No business like snow business

I was having a discussion with a small business owner friend this afternoon with the obvious topic of conversation being the white shroud of death overhanging our area. (I realize that, growing up in northwest Ohio, a 2″ snowstorm is much more common to me so I try to account for the local hypersensitive attitude toward winter weather. But I can’t always cut the local natives some slack.)

Anyway, his complaint was that the snow would not just kill his business today but that their likely closing tomorrow will also hurt him. Yet those who actually work for the school district won’t actually be hurting since they are paid whether school is in session or not.

Something about the conversation got us briefly onto the “broken window” theory – an axiom which contends that breaking a window would lead to positive economic activity because the homeowner would have to either purchase the supplies to repair the window (making a shopkeeper more wealthy) or hire someone to fix it (giving the service provider a job, who in turn invests the money in his family.) Obviously a snowstorm puts some people to work who wouldn’t otherwise be needed – private contractors who plow out driveways and parking lots, for example.

Of course, the problem with that theory is that the destruction of the window and repairs needed prevents the homeowner from addressing other needs with his money – instead of the cash going toward a new, more energy-efficient refrigerator or another item he would like to purchase, he’s simply replacing the investment to restore its full value.

In other words, like the ‘benefit’ to local snowplow operators measured against the lost productivity that the unexpected closing of school tomorrow due to the storm will present, the positive of the homeowner’s investment in fixing the window is only – at best – equal to the negative of having to make the repair. It would be like telling the man who just had the tornado blow through and destroy his farm he’s lucky because he now has the opportunity to build a better one; the problem is that everything he had of worth is gone with the storm.

All this reminds me of the specious argument about extending unemployment benefits as a boost to the economy. We are told that these benefits are good because they enable those who aren’t working to spend that money on their necessities and boost their local economy. On the surface this is true, but there’s nothing of value being created by those who are unemployed. Listen, we get angry when we hear about the auto workers who were paid by their employer to sit home during the occasional necessary shutdowns so why shouldn’t we get angry with this argument as well?

While I’ve been in the working field for most of the last 25 years, there have been three occasions where I was laid off long enough to collect unemployment. Still, I would wager that the premiums my employers paid have more than offset the few thousand dollars I’ve collected. And the system was designed as an insurance policy, with premiums and benefits calibrated to limited and infrequent stretches of joblessness. With me, it worked as it was supposed to.

But states had no expectation of keeping people on the unemployment rolls for nearly two years (and counting), so it’s no surprise their systems have all but failed. Now Uncle Sam is the one stepping in to pay, and it’s yet another case of the federal government bullying their way into state-level affairs. Last year Maryland accepted an infusion of federal cash to its unemployment fund in return for making the changes to their rules desired by the federal government.

To be gainfully employed, whatever your profession, generally means you are a net asset to the economy. The problem with the statist’s approach, embodied by their continual call for extending unemployment benefits, is that nothing being “added” to the economy comes from value – either the money is being borrowed or printed. Aside from a few people operating a printing press and the pencil-pushers needed to make sure the unemployed jump through all the hoops necessary to keep collecting checks ad infinitum, there’s nothing of value being produced.

As a society, it appears we are happy to break windows in order to put people to work. Personally, I’d rather allow those who produce to put their money to work as they see fit and not throw it down the rathole.

But then I’m the guy sitting here watching the snow fall – what do I know?

Author: Michael

It's me from my laptop computer.