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Jason Kenney - body
- You also have to take into account the increase in the cost of goods. If an employer has to raise its employment costs 5% you can almost guarantee they're going to try and make that up elsewhere, increasing the cost of their goods to make up the difference in income. Even if the higher cost of employment had a minimal impact on the bottom line, many businesses may see this as a sign that more people have a greater amount of income with which to afford certain items. Up goes the prices and we're right back where we started.
- comment Bill Garnett
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- Classical economics, Adam Smith, and free market forces – all wonderful concepts and very efficient and practical methods of managing our micro marketplace activities.
Except – except that in this natural world the ultimate progression is that the weak eventually fall by the wayside and the strong ultimately accumulate all the wealth. It is a game of Monopoly played large and as anyone who has played Monopoly knows, it is no fun to play once someone else controls all the hotels on Boardwalk and Park Place.
Are you suggesting that the obscene pay packages of many, if not most, of America’s top companies are the result of free market forces? Hardly, they are the result of networked boards, good old boy networks, greedy contracts of these executives, and the impotence of the finely divided stockholders who have little ability to coalesce into an effective opposing force. Do you think that there are not capable managers in America who could competently run any American company and happily subsist on a salary of half a million or less? These overpaid execs are not there out of a fair market competition – they are there because of a system that is skewed in their favor.
Is the ratio of remuneration between a nurse and a physician, or a lawyer and a paralegal based on market forces? – Not a chance. Is the value of a business executive or engineer that much greater than a high school teacher or a social worker?
As to minimum wages – there is half the planet that exists on less than two dollars a day. Certainly there are millions who would gladly take jobs in America for a fraction of the minimum wage. Note the effect a flood of illegal Hispanics has had on construction industry wages.
The minimum wage is a contract with ourselves, an agreement within our larger community that anyone who exchanges his work for pay should at least get enough to sustain himself/herself above poverty. This is not free market – it is compassionate and Christian values.
When we take the obsession with free markets and free trade to the extreme, we are essentially saying let the raw rules of nature, survival of the fittest, trump human compassion.
There are other models in the world – we are so hysterical when “socialism” is even slightly inferred that we may fail to see the advantages of community policy that results in a more egalitarian, democratic, fair and compassionate society. Otherwise we will only continue this slide towards a bipolar society, a widening gulf between rich and poor – and eventually the seeds of social unrest. And this is not the American promise.
- comment Shaun Kenney
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- Beyond that, what is the crime in prosperity?
As for the market wages for lawyers vs. teachers, et al., I would very much argue the wages leveled are created by the free market in most cases. In fact, where they are artificially high or artificially low is where you find bureaucracy (the teaching profession is an excellent example).
How do you intend to fix the problems created by socialism with... more socialism?
I would agree with you entirely that an employer has a moral obligation to pay their employees a fair, living wage. But a minimum wage only acts as an artificial barrier, offering the excuse for employers to do only what the law says is just. That's a strike against charity IMO. Moreover, a "living wage" for a single male at 20 isn't the same as a living wage for a single mom with four kids at 45. Nor is it the same for two incomes and no kids, etc.
Lastly, I would argue that the "gulf" between rich and poor is ultimately meaningless. What is meaninful is that the poor have an increased standard of living that is fused with an opportunity to advance.
The free market is the single greatest vehicle for the creation of wealth in the history of humankind. Unfettered, it does remarkable things. Fettered, it chokes itself off. Minimum wage hikes only hurt those we are trying to help.
A better solution? Moral employers and market forces that allow an opportunity society to flourish.
Some thoughts, though I agree 100% that any just society should pay its employees what they are worth and never below the ability to live.
- comment D.J. McGuire
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- "Are you suggesting that the obscene pay packages of many, if not most, of America’s top companies are the result of free market forces?"
I can't speak for Shaun, but my answer is: yes, I do.
The salaries and severance packages are largely based on the companies performance. The better the firm does, the higher the rewards to the folks in charge.
Oh sure, it may sound nice to talk about capping salaries at $500,000, but then you risk reducing the incentive of said firm leaders to continue to build up the firm.
Moreover, given the heavy participation of retirement-contribution-driven mutual funds, the stockholders who are demanding better performance from the firms by greating said incentives for the folks in charge are none other than you and I.
- comment James Atticus Bowden
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- The overpayment of executives will be fixed by the market if it is a problem. If it doesn't make a company unprofitable and uncompetitive then it will continue.
Where does their money go? Remember the speech in 'It's a Wonderful Life'?
What is important to everyone is the growth in capital.
Milton Friedman pointed out in his book that per capita capital - increased 32 times in 9 decades (in 1960 the dollars in the economy per capita was 32 x 1870) - that is through the Great Depression and many teeth rattling Recessions. It means - because the capital produces and buys technology - houses, electicity, cars, radio, TV, clothes, food, etc etc for everyone and a much higher standard of poverty.
- comment Bill Garnett
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- I’m not sure I follow some of the comments. Are some suggesting that free market forces should have no constraints? Do some imply that even when there are no constraints, that the free market is the sole predictor determining economic transactions? Free market is a theory and well describes some economic transactions but there are many exceptions – the marketplace is not perfectly informed, people do not always act rationally, perhaps markets do not always act rationally.
Collective bargaining, regulation, monopolistic practices, and democracy itself impinge on free market concepts. On a democratic island of ten people with one owning the only coconut grove, what prevents the other nine from voting to take over the coconut grove?
And, all other things equal, increasing the minimum wage only changes the circulation of cash flows and does not necessarily lead to unemployment – a case can be made for increased employment.
As to those who automatically recoil at the mention of socialism, I can suggest that to only view an issue from one point of view (particularly if that point of view is one you were born into) is not to have an open and honest debate. How many Dutch will argue that their system is better than ours, or Muslims who will argue that their religion is the best, or Chinese who will argue that their form of centralized control is the best?
And facts are facts – wealth in America is highly concentrated and has become even more so in recent decades. And the middle class real incomes have become rather stagnant.
Perhaps this minimum wage debate would better be broadened to include a discussion of the common good, quality of life, and human needs and values broader than just accumulating wealth.
- comment Doogman
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- Well-said Mr. Garnett. Well SAID.
- comment Shaun Kenney
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- (T)he marketplace is not perfectly informed, people do not always act rationally, perhaps markets do not always act rationally
I assume then you reject the thesis of The Wisdom of Crowds?
