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- Milton Friedman went to China on a tour.

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The Chinese delegation there showed him

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a new canal building project
that they were working on.

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Friedman asked the delegation,

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"Can I ask you why do you have men digging

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this canal using shovels?

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How come you're not using
earth movers or bulldozers?"

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And a member of the Chinese
delegation responded,

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"Oh, well, if we were
to use the big machines,

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we wouldn't be able to
create as many jobs."

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And Friedman said, "Oh, it's
a jobs creation program.

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I thought you wanted to build a canal.

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If it's jobs you want,
take away their shovels,

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and give them spoons."

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Job creation is on lots of people's lips,
especially politicians.

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I would argue that creating jobs is easy.

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It's the creation of wealth that's hard.

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For example, we could
destroy all farm machinery.

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That would create millions
of new farm jobs overnight,

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but I don't think anyone thinks

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that's the real solution to our problems.

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The point being that
economic progress comes not

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so much when we create jobs, that's easy,

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but when we destroy jobs
that we no longer need.

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100 years ago, over 40% of
the population was involved

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in agricultural jobs
of one sort or another.

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Today, that's under 2%,
yet agricultural output

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has boomed thanks to mechanization,

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and the invention of all
kinds of farm machinery.

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What happened to those
old agricultural jobs?

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As mechanization has made farm
products cheaper, people have

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had to spend less of their money on food,

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and are able to spend their
money on other kinds of things.

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The story of human progress
has been our ability

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to eliminate jobs by economizing
on the scarcest resource

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of all, human labor, in
order to make the things

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that we want.

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Of course, new innovations
don't happen all at once.

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They happen gradually over time.

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And all technological innovation
means that workers have

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to learn new skills, and some are likely

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to be unemployed for some period of time.

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And while that unemployment is bad,

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the alternatives are worse.

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These labor transitions
are the price we pay

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for economic progress.

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To prevent them would be
to halt growth, innovation,

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and the reduction of poverty.

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Job destruction also
signals young people about

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where the new jobs for the future will be.

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New jobs have come up that
have replaced the old jobs

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that were once in agriculture.

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Over the course of the
20th century, we've gone

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from a nation of farm
jobs to industrial jobs,

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to service jobs, to knowledge jobs,

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and market signals can
indicate to people what sorts

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of skills they should be investing in,

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and where the new jobs
of the future will be.

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Governments do not have these signals.

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In fact, many government
jobs programs are really

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about meeting the needs of politicians,

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not the needs of consumers
in the marketplace.

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Governments are good at creating work,

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but they're not good at
creating value generating jobs.

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If it's valuable jobs you want,

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you need people like Bill Gates,
or Steve Jobs who know how

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to create value and
generate meaningful jobs.

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The best job creation
program in human history is

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the free market and the
entrepreneurship that generates.

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[gentle music]
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