Creating Jobs - Part II

Let's reiterate my central thesis to helping end poverty: The best way to bring someone out of poverty, is to provide them with a well paying job. Now on to part II of this piece...

You'll recall in my last post I mentioned that the best way to help developing nations is to follow the Marshal plan of post WWII Europe: Creating small aid centers within developing nations, have them give loans to promising small businesses, and have those loans repaid directly to the country's government. That will get much needed capital into the hands of local business people, force the government to create an atmosphere for those businesses to thrive, and, ultimately, result in more and better paying jobs for the citizens of that country.

To be honest, I didn't come up with that theory. It heard it presented by Glenn Hubbard of Columbia University. It made so much sense to me, though, that I finally asked another question: Couldn't we apply that to modern day America?

Think about it. The major problem facing America right now is unemployment. The only way to end unemployment is for jobs to be created. But small and medium sized businesses, the biggest engine of job creation in America, are on hold because they can't get loans from the banks. So what better solution than for the federal government to take its stimulus money, create local business aid centers, and start actively giving loans to promising, cash strapped small businesses. In addition, these loans would be repaid to the city, county, and/or state governments where these businesses reside.

I believe this is a much better plan than having the federal government give this money to local government agencies to have them build infrastructure. As I mentioned in my last post, just building roads and bridges for the sake of putting people to the work isn't the best expenditure. Instead, let's give that money to small companies that are doing innovative research or producing useful products or services.

In addition, by having these businesses repay the loans to their local government agencies, we would help foster a climate that is conducive to small business success. Living in Chicago, I can tell you how badly reform is needed. Simply talk to any new restaurant owner about what it takes to get a liquor license here and you will learn about bribery, favors, and the need to be "connected" to get anything done. This is not a good way to help a small business get started.

That corruption drains money away from businesses and, ultimately, from the citizens that business could employ. By having these new small business loans repaid to the local government, we'll be creating a real incentive for our local political leaders to clean up their act. It will also give them a reason to create better schools, roads, and efficiencies throughout our government because all of these things help businesses succeed. And if they succeed, the local government gets a fistful of dollars repaid to it.

In short, I think there are a lot of similarities between ending unemployment and poverty in the third world and helping America out of it's current financial crisis: Get businesses much needed capital and give an incentive for political leaders to create a business friendly environment.