Sunday, April 24, 2016

Yes, this is the unacceptable face of capitalism

I've said for many years that there's an unacceptable side to capitalism - when business, otherwise laissez-faire, tries to use regulation to boost itself but impede everyone else, and refuses to 'share the wealth' by treating others just as fairly as it demands to be treated itself.  In his latest column, Fred Reed sums it up very neatly.

To understand the arguments of capitalists against the minimum wage, follow the money. In all the thickets of pious reasoning about the merits of capitalism and the market, and of freedom of contract, and of allowing this marvelous mechanism to work its magic, and of what Adam Smith said, the key is the dollar. The rest is fraud. Carefully ignored is the question that will be crucial in coming decades: What to do about an ever-increasing number of people for whom there is no work.

There is of course much hypocrisy in the theoretical edifice. For example, businessmen argue that the minimum wage constitutes intolerable interference by the government in the conduct of business—meanwhile sending armies of lobbyists to Washington to make the government interfere in the conduct of business. In fact capitalists have no objection to federal meddling. They just want it to be such meddling as puts more money in their pockets. Nothing more. Ever.

In like fashion they say that they want to protect the worker’s freedom—yes, his freedom, such is the capitalist’s benevolence, the worker’s freedom–to sell his labor at a mutually agreed price. Curiously, in practice this means the employer’s freedom to push wages as close to starvation as he can get away with. This miraculous congruence of high principle with low profit is among the wonders of the universe.

A capitalist will similarly object to zoning on grounds of protecting property rights–it’s his land, and he can do with it as he likes—but if you buy the lot next to his house and build a hog-rendering plant, he will shriek for... zoning.

In every case, without exception, his high principles will lead to more in his pocket. He will be against a minimum wage because, he says, it prevents young blacks from entering the job market and learning its ways. You can just tell he is deeply concerned about young blacks. He probably wakes up in the middle of the night, worrying about them. He doesn’t, however, hire any. Purely incidentally, not having a minimum wage saves him... money. And if he were truly concerned about young blacks, might he not express this concern by—paying them a living wage?


The quest for cheap labor has perhaps caused less misery than war—itself a most profitable business, war—but it is neck and neck. Businessmen imported blacks as slaves to have cheap labor, with disastrous results continuing to this day. Businessmen encourage illegal immigration from the Latin lands so as to have cheap labor. They sent America’s factories to China to have cheap labor.  And now they peer with wet lips and avid gaze at... robots.

These will drudge away day and night, making no demands, never unionizing,, needing no retirement or medical benefits. Actually, though, capitalists want robots because capitalists care about freedom and want to help young blacks.

A cynic might see this as intellectual scaffolding for social Darwinism and unaccountability–see, it’s all due to the workings of the market. and the capitalist is only a bystander  But no. It is about freedom., and justice, and all.

There's much more at the link.  Highly recommended reading. Fred gets it said.



mark leigh said...

Just that, interference in just who can do what and when and where and how is a root cause of things like oh say the health care crisis where everyone talks about the cost and who pays and no one talks about why the cost goes up. Yes many businesses are welfare queens depending for their existence and profitability on government suppression of possible competitors through licensing, regulation, banning products, criminalizing services ad infinite nauseum. When the gov. plays favorites everybody else loses.

Anonymous said...

My first job was working for a farmer. Back then, they were exempt from the minimum wage. I was proabably too young by .gov standards to even have a job, but I wanted money, and I worked for it. I got a 1.90 and hour when the minimum was about a dollar above that. But I made a deal with the man, and we both kept up our ends of the bargain. I didn't need some federal employee negotiating for me. But that isn't the issue.

When I was in college, all I could find was minimum wage jobs. But I was married, with 2 kids, and attending a private school that had high tuition. We managed pretty well on it.

With the FRB managed 2% inflation, we have lost tremendous amounts of money. Add to that Obamacare and a million other taxes, fees, permits, etc. and then force the employer to pay some kid that can't add two numbers without using 53 steps of common core, and you have KILLED the business climate. And why 15 bucks? Why not 50? Why not a 100? This is just another episode of federal meddling, by idiots that have NEVER worked a real job, or had a business, and that will kill businesses. I saw that UC Berkley had to release 500 workers due to CA passing the 15.00 foolishness. Think that will come off the top? Or the custodians, groundskeepers, and others that were supposed to be "helped"?

If we could roll back ALL the business killing that the .gov does, the US would be unstoppable. But since it's all for the "children" or the "poor", we are murdering ourselves with the death of a thousand cuts. .gov is just buying votes from the uninterested, uneducated, underinformed.

(a gas station in my town pays for the following: alcohol license, fuel seller license, underground tank license, tax permit, building permit, alarm permit = $20,000 /yr They haven't purchased one item for sale or hired one employee at this point. Just for the privilege of doing business, they are soaked about $2000/ month)

Richard Blaine said...