On a democratic island of ten people with one owning the only coconut grove, what prevents the other nine from voting to take over the coconut grove?
Property rights and the rule of law. Which is why democracies fail, because there is no rule of law.
As to those who automatically recoil at the mention of socialism...
Granted. Then again, name one other economy that has consistently performed at the same consistent rate of prosperity as the American economy has? Perhaps Britain when not impounded under Labour... Japan once, maybe China...
And facts are facts – wealth in America is highly concentrated and has become even more so in recent decades. And the middle class real incomes have become rather stagnant.
But here's where the Marxism bleeds through. I reject the notion that there is a finite amount of resources, a finite amount of wealth. Distribution of wealth is not a solution because wealth can indeed be created, but then again I don't subscribe to Marxist economic theory at all. Perhaps that is why the three of us commenting so far don't see wealth distribution as a problem... we see that as a mark of success that is re-invested into the economy.
There's nothing wrong with making a profit or being prosperous in America.
Additionally, the free market has undeniably improved the lives of billions of human beings. It is in fact the only moral system of economy we have, for all its warts and blemishes.
All this set aside...
Perhaps this minimum wage debate would better be broadened to include a discussion of the common good, quality of life, and human needs and values broader than just accumulating wealth.
Perhaps, but empirically one cannot defend (I believe) the notion that increasing the minimum wage achieves any of this in the long term.
- comment James Atticus Bowden
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- We don't live in perfect market economy. But market forces, even mitigated by government etc, still take effect. Mixing apples and oranges about values blah blah.
Economics has laws - based on rational empiricism - that are in effect as much as physical laws explained by Newton and others. And just like violating the law of gravity has consequences so does screwing with the laws of supply and demand.
The reason for rejecting, absolutely, socialism is that to every degree it is based on Marxist economics it is based on bunk. Bull, untruth, lies, magic...
Therefore, every socialist experiment has a punishing effect because even if the Libs don't get it (I studied econ at two of the most Liberal grad schools in the US) what happens in real life is still subject to the laws of economics.
For example - every $150m you take out of the economy in taxes (Libs call this investments and or steady revenue etc) means a loss of 5k jobs. I explained in one of my opeds about the price of pizza.
Read my piece from early 06 on Harvard gets it right sorta - on their longitudinal study of median incomes and purchasing power. The loss of discretionary income over 30 years is, drum roll...., TAXES.
If you love the poor then advocate the creation of capital. And don't whine when some people make a whole lot of it.
- comment NotNotJayHughes
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- Bill:
This is probably one of those issues where you and I are just need to agree to disagree and get it over with.
There are a number of issues with your post that I'd like to address.
First, I want every person to be able to participate in the economy of the 21st century. But that requires that people 1. avail themselves of information and 2. make good choices.
When I say avail themselves of information, individuals need to stay informed as to which skill sets are marketable and those that are not. That is really the root cause of low-wages. People simply have no marketable skills or skills in such low demand that their price is very low. Once again, here are those pesky economic concepts of supply and demand. People need to understand that their skills/profession may experience a decrease in quantity demanded. When that occurs, these people must have minds open to learning new, marketable skills.
Next people must understand that choices have consequences. Some consequences are good and some consequences are unpleasant. For a young person who stays in school, avoids drugs/booze/violence/teen pregnancy, etc. and goes on to get a 4 year degree and perhaps an advanced degree, there are vistas of opportunity for that person. But for the kid who racks up a lengthy criminal record, then that person should be prepared to have very limited opportunities for quite a long time.
Second, by mentioning the "concentration of wealth" you are, most likely, arguing that economics is a zero sum game. That is, there is a finite amount of wealth to go around so the "rich" keep the money and the "poor" get poorer. From a physics point of view, you are quite correct. There is most definitely a set amount of matter and energy in the universe. However, those amounts are so immense as to be incomprehensible by us. In other words, there's plenty of matter and energy in the universe and on our planet for all of us to be able to live. But what you're neglecting to consider is that wealth is created and destroyed all the time in a free-market economy. For instance, if you were to go back in time to 1969 and tell a computer programmer that in 2007 virtually every household would not only have an immensely powerful computing tool (by 1969 standards), they would also be connected to a global, computer telecommunications infrastructure (the internet) as well that 1969 programmer would probably say two things: "First, I agree with you about the global telecom infrastructure....but computers will never be integrated into people's homes!!!" That demonstrates how things gain value over time.
Also, things that seem like economic powerhouses at one time lose their "punch" over time. For instance, AOL. If you were to tell me in 1998 that America Online would be struggling for business in 2007, I'd say you're crazy! In the mid to late 1990s, AOL was unstoppable. However, here we are in 2007 and AOL is struggling for business. Why? Because others made a product that was innovative and better: high-speed internet. Nobody wants dial-up internet anymore.
The problem, Bill, with your argument is that you're ultimately arguing for slavery even though you don't realize it. When government starts interfering with market forces, its actually interferring with the individual's ability to make choices. Let's say that politicians decide that the jobs of typewriter repairmen need to be protected because with the introduction of personal computers and word processors nobody wants to own a typewriter so quantity demanded for typewriter repair services is decreasing. So let's say that politicians pass a law that heavily taxes computers. Now, not only are we denying the superior technology of computers to consumers, we're also denying the opportunity of greater income and growth to those typewriter repairmen who would choose to learn new skills. Would there be typewriter repairmen who stubbornly cling to their profession and suffer financially as a result? Sure there would be. But there would also be typewriter repairmen who might avail themselves of federal and state scholarships to learn a new skill like network administration (arguably the typewriter repairman of the 21st century) and greatly increase their income.
Now let's talk about Marxist states. Ultimately, whether you're a capitalist state or a marxist state the foremost issue is what "incentivizes" people. In a capitalist state, enlightened self-interest incentivizes people to work hard and be productive. Production of higher quantity and efficiency means more income for you. In a marxist state, the production incentive is the fear of having a 9mm, hot lead projectile inserted into one's temple at such a high velocity as to cause a ceasation of life functions.
The bottom line is that a free-market economy, whilst imperfect, solves more problems than it creates. But it does require people to be open-minded about the marketability of their skill sets and avail themselves of re-training when those skills become obsolete. Your vision of punishing so-called "overpaid" executives and income redistribution makes slaves of citizens because it means the government can take their property at any time for any "fashionable" reason.
