Tag Archives: Class-Warfare

Eat Once, Don’t Die?

      People so regularly like to spout off about the evils of capitalism and the depravity of the profit motive. Perhaps we should take a moment to gain some perspective on the matter. Human history has been dominated with periods of anti-capitalistic activities and economic structures. From the feudalist periods to the monarchies to just plain subversion to an eminent leader supposedly “ordained by God” (all three exhibit stunning similarities) and finally to an aristocracy (today we call this socialism or communism) there has been a constant throughout history when the rights of property were not identified and the profit motive was denied to the average individual.

     This constant in a world without property rights and capitalism was the motivating factor of human daily activities—eat once, don’t die. This could have been the daily motto for much of humankind throughout history—eat once, don’t die.

      Imagine this world without capitalism as people seem to fantasize about so regularly. Just imagine losing your car, your microwave, your smart phone, your internet, your air conditioning, your refrigerator, your television, your house, your job, running water, your toilet, the medicine you take to feel better (or, worse yet, the one you take to stay alive)…imagine losing your clothing and shoes in favor of animal hides to stay warm and more animal hides for your feet…imagine losing loved ones in their late twenties or early thirties, if you or them are lucky enough to live that long…imagine every day when you wake up your goal is not to merely be a pretentious ass that wishes a lack of luxury for others to make yourself feel equal, but instead you must struggle just to scrounge enough food for one meal for your family…imagine portioning that food out to your family not on the basis of fulfilling hunger, but on the basis of which family members would be more beneficial to survival if they have energy…imagine laying your head down at night being glad if nobody in your family died or not being surprised if one had.

      Imagine your daily motto was eat once, don’t die. This is the reality of the world before capitalism (and exists today outside of capitalisms reach); the human condition was that of strife, struggle, and immense physical and emotional pain. Is capitalism perfect? If by perfect you mean we all get to have what everyone else has regardless of effort, talent, or sacrifice…then no, it certainly is not. However, it is unambiguously clear throughout history that no economic system has ever brought more (or, I would argue any) people out of true poverty and complete squalor than capitalism.

P.S. By the way, capitalism and cronyism are in no way similar and the terms should not be used together, it makes people sound absurd to those of us who know better.

 

Trump is clearly no economist.

       There are a lot of Republicans these days embracing the anti-trade rhetoric of Donald Trump and, simultaneously, screaming about the ineffectiveness and unfairness of wealth redistribution through the welfare state. Interestingly enough, these two positions are equivalent to one another. You cannot be for trade protection (such as tariffs) and against wealth redistribution; they are fundamentally the same thing. Let me illustrate how.

   Wealth redistribution operates under the principal that government takes (forcibly, mind you) money from Susan and gives it to Tom. Susan is guilty of no crime besides being in an electoral minority, but nevertheless she incurs the wrath of Tom’s jealousy and greed of her accomplishments and higher earnings. Tom’s greedy vengeance is carried out by elected officials who are able to send men with guns to Susan’s house (if she doesn’t pay) to do what would be illegal for Tom to do himself, which is to steal from Susan.

     Now, this redistribution is all based on the premise that Tom should be allowed to do as he wishes (i.e. work less hours, invest less effort in his own skill set, and engage in more recreation) and still be provided with all the basic needs that life requires (including many that life does not require like cell phones, etc).   In effect, the welfare state makes inefficiency a right, one that can be subsidized. Productive capability is discounted in favor of lifestyle choice.

       This brings us now to trade protection and why the two things are indifferent. Let us imagine that Susan is now a consumer and Tom is a worker at an auto plant. We are told that tariff’s on foreign auto makers will “help” our economy (incidentally, zero of this claim is backed up by well-established economic principals or any evidence) so that Tom can keep his job and manufacturing will not be “shipped” overseas. Instead our government will place a 10% tariff on those evil foreign automakers that, for some reason or another, can supply us vehicles at a fraction of the price of Tom’s employer. If the foreign car is $20,000 and Tom’s car is $22,000 before the tariff, this new 10% tax (tariffs are taxes on consumers, by the way) will make them essentially the same price[i].