I put my way too long response on my own blog - becuase I'm a long winded, pedantic, opinionated.... well you get the idea. Feel free to ignore it.

Chris said...

I respect both you and Fred and read both blogs. But what Fred describes in this rant is as much capitalism as Bruce Jenner is a woman. Crony capitalism, or more accurately, corporatism (known as mercantilism two hundred plus years ago) is nothing like laissez faire, which hasn't existed in this country since roughly the 1820s.

Once the government begins "picking winners", freedom of commerce is out the window. And the corporations with the most influential politicians in their pockets get the most tax dollars. Back then, it was called the "American System", in which manufacturers (mostly in the North) were the recipients of protective tariffs and government grants (often indirectly paid by tariff receipts paid by the South). The father of the American System was Henry Clay, and his protege was Abraham Lincoln.

The US government has changed which side of the scales it's rather heavy thumb lands on from time to time, but it has always tipped a side of the scales. Whether anti-labor or anti-certain-industries, the silly and entirely political farce of "anti-trust", or the myriad alphabet soup regulatory agencies, FedGov has always interfered.

There was no laissez faire to deviate from recently, or even in the time of anyone alive today. Or their grandparents. Of course the corporate creatures make braying noises about open markets and level playing fields and so on, but they are no more sincere than a rapist professing undying love for his victims.

Every action government takes has some negative effect on commerce, and the corporations are usually in on the decision-making process. And the rest of us are now finding out that the electoral process is also a fraud, as the two parties change the rules like sweaty underwear to suit their ends.

You want freedom and justice for all? You aren't ever going to get any of that from a government. Taxation is theft. Anything thereafter is the divvying up of stolen goods.

sth_txs said...

I like Fred's columns but he is not describing capitalism.

We need to kill the Federal Reserve and get back to private commodity based money. And abolish a hell of a lot of regulations and fees.

Will said...

A lot of people are unaware that union wages are calculated as a multiple of minimum wage rates.

If you have wondered why so many union types are out there in range of the media's cameras pushing for a raise for all those downtrodden entry level workers, well, you can stop now.

They automatically get a raise when politicians pander to the bleeding hearts by jacking up that minimum wage rate.

And, of course, when a budget gets hit by this increase, you can bet that it won't financially impact those at the upper levels of whatever company or institution you look at. You can also make book on the fact that jobs that pay near the minimum will go away as a direct result of the increase.

David Lang said...

A teenager's first job should not be one that pays enough to support a family. Trying to set the minimum wage to that level just eliminates jobs that aren't worth that much.The jobs will either vanish or become 'in addition to other duties' responsibilities for other employees.

As painful as the California minimum wage hike is going to be for me (as prices go up), the people who are really going to be hurt by it are the ones who have been working hard and bettering themselves and are now making $16-20/hour. Their pay will probably not change at all.

Back when I was starting to work (late 80's), I went through exactly this. I worked hard and got a promotion, with extra work, only to see almost all may benefits vanish in a minimum wage increase that came within $0.05/hour of what I was making with my extra work. That was very discouraging.

sth_txs said...

What is also bad is that few people realize that some with college degrees don't make much above that $15/hour.

Bruce said...

Aah, but you all missed Fred's underlying point - businessmen are all hetero, white racist men. And we only care about our wallet.

Bibliotheca Servare said...

Exactly. I haven't read much by this man, but reading this acidic rant has not inspired a belief that he is a person worth listening to, I'll tell you that much. As others have said, what he describes is NOT "capitalism" in any sense of the word. What he describes can *only* exist in the presence of overbearing government interference in the affairs and economic activities of its citizens. He seems to be a not unintelligent man (especially considering Mr. Grant seems to respect him, and I generally respect Mr Grant's opinions in such matters) but in my opinion he wasn't thinking entirely clearly when he wrote this screed. I apologize if I've offered offense. God bless. :-)

Anonymous said...

Minimum wage, like all other price controls is complete nonsense.

The value of any item- food, gasoline, labor or whatever- is only determined by how much someone is willing to pay for it. There is no other value. At all. This value is determined by the purchaser and the seller, NOT by the government.

When price controls set the price of an item below the what the real value is, you end up with shortages- as we see in Venezuela right now, where people are running out of toilet paper, food, and everything else that the gov sets price controls on.

When price controls (like minimum wage) are set above the value of an item (like an hour of labor) people reduce them amount they buy. Employers start substituting capital (like machinery) for labor. This increases unemployment of everyone whose labor is not worth the price demanded by the government. Making low-skill people unemployable is harmful to them, not helpful. It prevents them from learning elementary job skills they need to work their way up to better paying labor.

You can study the results of price controls for hundreds of years and see these effects.

Fred does not know what he is talking about.

I recommend anyone to read "Basic Economics" by Thomas Sowell. He explains it very well.

Paul said...

if the minimum wage is not enough get off your dead ass and make your self worth more. Learn, improve your self, and leave the world a little better when you go on.

Minimum wage does not address that at any level.