The proper course is to reward innovation and productivity while using the resources of the state for those with obsolete skills to quickly and cheaply learn new skills. That way we respect property rights, productivity and initiative without having to forcibly take property from those who have legitimately earned it.
- comment Overd0g
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- The minimum wage law makes no sense unless accompanied by a minimum profit decree for all businesses.
- comment Bill Garnett
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- What is the alternative, in a free market economy, to having some minimum wage protection? Would not it be a Charles Dickens landscape?
I fully understand that wealth is not some finite quantity that is circulated and re-circulated among the population. And I agree that wealth is constantly created. I also appreciate that some chase wealth due to the incentive that being wealthy and powerful holds, and that incentives to wealth creation also lead to invention, and industry, and much progress.
My point is that many contribute to the health of society through occupations that are equally honorable. And it is the environment that a democracy provides which is the incubator of wealth – but that wealth is made on the backs of us all; but is disproportionately accrued by the few – and unfortunately, for vulgar amounts of wealth, is passed on to generations who had no hand in its creation.
A pure supply/demand free market, “invisible hand” society would be a dog-eat-dog survival-of-the-fittest world. We as humans have transcended that natural law state, and we make our own laws that in our democracy are based on the tenet that, “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights”. We, unique in all nature, have the capacity of compassion, charity, and equity. And it is our choice of how we balance the efficient system of free trade against excesses of poverty or excesses of wealth.
- comment Shaun Kenney
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- If you love the poor then advocate the creation of capital. And don't whine when some people make a whole lot of it.
Hear, hear!
My point is that many contribute to the health of society through occupations that are equally honorable. And it is the environment that a democracy provides which is the incubator of wealth – but that wealth is made on the backs of us all; but is disproportionately accrued by the few – and unfortunately, for vulgar amounts of wealth, is passed on to generations who had no hand in its creation.
Not so, because it is their capital makes much of the economy run, their property, the hard work of someone else, etc.
I appreciate that you cite the Declaration of Independence as a source, but finish the list or rights that Jefferson enumerates: "Life, liberty, and the pursuit of happiness."
If I earn something, no one else has the right to that property. It is mine because it is, as Jefferson puts it, an inalienable right.
I do challenge that the end of government (or any law) is to make men equal. Equal rights, equal opportunities -- yes to all. But equality as an end? All men may be created equal, but we also have unequal gifts, unequal drives, unequal starting points, unequal perspectives, unequal families, unequal backgrounds...
The goal of law (and government) should be harmony, interfering only when necessary to punish evildoers and protect from foriegn invaders... essentially the parts of the Constitution stapled on the "inalienable rights" we possess.
Naturally, I disagree with Rawls.
I will agree that unfettered capitalism leads to the same problems of unfettered socialism -- perhaps differentiating only in whom is abused more, workers or owners.
I would argue in response that the free market, rather than an extreme, is actually a "middle way" between total government control by labor (communism) and total government control by capital (fascism).
As for what protection for workers exists....
Narrowly to the minimum wage laws, they effect nothing other than job losses (albeit minimal, but losses nonetheless).
To the rights of workers, here is where the government establishes the rules of fair play, bought neither by capital nor swayed by labor.
In the case of minimum wage hikes, you have a clear example where labor is misusing government to impose a change. It won't do anything, in fact it only hurts labor by forcing capital to make decisions against U.S. workers. But it feels good... socialism slitting its own throat as slowly as a bureaucrat can.
So there you have it. I don't see the free market as an extreme, merely the "golden mean" between the excesses of communism and fascism that equates into maximum opportunity and maximum freedom... without being libertines, of course.
- comment NotNotJayHughes
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- It's not survival of the fittest in a free-market economy, Bill. It's survival of the marketable.
Those are two very different things. In the state of nature each lifeform only has a certain set of abilities to enable them to survive. Such as acute hearing, sight, flight, etc. They cannot give themselves new abilities. For instance a wolf can't grow wings to fly. If the environment sufficiently changes such that the wolf needs to fly in order to survive he'll die.
However, our free-market economy is not the state of nature. It is a purely human construct, and, as such, you cannot totally compare it to the state of nature. People can survive by changing their skill-sets. All they have to do is learn new ones. Basically, the wolf can learn to fly if he has to survive. But first the wolf must be willing to learn how to fly.
More on this later. By the way, I love your writing style.
- comment Bill Garnett
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- I apologize in advance as the following is a bit off topic, but I wanted to expand my argument against the excesses of capital accumulation, and to suggest there is a role for government in society to address the extremes of poverty and wealth.
The continued passing of obscene amounts of inherited family fortunes into perpetuity is unwise, unfair, and is unhealthy to the concepts of individual equality and opportunity in America.
Individuals born into inordinate wealth have little incentive to rise to their own potential, and are too tempted to live lives of self-indulgence, and to develop misguided attitudes of superiority.
Wealth equates to power and the networking of power, in which rest the seeds of corruption and abuse of power, with the attendant denial of freedoms to those of considerably less wealth.
Society might be better served and grow towards a more universal health by a tilt towards egalitarianism rather than away from it.
Continued drift of the wealthy away from the poor can not be sustained in the long run and will inevitably lead to unrest, social disturbance, diminished motivation and individual satisfaction, and finally to revolution - possibly violent.
Individual and family wealth can only occur in America due to the benefits and opportunities this democracy offers, and to the free enterprise system that has been put in place. Thus those who accumulate great wealth under this system can be argued to owe the government a disproportionate tax for this privilege. Great wealth is only made on the backs of many, many individuals who have worked no less, sacrificed no less, and struggled no less than the wealthy individuals who benefit from those efforts. No wealth is created in a vacuum but in the context of a complex and interdependent society. A compassionate and fair society recognizes that the good fortune of some is to an extent the effect of luck, special privilege, the accident of birth, and the contributions of others much less rewarded. Certainly at death, an individual so fortunate in wealth should have that wealth largely distributed back to the community.
And it is particularly significant that wealthy individuals such as Warren Buffet, Bill Gates, and George Soros oppose the elimination of the death tax and generally support this argument.
