacuum. Reality is not like that at all.

[taupe]

54. That is exactly what entrepreneurs do, they create demand out of

whole cloth. They invent something that is less expensive and that does a better job. So, people will buy it. These items can be essentials, not just luxuries. That was what my car example was about.

You state " but without that demand, it can never be marketed". This is just wrong. I know many products that were marketed but had little demand. Those companies failed. You can definitely market something for which there is no demand.

There may be a recession going on but people still buy pizzas, still go to Lady Gaga concerts. She is an entrepreneur and invented a new type of entertainment.

We don't seem to be getting anywhere here. Your ideas about demand are so vague it is ridiculous. Somehow you tie demand to money to buy the product. Money is fungible. People substitute all kinds of things. There is no money dedicated to one specific demand item. If a company invents some new fiber pants that don't wrinkle, I buy those instead of the old cotton ones, plus they are cheaper. The money to buy this came out of the clothing budget.

[EOTE]

55. So you feel an economy can survive without a middle class?

That seems to be what you're suggesting. You also seem to suggest that an economy can subsist on nothing but failed good intentions from entrepreneurs. I guess hopes and dreams count as currency to you. And by the way, demand and money to buy a product are very much intertwined. That you fail to grasp this seems to be the root of your confusion.

[taupe]

57. Now you are changing the subject.

All I ever said was that the FIRST thing in the process is the entrepreneur's idea and actions, not demand. Most entrepreneurs are middle class by the way.

[EOTE]

58. By believing that, the logical extension is that the middle class don't matter.

You could simply have an owner class and the poor and any good entrepreneur should enjoy incredible success. Because after all, demand for their product exists because people want it so much. That they can afford it doesn't matter. Nope, the entrepreneur is so good, he gets you to buy the product whether you can afford it or not. Do you plan on answering any of my myriad past questions? Do you know what the credit crunch is? Do you know what caused it?

[taupe]

59. Nope.

I said most entrepreneurs are middle class. They own the dry cleaners, the shoe repair shop, the computer fix it store, etc.


"he gets you to buy the product whether you can afford it or not" This is absurd. People buy things because they find value in them.

Nope, no more answers from me. You get way off point. Plus, your comments about demand are so vague that there is no point in discussing it any more.

[EOTE]

61. So you can't answer any of those questions.

Well, thanks for nothing, Supply Side Jesus.

[CTyankee]

63. Jevons "catena" is called to mind here:

Cost of production determines supply;
Supply determines final degree of utility.
Final degree of utility determines value.

Oh, how I struggled with the Marginalist School when I took an Econ course in grad school...

[lib2DaBone]

19. The supply Side myth has become so ingrained since 1980...

that even with overwhelming proof of its failure... they refuse to change.

[Brigid]

23. Henry Ford understood this too.

He may have been an anti-semitic jerk, but he was smart enough to know that it made no sense for his workers to be building cars that they themselves could not afford -- especially when those cars were intended for people just like them. So he made sure his cars were priced affordably. He knew where the economic engine of the country was really located.

[Supply Side Jesus]

27. I LIVE!!!!

Just when you thought you sealed up the tomb, I have RISEN!





http://www.youtube.com/watch?v=AK7gI5lMB7M

[sendero]

39. It's so obvious they all know it..

... they just are using the economy to further rip off the middle class.

[Rex]

41. Wealth creates bureaucracy.

And sometimes has the rare offshoot of help for the poor, but not much.

[B Calm]

56. Consumers create jobs! and the consumer needs a BAIL-OUT!

[CTyankee]

64. Yes, I believe this. One of my ESL students is a small business owner

from South Korea. He has a nail salon and hires (mostly hispanic) women to provide the services, mainly manicures and pedicures. When demand goes up he hires more staff. Of course, I'm sure he would like a cheaper rent and cheaper supplies (without impairing quality) but the main determinant for him is demand...