Please read through this in its entirety. It might look long, but I think it reads pretty quickly.
If you've ever paid attention to a word I've said (why you would do that is beyond me), you know that I oppose the minimum wage and hikes thereof. Countless times on this site, I've offered countless explanations of how the minimum wage hinders progress, causes inflation, increases poverty, decreases employment, etc.
However, I have not once offered an explanation to how elimination of the minimum wage would work in a truly free market. Now, when I say free market, I want to be clear: I'm talking about a market that is governed only by the laws of supply and demand. In this market, there would be no government intervention, that is, no labor codes, no unions, no intellectual property laws, and (obviously) no minimum wage.
I find that the best way to explain things is through use of an example. If I were to try to abstractly explain this, I'd probably catch myself up in a heap of jargon which would be rather unintelligible, considering I would be making up most of my own terms.
So, let's say that there are five factories. Each of these factories manufactures widgets (they're so useful in the summer, I find). At present, Wurther's Widgets has the highest quality widget in the United States. Because of this, Wurther's Widgets are also the most expensive. In the free market, this would likely mean that any consumer who actually cares about the quality of his widgets would pay the extra $2 or $3 for a widget made by Wurther. We'll say that this consists of 50% of society. The rest of society goes for the cheapest widget.
Wurther's Widgets is a very cunning company, so they do a lot of consumer polls. Time and time again, the results from their polls, which poll random landline phones, show that an overwhelming percentage of the population regard Wurther's Widgets as the best.
The first course of action for Wuther's Widgets is to try to raise the price of their widgets. Wurther sees that this fails because eventually the price goes too high, and most consumers go for the second best (if not the cheapest) widgets.
One day, Wurther's Widgets decides that they want to try to monopolize the market on widgets. To do this, they propose that they lower the price of their widgets, and, since their widgets are the best, the other companies will lose all their revenue because there is no reason why every consumer wouldn't buy a widget from Wurther's.
Well, in order to do this, Wurther's has to drastically decrease the wages of his employees, mostly those who work in the factories. Word gets out that Wurther's is decreasing the wage of his employees, and the executives at Orlaf's Widgets hear.
Now, Orlaf's has historically been second behind Wurther's. Because there is no intellectual property, the secret to Wurther's Widgets are known and protected by the employees of Wurther's and them alone. Up until Wurther's decision to decrease prices and wages, the empoyees of Wurther's were more than willing to oblidge by Wurther's code of silence. However, now that their wages have been significantly reduced, they aren't so sure.
So, the people at Orlaf's Widgets decide that they'll take advantage of Wurther's disgruntled workforce (it should be noted that before the price increase, Wurther's workforce was significantly gruntled), by posting scouts and recruiters outside of Wurther's factory. It might not even be in the form of people. It could be fliers posted on cars and telephone poles in the area.
The workers at Wurther's see that Orlaf's is hiring and they know that Orlaf's offers better wages than Wurther's, so they flock to Orlaf's in search of a better paying job. Upon being hired, they are asked for the secret to Wurther's widgets. Some, who still have a warped sense of honor, refuse to offer up the secret, but, soon enough, Orlaf's has the secret to Wurther's and begins to produce widgets for a slightly higher price than Wurther's.
Reaction to Orlaf's Widgets is mum at first. Wurther's are still priced lower, but as his workforce diminishes and workload on the individual employee begins to mount up in comparison to his wage, Wurther's is soon forced to increase its worker's salaries and again raise their prices, restoring the competitive market, but having lost a company secret.
In a truly competitive, free market without intellectual property laws, a company is forced to keep their employees happy (through wages, benefits, safety provisions, etc.), lest their employees leave the company for the competition and reveal their trade secrets.
Now do you see how free market economics without government intervention is progressive?
First of all, what an intersting topic and a well-written post.
Secondly, I do agree that free market, Laissez Faire policies are the best way to go. Keynesian theory has yet to come up with a better idea, and liberal economics (i.e., WITH government intervention) has historically been a recipe for war, tyranny, and social conflict.
However, Adam Smith's ways have some problems and loopholes too.