- comment NotNotJayHughes
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- Bill:
Instead of taxing the wealth of people, let's call for people to voluntarily give their wealth to chariable organizations. I think it's more meaningful when rich people voluntarily give away their money. Will you join me in calling for wealthy people like Ted Kennedy, Teresa Heinz-Kerry, et. al. to give up to 60% of their wealth to chariable organizations? These people are so rich that they could afford to give up that kind of money and still live very comfortably
- comment Bill Garnett
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- “Actually, there is no rational case to be made that it increases employment, except in monopsony (sic) conditions, which the American economy generally is not.”
Raising the wages of low-income workers gives them more money to spend. Raising minimum wages attracts unemployed and underemployed to job openings. Raising minimum wages creates demand for productivity improvement. There are economic rationales for raising minimum wages. And we have seen the alternative where un-empowered farm workers have been used as almost indentured serfs by greedy landowners.
I agree and support a minimum of government intervention, regulation, and interference. I also am a Christian and a moral person and believe that human society seen large is best when it is less judgmental of the poor and indigent and understands that, “there but for the grace of God, go I”. Of course this type of Christian caring is best done on an individual level, but when the welfare of whole classes of citizens are at stake then whole classes of affluent can be called upon to step up to the plate. It is so easy for the educated and the clever, who quite frankly are still a small and privileged class even here on the Internet, to not see the plight of others. And to be so dismissive of the disparities in society.
Once we had no fire departments run by government – they were all private. But few would support that notion today. There are services that are best provided by government and services that are best provided by free enterprise.
I lived under another system, in The Netherlands for 2 ½ years. Health care was far better, crime was far lower, tolerance was far greater, access to culture and the arts was far greater, the society was far less materialistic, quality of life was better, education was better and people were more educated and sophisticated than in America. We are often pompous and arrogant in America that we are the best at everything and thus are unwilling to look outside our borders for ideas or solutions.
I favor free enterprise generally. I know that teacher unions have led to poor teachers tenured in their positions. But that is just as much the fault of citizens who don’t fight for better quality teachers and who won’t support higher costs for public education. And it may be free enterprise considerations that allow school quality to be a function of local real estate values, but I believe every American child should have access to a good and reasonably equivalent education opportunity and to the opportunity to grow to his/her potential.
China is graduating six to seven time as many scientists, engineers, and mathematicians as is America. And their centralized government allows identification of bright children, and sending of these gifted kids to special schools with intensely driven programs. Will our free enterprise system compete with that?
And if you don’t think that the AMA and ABA don’t control the supply of doctors and lawyers then you probably also don’t think that DeBeers controls that supply of diamonds. Under the 80/20 rule, the majority of “medicine” and “law” performed by doctors and lawyers could be handled by a one-year apprenticeship of the average high school graduate.
I agree as to the distorting effects that government intervention has on the markets. I believe that governments are inherently inefficient and bureaucratic. But I also believe that there is a balance. There are things a society does best through government and does poorly as individuals or as families or even as local communities – things like defense against a foreign enemy, providing a monetary system, providing roads, providing a criminal justice system, etc, etc.
But just as Social Security, or the Smithsonian, or National Parks, or even fire departments were not envisioned by our founders – today, we should look at the balance of meeting commonly held needs via some type of government response. The need to have security against catastrophic health care is one, the need to have assurance that doing a fair weeks work will provide a fair compensation that will be above poverty is another. In my humble opinion.
- comment Bill Garnett
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- “First, monopsony was not a misspelling; the fact that you don't know what one is or its relationship to this discussion probably means that any further talk here is pointless. But I'll endure” How kind of you. (Not such a common word that my spell check didn't recognize it – and I would suggest few businessmen would either. Politeness might better serve you – even on these boards.)
"It is feel-good tripe (sic) for people who want to pat themselves on the back . . ."
We have had minimum wage policies for years – they seem to work just fine. Some cities also have livable wage minimums. I agree that America is far too litigious and that there are far too many attorneys. And I agree that a society that handles disagreement without initially resorting to lawyering would be a vast improvement. And far too many legislators are attorneys and the proliferation of laws, rules, regulations, is reflected in that.
And far too many have a vested interest in the criminal and civil justice system.
The polarization of debate into opposite comers of rank liberal and conservative seems a no winner. The ability to have Socratic debate without ad hominem attack and to find areas of common ground seems to me to be a better way of moving forward.
Personalities that are skewed to authoritarian and extreme right wing or libertarian and far left wing tend to create more heat than light. I do not know the answer but suspect it lies in some balance of appreciating what we know about economics AND what we know about social science.
And having watched a government controlled on all three branches by conservative Republicans over the last six years gives little confidence that the authoritarian right wing approach is moving us forward as a nation. May I suggest the conduct of the war, the impasse on immigration, the mounting debt, the off shoring of jobs, the rapidly rising health care and education costs.
Cooling off the rhetoric and coming together to a more gentlemanly discussion might better serve Red and Blue.
- comment NotNotJayHughes
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- Bill:
Your calls for balanced discussion are fine and good...
There's one problem....
Your posts are anything but balanced. Based on what I've read of your postings so far, you're nothing more than a European-style socialist...nothing balanced there....you're firmly skewed to the left.
You want a government that determines which economic sectors are higher paid and not so highly paid. Hence your bit about which professions should be paid more: teachers or lawyers.
Having government decide the pay-level of each profession is fine...until it comes to your profession and what if government suddenly decides you're overpaid?...Then I suspect you'll find yourself back on the free-market side of things....
- comment Bill Garnett
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- Perhaps I am a bit of a European-style socialist, although I’ve not thought of myself as such. I’m not that comfortable being pigeonholed. I actually agree with and/or find merit in quite a bit of what the ”other side” is arguing in this discussion. I am rather open-minded and willing to listen to the arguments.
The core issue to me though is not as clear as it seems to most posting here. I am unconvinced that applying economic theory alone outside the context of sociological and behavioral considerations is the best response of government to those who are at the bottom of the wage scale. I certainly do not support an increase in the minimum wage for what might be called “feel good” political strategy.
I sense that solely thinking in a supply/demand free market way about minimum wages is simplistic and unrealistic, although, as I have said earlier, I do agree that this works well at the micro level and does bring about efficiency and fairness. Left to run its course, it becomes a “game” in which some win because they know the rules and play well and others lose because they don’t know the rules and play poorly. Certainly the incentives and disincentives of “invisible hand” economics play a large part in the success of economies and in individual success.