      So, now Susan (and everyone else) must pay $2,000 more per vehicle for Tom to remain employed (not to mention increased sales taxes, etc.) in his current occupation. If Susan chooses to purchase the foreign car, the government will profit after placing no value into the production of said vehicle much like the mobster running a protection racket. If Susan chooses to purchase the car Tom makes, she will pay a greater price to subsidize Tom’s relative inefficiency; because, if Tom were as efficient as the competition, his autos would be priced accordingly. Tom gets to keep his job that he is not as good at as the competitor is while everyone that purchases a car pays more to ensure this. The government has then taken money from every consumer (a tax) and given it to Tom to subsidize his inefficiency (we could just as easily call this welfare…see paragraph 3, sentence 2).

       If 50,000 people buy a car in a given year, the result is $100M that cannot be spent elsewhere or saved for the future (either choice is an investment in economic growth). Incidentally, this most adversely affects those families making relatively less money—that is right, the much maligned middle class and poor; rich people are not concerned with trivial little tariffs and will buy the foreign car anyway if they want to.

       If you think (rightly) that a redistributive tax hurts the economy by reducing consumption, which in turns reduces the amount of production required, and thus lowers employment you cannot simultaneously think a tariff—which accomplishes the same thing at an even greater cost—will not hurt the economy. Well, you can…but it is no less fantasy than unicorns or Bigfoot. Holding this belief would have led the government to ban the car to protect the wagon builder or ban the light bulb to protect the candle maker. Mass production of food through technological advances would have been outlawed so we could maintain the same volume of farmers, plow makers, and ox breeders (a decision which would have increased the likelihood of starvation due to poor conditions, a concern we no longer carry as humans in the U.S.).

       We must resist the urge to fall into emotional, unsupported arguments—such as those being made by Donald Trump—that tariffs will help the American worker and engaging in trade is bad. I know what you may be thinking now: “we want trade, but fair trade.” Did I get that right? That is hogwash, too. In no way, does us buying goods at a cheaper price—enabling us to consume more and thus produce a wider array of products ourselves—ever, never , never, ever hurt us. If this principle is true, why not only buy things from within your town, or county, or state and really help your local economy boom? If you think unemployed people in your town just need a chance, quit buying things from the mall, Walmart, or Amazon. The reason you do not do this is that you know deep down it is malarkey. Politicians like Trump can use nationalistic hubris to motivate an adverse response that goes against your own best interest. History has known another politician who was effectively able to do this…Adolf Hitler.

Is government absolution?

It has often been said that government is required to help the poor and disabled; however the evidence consistently shows that government’s involvement has not reduced poverty levels. Seeing that government has never (to my knowledge) cured a societal ill like poverty, why then does there remain so much confidence in it for future success? Could it be that support for government welfare programs stems not only from those who directly benefit from being on it, but also as a path to absolution by those who advocate for it?

So, what do I mean by absolution? First, let us discuss the idea that our government has a responsibility to the poor. Milton Friedman wisely pointed out that governments cannot have a responsibility to people…instead, only individuals can have responsibility. We often hear advocates of government welfare say that we are “our brother’s keeper,” a clear reference to the book of Genesis in the Bible; however, the verse is talking about an individual’s (Cain’s) responsibility to his own brother (Abel) and not society’s responsibility to a person or people. This is a blatant misuse of a Bible verse with the intent of misleading people who, by faith, feel an obligation to fulfill Biblical mandates (at least to some extent).

The question then is how does the brother’s keeper example contrast with government welfare and where does the concept of absolution come in? Let us assume that people do feel an innate obligation to help others; which is arguable, but for the sake of this discussion we must accept it generally. What is the easiest way for people to meet that obligation to others? One could work harder and produce more so that they may transfer (via donation) some of that excess production for the consumption of others. Or, one could spend a few minutes every couple of years voting for a group of people who will give money (that is largely not theirs) to others. Both seems to meet the goal of “helping others” yet one of the two options entails significantly less hardship on the individual choosing to vote instead of donate. It is certainly much easier to vote charity to others than it is to actually provide it. Particularly when a good segment of society pays nothing to fund these programs; the estimated percentage of people in America who file tax returns and owe $0 (or less) is 43% (as of 2013).