Not having a minimum wage is certainly progressive in some ways. But my issue is, and I hope that you can answer this, that without a minimum wage, employees are shuffled around constantly as the market adjusts. Even in your example, the workers had to change jobs like three times. Going to Wurther's as it gained success, then to Orlaf's when Wurther's lowered its prices and wages, then back to Wurther's in the end.
So my issue is, without a minumum wage, workers are constantly changing jobs and having their wages changed without any of their say. THeir jobs are not stable in this way, and neither are their wages.
We know how markets are constantly adjusting; moving along supply and demand curves, constantly chasing equilibrium. Without a minimum wage, workers are thrown around by this constant movement. Out of a job one day, employed the next; working for $10 an hour one month, for $2 an hour the next.
There's little opportunity to move up in a company or gain seniority (because workers are constantly going between Wurther's and Orlaf's).
In summary, we know that free market economics work well--but that they are constantly shifting, dynamic, and somewhat tumultuous. The question is, do we really want to subject PEOPLE to this tumult by removing their one source of employment stability: the minimum wage?
(The unions are going to have a field day) :)
Remember Nietchze's very relavent quote: "It is by invisible hands that we are bent and tortured worst."
Hope you have some answers to this question...and sorry about the long comment! Congrats if you read it all. :)
Allison
"Be the change you want to see in the world" ~Mahatma Gandhi
Don't apologize; it's good to see people thinking (it gives me hope). My theory is that eventually, businesses will learn from history and not make the same mistake twice.
Modern businesses tend to consist of more than just employees and employers. Often, they'll have consultants, et al. which will do various means of market research to determine what is best for the company. If they're worth their paycheck, they'll quickly realise the cause of this pattern and adjust their marketing plan accordingly.
My example shows how the free market prevents monopolies. Eventually, business people will learn to either stop striving for monopolies and compete through means of offering the best goods at the most reasonable prices or go belly up.
Remember, humans are dynamic creatures capable of learning from their mistakes and planning accordingly.
--Mike
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Yeah, I agree. There are more to businesses these days than just employers and employees.
And humans ARE "dynamic creatures capable of learning from their mistakes and planning accordingly..."
...even if they don't act like it most of the time! :)
Allison
"Be the change you want to see in the world" ~Mahatma Gandhi
Classical Liberal Thinker John Stuart Mill actually wanted to get rid of the wage system because it was dehumanizing.
"He therefore made the radical proposal that the whole wage system be abolished, and that it be replaced by a cooperative system in which the producers would act in combinations, collectively owning the capital necessary for carrying on their operations, and working under managers who would be responsible overall to them. "
http://plato.stanford.edu/entries/mill/#PolEco
I totally and whole-heartedly agree but the word classical liberalism has been hijacked by Thatcher and Reagan's economic talking heads "Friedman".
It seems as though you had thought about your views and make a good point. I got a little confused, but I got the jist of it and tottally got what you were saying. Thanks for this read. It really gave me something to think about.
Instead of abolishing minimum wage, why not abolish all wage systems.
Instead of having cut throat competition, why don't we have cutthroat cooperation.
Instead of having managers accountable to CEOs, why don't we have managers accountable to workers.
Instead of allocating parts of the world by private ownership, why don't we take the Bohemian Jesusy approach and democratically distribute land.
All wars are essentially fought over what? Resources
American Revolution was over land. Fought by the common people while the Federalists owned the Constitution.
Civil War fought for slaves which were a huge labor resource to the south's King Cotton industry.
Vietnam War was fought by the US for land in the Pacific to have a presence where France had had for a good time.
Presian Gulf War was the US protecting Kuwait so our Energy Resources wouldn't have more oil, but so we could have a greater piece of the pie that OPEC had been dominating.
The Iran-Contra Affair involved selling nuclear weapons to Iran (Neoconservatives foul up again and the consequences are about to climax) so we could get money from Contras in Nicaragua.
Indonesia was aided by US funds and plans to take over East Timor: a peaceful indigineous people inhabiting an area that would be a cost cutting oil passage in the South Pacific. All reporters died during the commission.
There is a trend that shows that cut throat competition will continue as long as we choose competition over cooperation. We can reconcile our differences through force or through peace. Anarchocapitalism removes an established government and replaces it with interest groups that have total freedom with no checks and balances. Anarchocapitalist business will replace government as a political institution and the whole purpose of business is to what?