But I take a broader point of view, that although this game does play out in one dimension of our society, that there are other important dimensions that need attention if we as a society are to enjoy a higher quality of life.
I also think there are philosophical questions that should be addressed that are outside the realm of economic theory and equations. One relevant here is how should we respond to a class of or citizens who work fairly and honestly for wages, but those wages only allow a below poverty income. And this despite the rather significant wealth of the community at large. It seems naïve to expect that an employer would always pay a living wage. And it may be the proper duty to one’s stockholders for an employer to maximize the discounted net value of his company by paying the lowest wage the market will bear.
As we move further into the new world order, the international economy, we realize that as Anne Lynam Goddard, the new president of the Christian Children’s Fund recently stated, “Three billion people live in poverty around the world. And half of them are children.” To take free market theory to the extreme and eliminate all trade barriers, and restraint to free movement of goods and labor, would, I’d guess, result in a substantial increase in worldwide total wealth, but I think it would certainly depress the relative standard of living of America’s middle, and lower classes.
Thus moves to pure free markets have, to me, to be seen in the context of the reality in which we live.
There is a growing chasm between the wealthy and the middle class in America – this is well documented. Real growth in middle class incomes has stagnated recently, also well documented. And the top few percent of the wealthiest are doing extremely well. These are changes that will have consequences to the fabric of America and I would hope that this could be addressed sensibly and rationally and sooner rather than later. Conversations on boards such as this could be part of the process of facing this reality, and I believe conservative leaning and liberal leaning Americans must come to the same table and work together to face this squarely as we have successfully faced common issues in the past.
20 Comments:
Except – except that in this natural world the ultimate progression is that the weak eventually fall by the wayside and the strong ultimately accumulate all the wealth. It is a game of Monopoly played large and as anyone who has played Monopoly knows, it is no fun to play once someone else controls all the hotels on Boardwalk and Park Place.
Are you suggesting that the obscene pay packages of many, if not most, of America’s top companies are the result of free market forces? Hardly, they are the result of networked boards, good old boy networks, greedy contracts of these executives, and the impotence of the finely divided stockholders who have little ability to coalesce into an effective opposing force. Do you think that there are not capable managers in America who could competently run any American company and happily subsist on a salary of half a million or less? These overpaid execs are not there out of a fair market competition – they are there because of a system that is skewed in their favor.
Is the ratio of remuneration between a nurse and a physician, or a lawyer and a paralegal based on market forces? – Not a chance. Is the value of a business executive or engineer that much greater than a high school teacher or a social worker?
As to minimum wages – there is half the planet that exists on less than two dollars a day. Certainly there are millions who would gladly take jobs in America for a fraction of the minimum wage. Note the effect a flood of illegal Hispanics has had on construction industry wages.
The minimum wage is a contract with ourselves, an agreement within our larger community that anyone who exchanges his work for pay should at least get enough to sustain himself/herself above poverty. This is not free market – it is compassionate and Christian values.
When we take the obsession with free markets and free trade to the extreme, we are essentially saying let the raw rules of nature, survival of the fittest, trump human compassion.
There are other models in the world – we are so hysterical when “socialism” is even slightly inferred that we may fail to see the advantages of community policy that results in a more egalitarian, democratic, fair and compassionate society. Otherwise we will only continue this slide towards a bipolar society, a widening gulf between rich and poor – and eventually the seeds of social unrest. And this is not the American promise.
As for the market wages for lawyers vs. teachers, et al., I would very much argue the wages leveled are created by the free market in most cases. In fact, where they are artificially high or artificially low is where you find bureaucracy (the teaching profession is an excellent example).
How do you intend to fix the problems created by socialism with... more socialism?
I would agree with you entirely that an employer has a moral obligation to pay their employees a fair, living wage. But a minimum wage only acts as an artificial barrier, offering the excuse for employers to do only what the law says is just. That's a strike against charity IMO. Moreover, a "living wage" for a single male at 20 isn't the same as a living wage for a single mom with four kids at 45. Nor is it the same for two incomes and no kids, etc.
Lastly, I would argue that the "gulf" between rich and poor is ultimately meaningless. What is meaninful is that the poor have an increased standard of living that is fused with an opportunity to advance.
The free market is the single greatest vehicle for the creation of wealth in the history of humankind. Unfettered, it does remarkable things. Fettered, it chokes itself off. Minimum wage hikes only hurt those we are trying to help.
A better solution? Moral employers and market forces that allow an opportunity society to flourish.
Some thoughts, though I agree 100% that any just society should pay its employees what they are worth and never below the ability to live.
I can't speak for Shaun, but my answer is: yes, I do.
The salaries and severance packages are largely based on the companies performance. The better the firm does, the higher the rewards to the folks in charge.
Oh sure, it may sound nice to talk about capping salaries at $500,000, but then you risk reducing the incentive of said firm leaders to continue to build up the firm.
Moreover, given the heavy participation of retirement-contribution-driven mutual funds, the stockholders who are demanding better performance from the firms by greating said incentives for the folks in charge are none other than you and I.
Where does their money go? Remember the speech in 'It's a Wonderful Life'?
What is important to everyone is the growth in capital.
Milton Friedman pointed out in his book that per capita capital - increased 32 times in 9 decades (in 1960 the dollars in the economy per capita was 32 x 1870) - that is through the Great Depression and many teeth rattling Recessions. It means - because the capital produces and buys technology - houses, electicity, cars, radio, TV, clothes, food, etc etc for everyone and a much higher standard of poverty.
Collective bargaining, regulation, monopolistic practices, and democracy itself impinge on free market concepts. On a democratic island of ten people with one owning the only coconut grove, what prevents the other nine from voting to take over the coconut grove?
And, all other things equal, increasing the minimum wage only changes the circulation of cash flows and does not necessarily lead to unemployment – a case can be made for increased employment.
As to those who automatically recoil at the mention of socialism, I can suggest that to only view an issue from one point of view (particularly if that point of view is one you were born into) is not to have an open and honest debate. How many Dutch will argue that their system is better than ours, or Muslims who will argue that their religion is the best, or Chinese who will argue that their form of centralized control is the best?
And facts are facts – wealth in America is highly concentrated and has become even more so in recent decades. And the middle class real incomes have become rather stagnant.