In the case of this group of people, a vote for welfare is not only costless and potentially beneficial, but also absolves them totally of any further responsibility to be their “brother’s keeper.” In fact, an IRS analysis of the 2012 tax year showed that the most generous states (by percentage of their income donated) were “red states” that voted for Mitt Romney. This implies that those people that believe government should not engage in coerced charity (to as great of an extent) are much more likely to give of their own money while people who see government as a reasonable and righteous source of charity (albeit at the point of a gun, a fact they often ignore) sees little reason to give of their own money when they can instead vote for “charitable” actions.

Therefore, a vote for government welfare represents a much cheaper way (for the voter) to donate largely because others pay the bill. Individuals can then fulfill their sense of obligation from the pockets of others and still gain the sense of giving that usually motivates people to actually give. This leaves people who preach an obligation to the poor and disabled from actually having any responsibility for meeting that obligation personally. Thus, the individuals that choose the voting method over the donating method have effectively been absolved of their responsibility to others. Effectively, those people do not practice what they preach; instead they demand others serve as their brother’s keeper, while they hold the moral high ground through their mere demanding of action by force.  This reminds me of the brilliant words of Ayn Rand who said:

“It stands to reason that where there’s sacrifice, there’s someone collecting sacrificial offerings. Where there’s service, there’s someone being served. The man who speaks to you of sacrifice, speaks of slaves and masters. And intends to be the master.”

Interestingly, the people most hurt are the ones who do, most significantly, need the help. For the real crime is not that everyone does not have access to “assistance”; instead, the real crime lay in the reality that those who truly cannot do for themselves are left in poverty so as to satiate the majority who wishes to forgo their own personal responsibility for their own monetary gain. Simply put the absolution through government costs the absolved little, while that release from obligations is paid for dearly by those they claim to be helping. This is the danger of idealism rooted in greater good terms; for the actual good is left subjected to the eye of the beholder while the intent of actions is weighted far greater than actual outcomes. I close with the definition of absolution: “the formal release of guilt, obligation, or punishment.”

Unions are cartels that should be subject to anti-trust laws

        Most people are familiar with the general idea of anti-trust laws and proceedings; but, as with many things the devil is in the details. A major problem that underscores this greater issue is a lack of understanding of the exact nature of labor. People often think of labor and capital as having a protagonist/antagonist relationship and this misconception is quite profitable to labor leaders and their political allies. However, the pervasiveness of this misconception does great harm to those who directly control labor—individuals; particularly those individuals who have the lowest skill levels which are most often the poor, minorities, and young people. People see laborers as having no leverage in the business relationship and thus assign laborers a more limited value.

        First of all, there are two primary factors of production: labor and capital. Labor is the efforts of people in producing goods and services for trade. Capital describes the accumulation of machinery and tools (often thought of monetarily) that are used in the production process. Neither factor holds a distinctive advantage over the other as a general rule, but differing circumstances can tip the scales of control to one or the other.

        This can be seen throughout history and even today. For example, there was a period in time when labor was so highly demanded (thus, labor held the advantage) that employers would wait outside of prisons to hire people as they were released. In the modern day, people who hold strong skills in computer programming or web design (etc.) can command significant salaries and benefits. These are not the instances that the media and politicians focus on; instead they choose to highlight the false narrative of the minimum wage and the “plight” of entry-level, low wage workers. This misses the reality of the damage done by labor unions by creating a sleight of hand, parlor trick.

         We—rightly—prosecute the collusion (cartelization) of business (owners of capital) if they join together to fix prices or production levels in a manner to extract much higher profits from the market than the competitive (more often the monopolistically competitive) value of their outputs. However, when it comes to labor unions, who collude openly on a national scale and across industry sectors (e.g. SEIU and AFL-CIO), we see that not as being an extortion of the consumer as we do in the capital example. Instead, we see labor unions—simply groups of individuals colluding to monopolize and thus increase their market power artificially—as merely protecting their members from an otherwise predatory institution. This is not the reality when it comes to mega-unions. The reality is that they are utilizing their control of one of the two primary factors of production in the same way businesses do when they collude; therefore consumers pay significantly higher prices which would resemble monopoly level pricing.

