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ARTICLES AND THINKPIECES

GOVERNMENT DOESN’T CREATE JOBS?!?!?!? SINCE WHEN???

A meme that has popped up into the zeitgeist lately, and we heard it again election night from Rand Paul, is that government doesn't create jobs.

Now, I'm no economist, but I've been in the business world for a long time, and that concept does not even remotely square with my experience or the histories of the fields in which I spend my days.

At MC Squared, we work primarily in three fields: digital media, CleanTech and commercial space. Let's look at each of them quickly.

Although software existed before, the beginning of today's digital media industry was the creation of the Internet. The U.S. Government's Advanced Research Projects Agency essentially created and funded the Internet, originally known as ARPANET. Once the platform was built, the inventors and entrepreneurs got involved, and, in the following decades, literally millions of jobs have been created worldwide. Suddenly, there was the World Wide Web, and then came Amazon, eBay, Yahoo!, Google, Cisco, Vonage, Facebook, Dell's revolutionary business model, modems, netbooks, and countless other hardware and software solutions. Anyone working at one of those companies who believes that the government doesn't create jobs doesn't understand why he or she has a job.

The entire CleanTech world dealing with renewable energy, energy efficiency, and energy conservation has been on hold, waiting to see if the U.S. was going to pass an energy bill that included some kind of cap and trade, carbon tax, or other renewable energy incentive. Both the left-wing tree huggers and right wing venture capitalists understand that government energy policy will determine how many startup companies will enter the fray, and, how many employees they will be able to hire. The fact that the capital community now understands that no comprehensive energy bill will be emerging from Congress has put a damper on VC and angel investment in energy solutions. In fact, just the presence on the ballot of California's Prop. 23, which threatened to roll back California AB 32 (California's forward thinking renewable energy/climate change statute), stopped investors from putting money into new ventures (investments that create jobs) while they waited to see how the election would affect their financial projections. Witness John Doerr, one of the premier venture capitalists in Silicon Valley contributing over $2,000,000 to defeat Prop. 23. He understands that AB 32 has been and will continue to be great for business, and, therefore, job creation. And, he was just one of several powerhouse VCs to give generously to protect AB 32. The Yes on 23 funding didn't come from the business community seeking to roll back a job killing measure; it primarily came from oil companies seeking to protect their turf from innovation.

With regard to commercial space, first of all, let's ask Boeing and Northrop Grumman if the government creates jobs. I think you know what they will say. SpaceX has a $3 billion contract with NASA to send payloads to the International Space Station after the Space Shuttle fleet is retired. Even Elon Musk's hundreds of millions of investment dollars weren't enough to bring the new rocket company to maturity. Government contracts were required. We have done presentations on the value of public private partnerships in creating NewSpace businesses. It is widely believed in the commercial space business (again, a non-partisan consensus) that President Obama's new direction for NASA will be a boost to the private space business. And, let's not forget that a private space industry would not even be possible without the original NASA space program. Again, government actions and policies directly creating private sector jobs.

This experience is true, not just in the industries I've mentioned above, but throughout the economy. Is anyone really going to argue that the federal funding and creation of the interstate highway system didn't create jobs by creating new national markets for local goods, and by creating a vibrant trucking industry? Does anyone think Halliburton and Kellogg, Brown and Root, as well as the company formerly known as Blackwater, didn't employ many thousands of people in Iraq by winning contracts from the United States government?

So, the next time someone quotes a pundit saying, "Government doesn't create jobs," don't buy the hype! Engage your brain!