Perhaps this minimum wage debate would better be broadened to include a discussion of the common good, quality of life, and human needs and values broader than just accumulating wealth.
I assume then you reject the thesis of The Wisdom of Crowds?
On a democratic island of ten people with one owning the only coconut grove, what prevents the other nine from voting to take over the coconut grove?
Property rights and the rule of law. Which is why democracies fail, because there is no rule of law.
As to those who automatically recoil at the mention of socialism...
Granted. Then again, name one other economy that has consistently performed at the same consistent rate of prosperity as the American economy has? Perhaps Britain when not impounded under Labour... Japan once, maybe China...
And facts are facts – wealth in America is highly concentrated and has become even more so in recent decades. And the middle class real incomes have become rather stagnant.
But here's where the Marxism bleeds through. I reject the notion that there is a finite amount of resources, a finite amount of wealth. Distribution of wealth is not a solution because wealth can indeed be created, but then again I don't subscribe to Marxist economic theory at all. Perhaps that is why the three of us commenting so far don't see wealth distribution as a problem... we see that as a mark of success that is re-invested into the economy.
There's nothing wrong with making a profit or being prosperous in America.
Additionally, the free market has undeniably improved the lives of billions of human beings. It is in fact the only moral system of economy we have, for all its warts and blemishes.
All this set aside...
Perhaps this minimum wage debate would better be broadened to include a discussion of the common good, quality of life, and human needs and values broader than just accumulating wealth.
Perhaps, but empirically one cannot defend (I believe) the notion that increasing the minimum wage achieves any of this in the long term.
Economics has laws - based on rational empiricism - that are in effect as much as physical laws explained by Newton and others. And just like violating the law of gravity has consequences so does screwing with the laws of supply and demand.
The reason for rejecting, absolutely, socialism is that to every degree it is based on Marxist economics it is based on bunk. Bull, untruth, lies, magic...
Therefore, every socialist experiment has a punishing effect because even if the Libs don't get it (I studied econ at two of the most Liberal grad schools in the US) what happens in real life is still subject to the laws of economics.
For example - every $150m you take out of the economy in taxes (Libs call this investments and or steady revenue etc) means a loss of 5k jobs. I explained in one of my opeds about the price of pizza.
Read my piece from early 06 on Harvard gets it right sorta - on their longitudinal study of median incomes and purchasing power. The loss of discretionary income over 30 years is, drum roll...., TAXES.
If you love the poor then advocate the creation of capital. And don't whine when some people make a whole lot of it.
This is probably one of those issues where you and I are just need to agree to disagree and get it over with.
There are a number of issues with your post that I'd like to address.
First, I want every person to be able to participate in the economy of the 21st century. But that requires that people 1. avail themselves of information and 2. make good choices.
When I say avail themselves of information, individuals need to stay informed as to which skill sets are marketable and those that are not. That is really the root cause of low-wages. People simply have no marketable skills or skills in such low demand that their price is very low. Once again, here are those pesky economic concepts of supply and demand. People need to understand that their skills/profession may experience a decrease in quantity demanded. When that occurs, these people must have minds open to learning new, marketable skills.
Next people must understand that choices have consequences. Some consequences are good and some consequences are unpleasant. For a young person who stays in school, avoids drugs/booze/violence/teen pregnancy, etc. and goes on to get a 4 year degree and perhaps an advanced degree, there are vistas of opportunity for that person. But for the kid who racks up a lengthy criminal record, then that person should be prepared to have very limited opportunities for quite a long time.
Second, by mentioning the "concentration of wealth" you are, most likely, arguing that economics is a zero sum game. That is, there is a finite amount of wealth to go around so the "rich" keep the money and the "poor" get poorer. From a physics point of view, you are quite correct. There is most definitely a set amount of matter and energy in the universe. However, those amounts are so immense as to be incomprehensible by us. In other words, there's plenty of matter and energy in the universe and on our planet for all of us to be able to live. But what you're neglecting to consider is that wealth is created and destroyed all the time in a free-market economy. For instance, if you were to go back in time to 1969 and tell a computer programmer that in 2007 virtually every household would not only have an immensely powerful computing tool (by 1969 standards), they would also be connected to a global, computer telecommunications infrastructure (the internet) as well that 1969 programmer would probably say two things: "First, I agree with you about the global telecom infrastructure....but computers will never be integrated into people's homes!!!" That demonstrates how things gain value over time.
Also, things that seem like economic powerhouses at one time lose their "punch" over time. For instance, AOL. If you were to tell me in 1998 that America Online would be struggling for business in 2007, I'd say you're crazy! In the mid to late 1990s, AOL was unstoppable. However, here we are in 2007 and AOL is struggling for business. Why? Because others made a product that was innovative and better: high-speed internet. Nobody wants dial-up internet anymore.
The problem, Bill, with your argument is that you're ultimately arguing for slavery even though you don't realize it. When government starts interfering with market forces, its actually interferring with the individual's ability to make choices. Let's say that politicians decide that the jobs of typewriter repairmen need to be protected because with the introduction of personal computers and word processors nobody wants to own a typewriter so quantity demanded for typewriter repair services is decreasing. So let's say that politicians pass a law that heavily taxes computers. Now, not only are we denying the superior technology of computers to consumers, we're also denying the opportunity of greater income and growth to those typewriter repairmen who would choose to learn new skills. Would there be typewriter repairmen who stubbornly cling to their profession and suffer financially as a result? Sure there would be. But there would also be typewriter repairmen who might avail themselves of federal and state scholarships to learn a new skill like network administration (arguably the typewriter repairman of the 21st century) and greatly increase their income.
Now let's talk about Marxist states. Ultimately, whether you're a capitalist state or a marxist state the foremost issue is what "incentivizes" people. In a capitalist state, enlightened self-interest incentivizes people to work hard and be productive. Production of higher quantity and efficiency means more income for you. In a marxist state, the production incentive is the fear of having a 9mm, hot lead projectile inserted into one's temple at such a high velocity as to cause a ceasation of life functions.
The bottom line is that a free-market economy, whilst imperfect, solves more problems than it creates. But it does require people to be open-minded about the marketability of their skill sets and avail themselves of re-training when those skills become obsolete. Your vision of punishing so-called "overpaid" executives and income redistribution makes slaves of citizens because it means the government can take their property at any time for any "fashionable" reason.