Provide the consumer with information and great products.
No, the meaning of life for business is not to abide by Kant's Categorical Imperative (do unto others as you would have them do unto you). It is the exact opposite of the Golden Rule. Business is all about the bottom line and maximizing monetary profit. A large part of business is social deception like Adam Smith wrote in his Theory of Moral Sentiment. Business will use workers as a means to an end and anyone who has worked in a cubicle understands that.
Who will protect you when there is no established government in an anarchocapitalist system. Supply and demand curves will be the new moral code. Total freedom is ignorant of necessity. Any functioning society needs general education to be harmonious, and anarchocapitalism provides absolutely no enforcement or legislation or impetus to come together as a community unless it makes economic sense. The most successful people would be the smart and sneaky ones.
I guess the good thing about anarchocapitalism is that all the weak would die and the strong would survive. Natural selection would be relevant to the human race again only the traits passed down would be aggressive and competitive like the system that it thrives under. The weak (laid back, doting, and sympathetic) would not do what it takes to survive because they would be too busy thinking about human rights and other nonsense that wouldn't mean anything because there would be no established government nor incentive(anarchocapitalist buzz word) for social organisation and institution.
The dollar sign and margins would replace what I believe to be fundamental human traits ie sympathy and compassion.
Sympathy and compassion in the sense that you're referring to are really just euphemisms for guilt. What you propose provides no incentives for the workers to work hard at all and, due to lack of competition, would result in a catastrophic slew of monopolies (because, without a monetary system, what's the point of having more than one company make a good). Even if there were no money, businesses (or industry if you identify business with the capitalist system) could easily monopolize the market and manipulate supply to attain their own ends. Truly, the capitalist system is the only fair system, even if it doesn't seem outwardly compassionate.
--Mike
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Sympathy and compassion in the sense that you're referring to are really just euphemisms for guilt.
Adam Smith use of the word sympathy referred to the ability to understand another individual at any level according to his Theory of Moral Sentiment.
Sympathy meant something totally different back in 1756 and so did compassiona and pity. Reading Adam Smith in a 21st century Comedy Central Progressive context is almost useless without reading supplementary scholarly articles.
Old texts that recommended by Amazon.com are there because they reinforce the doctrinal system of our America. Very few people read them but the majority of the populace notices the name Plato popping up everywhere. That is what the people will remember. They don't learn about cynics, Buddhism, Mao Zedong, or things that apply to the international community because it doesn't make economic sense to recommend a readable book that is anti-American. Milton Friedman understood this and was able to destroy the true meaning of Adam Smith's moralist work.
Adam Smith was a moralist and a capitalist? I thought anarchocapitalism was about freedom from silly moral codes. Adam Smith's legacy has been tarnised in America due to a neoliberal campaign authorized by the Reagan-Thatcher Superpower Diopoly of International Commerce and carried out by Friedman, and earlier von Mises. BAstiat is being resurrected as we speak throguh Milton's decpetion.
Anything international is anti-American. Just like they called Hemingway and Gatsby expatriates. Everyone in America to this day by that horrid definition has relatives that are expatriates. But if their coming to America, they are just immigrants. Unless they are Mexican and then they are illegal aliens.
Anarcho-capitalism is about freedom from others' silly moral codes. Regardless, Smith was not an Anarcho-Capitalist.
Von Mises (and the rest of the Austrian school) are very much opposed to the Neoliberal ideals because it forces economic liberalism, which goes against the Anarcho-capitalist ideals in the first place. That's why you'll see a lot of ana-caps oppose Reagan as well as NAFTA, the IMF, the WTO and the World Bank. I'm a bigger fan of Lew Rockwell, anyway.
Why is it that you change the topic of every argument to bashing America and Americans?
--Mike
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"Von Mises (and the rest of the Austrian school) are very much opposed to the Neoliberal ideals"
"Friedrich von Hayek (1899-1992) is probably the single most influential individual economist or political philosopher to shape what is now understood as neo-liberalism, although he is best regarded, and considered himself, as a classical liberal. Hayek's own theoretical direction SPRANG OUT of the so-called AUSTRIAN SCHOOL established by Carl Menger, Eugen Boehm-Bawerk and LUDWIG VON MISES during first decade of the early twentieth century." from http://www.vusst.hr/ENCYCLOPAEDIA/neoliberalism.htm
Friedrich von Hayek is probably the most popular figure from the Austrian school of economics maybe with the exception of Ludwig von Mises. von Mises provided the basic criticisms of socialism on which Hayek elaborated and carried mainstream toward the Chicago School.