     Furthermore, just as other monopolies who do not enjoy regulatory protection by government which controls market entry, they induce others to enter the market and capture their market share by offering superior products at lower prices [note: natural monopolies that do not rely on regulatory control of market entry do exist; however, they are quite rare]. The effects of the monopoly, outside of government intervention, are often limited in their scope. We can see the results of this in the automobile market where, as trade restrictions relaxed (which is good for the US consumer), the foreign car producers began to rapidly grow against the domestic ones which were plagued by higher than natural equilibrium labor costs and diminishing relative quality (as a way to fight costs) versus the competition. The eventual result was that all those people who owned and controlled the labor factor of production in the car market and enjoyed higher than appropriate levels of profits (pay and benefits) ended up dropping their long run incomes to zero as new competitors entered and captured market share. From a labor perspective, these new market participants would include southern state workers who drew in production facilities as well as foreign workers (via outsourcing).

      Additionally, areas densely populated with people who enjoyed this monopoly level pricing for their labors collapsed as the monopoly structure of their labor force declined. Their government, bloated on the excess of extracting unrealistic levels of profits in their labor force from other areas in the country, could not sustain the drop in tax revenues and have essentially become ghost towns (Detroit’s population in 1950 was 1.8 million and is approximately 700,000 today). Also, the greater than equilibrium labor cost overall in markets like Detroit due to unionization of the auto industry crowded out other industries making Detroit perilously dependent on one industry.

        The real long-run winners in the equation have been the labor unions themselves (not their members) and the politicians who have enjoyed control of their votes and contributions for many years. The losers in the short run were workers that did not gain entry into those industries and, in the long run, all the people of areas once dominated by big labor production. People often say that unions were once a good thing and that somehow is supposed to justify the existence of mega union entities; however, I find that logic to be severely flawed. Instead, I argue that unions are still positive things when they are constrained to plant (or perhaps firm) level entities. This reduces large scale collusion while granting the owners of labor a more even position in the negotiating process without giving them unfettered control of the production of certain markets completely. Owners of a particular firm control all of the capital for that firm, but no single laborer controls all of the labor for a firm; therefore, an alliance of firm level labor can be positive without being punitive to consumers or damaging to the industry sector. Also, compulsory inclusion in unions should not exist because this removes the competitive nature of markets which allow a fair blend of profits to capital and labor simultaneously, while ensuring maximum marginal value to the consumers.

The Fallacy of Greed

       Greed…what a fun word! It is that invisible cause of all of society’s problems, right? Have an older car or smaller house than your neighbor? Don’t beat yourself up, they are obviously greedy. Textile manufacturing is now (predominantly) overseas? Duh…just a greedy capitalist. Walmart not forking over that mythical thing called a “living wage?” They are blatantly exhibiting their own greed. She has too much; he has too little…all byproducts of American greed, right?

     Effort is good, the old college try they used to say; but don’t you dare actually succeed because clearly you have morphed into just a common greedy piece of trash. Here is an interesting question then: If, in fact, a person who develops a product for which millions wish to pay for is greedy; what do we call a person who is willing to live for nothing off the labors of others? Ah, I remember now, we call them victims of American greed. Instead might I suggest we call them greedy victimizers of Americans; merely a semantic difference, I am sure.

     The convenience of greed lay in its ability to be arbitrarily blamed for anything. Those on the left have made careers playing on peoples’ petty jealousy through use of the word greed. People have justified the taking of others’ property because of greed; however, greed cannot be proven and, perhaps more importantly, cannot be disproven. How does one combat an accusation of greed? They cannot, which is why it is such a powerful tool of the politician to ensure support from those who Bastiat noted “wish to live at the expense of others.”

     Legalized theft and redistribution gains its mandate from this notion of greed, but how do we define greed exactly? If greed is to be defined as the desire and effort to take something from people which is not theirs, then who is greedy? Can we rightfully call Steve Jobs greedy because he created things which many were willing to trade money for? Or would that title be more properly attributed to the 23 year old which, instead of practicing responsibility, decides to live off the welfare system? I would say the latter; our president would likely say the former. A person who makes a living at the point of a gun is, in my estimation, greedy. There is little difference between someone who is able-bodied and living (almost) exclusively off the taxpayer than there is a common gangster. Both prey off of those unable to defend themselves from their oppressors, the only difference is the mobster at least has the courage to do their own dirty work.

The fallacy of class-warfare: An illusion designed to keep people in want.