The proper course is to reward innovation and productivity while using the resources of the state for those with obsolete skills to quickly and cheaply learn new skills. That way we respect property rights, productivity and initiative without having to forcibly take property from those who have legitimately earned it.
I fully understand that wealth is not some finite quantity that is circulated and re-circulated among the population. And I agree that wealth is constantly created. I also appreciate that some chase wealth due to the incentive that being wealthy and powerful holds, and that incentives to wealth creation also lead to invention, and industry, and much progress.
My point is that many contribute to the health of society through occupations that are equally honorable. And it is the environment that a democracy provides which is the incubator of wealth – but that wealth is made on the backs of us all; but is disproportionately accrued by the few – and unfortunately, for vulgar amounts of wealth, is passed on to generations who had no hand in its creation.
A pure supply/demand free market, “invisible hand” society would be a dog-eat-dog survival-of-the-fittest world. We as humans have transcended that natural law state, and we make our own laws that in our democracy are based on the tenet that, “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights”. We, unique in all nature, have the capacity of compassion, charity, and equity. And it is our choice of how we balance the efficient system of free trade against excesses of poverty or excesses of wealth.
Hear, hear!
My point is that many contribute to the health of society through occupations that are equally honorable. And it is the environment that a democracy provides which is the incubator of wealth – but that wealth is made on the backs of us all; but is disproportionately accrued by the few – and unfortunately, for vulgar amounts of wealth, is passed on to generations who had no hand in its creation.
Not so, because it is their capital makes much of the economy run, their property, the hard work of someone else, etc.
I appreciate that you cite the Declaration of Independence as a source, but finish the list or rights that Jefferson enumerates: "Life, liberty, and the pursuit of happiness."
If I earn something, no one else has the right to that property. It is mine because it is, as Jefferson puts it, an inalienable right.
I do challenge that the end of government (or any law) is to make men equal. Equal rights, equal opportunities -- yes to all. But equality as an end? All men may be created equal, but we also have unequal gifts, unequal drives, unequal starting points, unequal perspectives, unequal families, unequal backgrounds...
The goal of law (and government) should be harmony, interfering only when necessary to punish evildoers and protect from foriegn invaders... essentially the parts of the Constitution stapled on the "inalienable rights" we possess.
Naturally, I disagree with Rawls.
I will agree that unfettered capitalism leads to the same problems of unfettered socialism -- perhaps differentiating only in whom is abused more, workers or owners.
I would argue in response that the free market, rather than an extreme, is actually a "middle way" between total government control by labor (communism) and total government control by capital (fascism).
As for what protection for workers exists....
Narrowly to the minimum wage laws, they effect nothing other than job losses (albeit minimal, but losses nonetheless).
To the rights of workers, here is where the government establishes the rules of fair play, bought neither by capital nor swayed by labor.
In the case of minimum wage hikes, you have a clear example where labor is misusing government to impose a change. It won't do anything, in fact it only hurts labor by forcing capital to make decisions against U.S. workers. But it feels good... socialism slitting its own throat as slowly as a bureaucrat can.
So there you have it. I don't see the free market as an extreme, merely the "golden mean" between the excesses of communism and fascism that equates into maximum opportunity and maximum freedom... without being libertines, of course.
Those are two very different things. In the state of nature each lifeform only has a certain set of abilities to enable them to survive. Such as acute hearing, sight, flight, etc. They cannot give themselves new abilities. For instance a wolf can't grow wings to fly. If the environment sufficiently changes such that the wolf needs to fly in order to survive he'll die.
However, our free-market economy is not the state of nature. It is a purely human construct, and, as such, you cannot totally compare it to the state of nature. People can survive by changing their skill-sets. All they have to do is learn new ones. Basically, the wolf can learn to fly if he has to survive. But first the wolf must be willing to learn how to fly.
More on this later. By the way, I love your writing style.
The continued passing of obscene amounts of inherited family fortunes into perpetuity is unwise, unfair, and is unhealthy to the concepts of individual equality and opportunity in America.
Individuals born into inordinate wealth have little incentive to rise to their own potential, and are too tempted to live lives of self-indulgence, and to develop misguided attitudes of superiority.
Wealth equates to power and the networking of power, in which rest the seeds of corruption and abuse of power, with the attendant denial of freedoms to those of considerably less wealth.
Society might be better served and grow towards a more universal health by a tilt towards egalitarianism rather than away from it.
Continued drift of the wealthy away from the poor can not be sustained in the long run and will inevitably lead to unrest, social disturbance, diminished motivation and individual satisfaction, and finally to revolution - possibly violent.
Individual and family wealth can only occur in America due to the benefits and opportunities this democracy offers, and to the free enterprise system that has been put in place. Thus those who accumulate great wealth under this system can be argued to owe the government a disproportionate tax for this privilege. Great wealth is only made on the backs of many, many individuals who have worked no less, sacrificed no less, and struggled no less than the wealthy individuals who benefit from those efforts. No wealth is created in a vacuum but in the context of a complex and interdependent society. A compassionate and fair society recognizes that the good fortune of some is to an extent the effect of luck, special privilege, the accident of birth, and the contributions of others much less rewarded. Certainly at death, an individual so fortunate in wealth should have that wealth largely distributed back to the community.
And it is particularly significant that wealthy individuals such as Warren Buffet, Bill Gates, and George Soros oppose the elimination of the death tax and generally support this argument.
Instead of taxing the wealth of people, let's call for people to voluntarily give their wealth to chariable organizations. I think it's more meaningful when rich people voluntarily give away their money. Will you join me in calling for wealthy people like Ted Kennedy, Teresa Heinz-Kerry, et. al. to give up to 60% of their wealth to chariable organizations? These people are so rich that they could afford to give up that kind of money and still live very comfortably
Raising the wages of low-income workers gives them more money to spend. Raising minimum wages attracts unemployed and underemployed to job openings. Raising minimum wages creates demand for productivity improvement. There are economic rationales for raising minimum wages. And we have seen the alternative where un-empowered farm workers have been used as almost indentured serfs by greedy landowners.