The University of Chicago protege Milton Friedman Americanized a European concept which is always difficult but easy for people sponsored by entrepreneurs who espouse a big business friendly economic farce. The only people who would donate to Von Mises Institute would be business owners who are dreaming of being a big businessman.
Also, the Ludwig von Mises Institute in my opinion is just rhetoric supporting big business and globalism. Think Heritage Foundation or Cato INstitute in thinktank capitalist proportion.
You realize that your counterargument isn't a counterargument at all. That's like saying that Locke was a rationalist because his theories sprang out from a criticism of Descartes.
--Mike
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"Von Mises (and the rest of the Austrian school) are very much opposed to the Neoliberal ideals"
Could you give me 5 examples of members of the Austrian School who opposed the neoliberal ideals they generated?
Could you give one example of a member of the Austrian school who actually espoused Neoliberal ideals (Chicago school is not the Austrian school).
--Mike
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Could you answer my question with a question? It makes you look like your reaching.
FA HAYEK and WILHELM ROPKE are considered by the Ludwig von Mises Institute as the Great Austrian Economists. They are from the Austrian School. Hayek is most famous from that school and he is associated with neoliberalism because he spread the neoliberal order with his economics.
Answer my question first instead of dodging me because whatever I write will be considered irrelevant. I asked you a question and you did not respond. I made no reference to the Chicago School in the question I addressed to you (because that school has neoconservatism and globalism smeared all over it and the American use of an Austrian concept is seemingly distorted in translation and propaganda.)
But if you want a wikipedia article then:http://en.wikipedia.org/wiki/Neoliberalism
"Neoliberalism is associated with Friedrich Hayek and the Austrian School of economics, economics departments such as that at the University of Chicago (and such professors as Milton Friedman and Arnold Harberger), and international organizations such as the International Monetary Fund and The World Bank. "
And for a second source from your main man's website, Ludwig von Mises Institute posted rhetoric:
"In the fall of 1919, von Mises wrote his most famous essay, on "economic calculation in the socialist commonwealth." He argued that a socialist leadership lacked the essential tool for the rational allocation of resources--economic calculation--and that only the money prices of a capitalist economy make it possible to compare alternative investment projects in terms of a common unit. Two years later he published a treatise on socialism (Die Gemeinwirtschaft, 1922), which had a decisive impact on a whole generation of rising intellectual leaders--men such as FA HAYEK and WILHELM ROPKE, who after World War II would lead the nascent NEOLIBERAL movement."
http://www.mises.org/misestributes/misesjgh.asp
You should read the articles from the Institute that promotes Lew Rockwell and von Misesism.
Please don't bend the language with the word espoused.
http://www.stern.nyu.edu/Sternbusiness/fall_winter_2002/grandillusions.h... Read this article because I will soon be posting a blog the "Farce of the Free Market" when I get around to it.
I'm reluctant to answer the question because while I'm debating philosophy, you're debating philosophers and labels.
Neoliberalism as it was dreamed is far different than neoliberalism as it has been carried out. While the Austrian school expressed non-interventionism in the economy by the state, the politicians who espoused these ideals (or claimed to) completely fucked it up through globalization organizations like NAFTA, the IMF, the WTO, and the World Bank. These organizations essentially use interventionism to create a pseudo-non-interventionist world. It doesn't work.
Lew Rockwell is the only philosopher from the Austrian school that I know enough about (from his website) that I can say with wavering confidence is not a neoliberal.
I look forward to reading your blog.
--Mike
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"Why is it that you change the topic of every argument to bashing America and Americans?"
I bash jingoism and flag waving. I am a humanist before an American. I am an internationalist before a territorialist.
But my post had nothing to do with America at all. It addressed a free market without any form of government. I'm not sure how free enterprise can be interpreted as jingoism and flag waving.
--Mike
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