I agree and support a minimum of government intervention, regulation, and interference. I also am a Christian and a moral person and believe that human society seen large is best when it is less judgmental of the poor and indigent and understands that, “there but for the grace of God, go I”. Of course this type of Christian caring is best done on an individual level, but when the welfare of whole classes of citizens are at stake then whole classes of affluent can be called upon to step up to the plate. It is so easy for the educated and the clever, who quite frankly are still a small and privileged class even here on the Internet, to not see the plight of others. And to be so dismissive of the disparities in society.
Once we had no fire departments run by government – they were all private. But few would support that notion today. There are services that are best provided by government and services that are best provided by free enterprise.
I lived under another system, in The Netherlands for 2 ½ years. Health care was far better, crime was far lower, tolerance was far greater, access to culture and the arts was far greater, the society was far less materialistic, quality of life was better, education was better and people were more educated and sophisticated than in America. We are often pompous and arrogant in America that we are the best at everything and thus are unwilling to look outside our borders for ideas or solutions.
I favor free enterprise generally. I know that teacher unions have led to poor teachers tenured in their positions. But that is just as much the fault of citizens who don’t fight for better quality teachers and who won’t support higher costs for public education. And it may be free enterprise considerations that allow school quality to be a function of local real estate values, but I believe every American child should have access to a good and reasonably equivalent education opportunity and to the opportunity to grow to his/her potential.
China is graduating six to seven time as many scientists, engineers, and mathematicians as is America. And their centralized government allows identification of bright children, and sending of these gifted kids to special schools with intensely driven programs. Will our free enterprise system compete with that?
And if you don’t think that the AMA and ABA don’t control the supply of doctors and lawyers then you probably also don’t think that DeBeers controls that supply of diamonds. Under the 80/20 rule, the majority of “medicine” and “law” performed by doctors and lawyers could be handled by a one-year apprenticeship of the average high school graduate.
I agree as to the distorting effects that government intervention has on the markets. I believe that governments are inherently inefficient and bureaucratic. But I also believe that there is a balance. There are things a society does best through government and does poorly as individuals or as families or even as local communities – things like defense against a foreign enemy, providing a monetary system, providing roads, providing a criminal justice system, etc, etc.
But just as Social Security, or the Smithsonian, or National Parks, or even fire departments were not envisioned by our founders – today, we should look at the balance of meeting commonly held needs via some type of government response. The need to have security against catastrophic health care is one, the need to have assurance that doing a fair weeks work will provide a fair compensation that will be above poverty is another. In my humble opinion.
"It is feel-good tripe (sic) for people who want to pat themselves on the back . . ."
We have had minimum wage policies for years – they seem to work just fine. Some cities also have livable wage minimums. I agree that America is far too litigious and that there are far too many attorneys. And I agree that a society that handles disagreement without initially resorting to lawyering would be a vast improvement. And far too many legislators are attorneys and the proliferation of laws, rules, regulations, is reflected in that.
And far too many have a vested interest in the criminal and civil justice system.
The polarization of debate into opposite comers of rank liberal and conservative seems a no winner. The ability to have Socratic debate without ad hominem attack and to find areas of common ground seems to me to be a better way of moving forward.
Personalities that are skewed to authoritarian and extreme right wing or libertarian and far left wing tend to create more heat than light. I do not know the answer but suspect it lies in some balance of appreciating what we know about economics AND what we know about social science.
And having watched a government controlled on all three branches by conservative Republicans over the last six years gives little confidence that the authoritarian right wing approach is moving us forward as a nation. May I suggest the conduct of the war, the impasse on immigration, the mounting debt, the off shoring of jobs, the rapidly rising health care and education costs.
Cooling off the rhetoric and coming together to a more gentlemanly discussion might better serve Red and Blue.
Your calls for balanced discussion are fine and good...
There's one problem....
Your posts are anything but balanced. Based on what I've read of your postings so far, you're nothing more than a European-style socialist...nothing balanced there....you're firmly skewed to the left.
You want a government that determines which economic sectors are higher paid and not so highly paid. Hence your bit about which professions should be paid more: teachers or lawyers.
Having government decide the pay-level of each profession is fine...until it comes to your profession and what if government suddenly decides you're overpaid?...Then I suspect you'll find yourself back on the free-market side of things....
The core issue to me though is not as clear as it seems to most posting here. I am unconvinced that applying economic theory alone outside the context of sociological and behavioral considerations is the best response of government to those who are at the bottom of the wage scale. I certainly do not support an increase in the minimum wage for what might be called “feel good” political strategy.
I sense that solely thinking in a supply/demand free market way about minimum wages is simplistic and unrealistic, although, as I have said earlier, I do agree that this works well at the micro level and does bring about efficiency and fairness. Left to run its course, it becomes a “game” in which some win because they know the rules and play well and others lose because they don’t know the rules and play poorly. Certainly the incentives and disincentives of “invisible hand” economics play a large part in the success of economies and in individual success.
But I take a broader point of view, that although this game does play out in one dimension of our society, that there are other important dimensions that need attention if we as a society are to enjoy a higher quality of life.
I also think there are philosophical questions that should be addressed that are outside the realm of economic theory and equations. One relevant here is how should we respond to a class of or citizens who work fairly and honestly for wages, but those wages only allow a below poverty income. And this despite the rather significant wealth of the community at large. It seems naïve to expect that an employer would always pay a living wage. And it may be the proper duty to one’s stockholders for an employer to maximize the discounted net value of his company by paying the lowest wage the market will bear.
As we move further into the new world order, the international economy, we realize that as Anne Lynam Goddard, the new president of the Christian Children’s Fund recently stated, “Three billion people live in poverty around the world. And half of them are children.” To take free market theory to the extreme and eliminate all trade barriers, and restraint to free movement of goods and labor, would, I’d guess, result in a substantial increase in worldwide total wealth, but I think it would certainly depress the relative standard of living of America’s middle, and lower classes.
Thus moves to pure free markets have, to me, to be seen in the context of the reality in which we live.
There is a growing chasm between the wealthy and the middle class in America – this is well documented. Real growth in middle class incomes has stagnated recently, also well documented. And the top few percent of the wealthiest are doing extremely well. These are changes that will have consequences to the fabric of America and I would hope that this could be addressed sensibly and rationally and sooner rather than later. Conversations on boards such as this could be part of the process of facing this reality, and I believe conservative leaning and liberal leaning Americans must come to the same table and work together to face this squarely as we have successfully faced common issues in the past.
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