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10. January 2010

The worker and the consumer: jobs as the means to an end

Filed under: economy — admin @ 19:21

A short while ago, I found myself in a conversation with an organic soap-maker at the Pike Place Market.  To be fair, his soap was very high-quality stuff, but I found one serious problem with it: the soap was exorbitantly priced.  Since I was dealing with the soap-maker himself and had the option of purchasing a slightly lower quality soap in bulk for a far more affordable price (less than $5 a bar, thank goodness), haggling seemed my best option.  So haggle I did.

What I found was that the soap-maker couldn’t sell me on the quality of the bar at that price, and he knew this–as he didn’t put up much of a fight.  But what he then said to me has puzzled me ever since: the reason I should buy the soap, he said, was because he paid his soap-makers $18 an hour, which is more than I currently make at the moment.  Not sold on the idea, I smiled, declined, and took off.  I’d later go on to buy about 17 more bars for about three bucks more.

The reason this puzzled me so much was because–in my mind–the only reason I buy products is because 1) I need/want them, and 2) I can afford them.  This is the same way everyone else has thought since the beginning of time, or at least I thought.  But the sad truth is that this was the way people thought about the economy until recently, when somewhere within the last 100 or so years or so, even the so-called right-wingers began thinking of the economy in very Leftist terms, as if the economy exists to produce jobs for the benefit of the worker (and taking it one step further, that the government’s duty is to stimulate the economy).

Don’t get me wrong: having jobs and a healthy economy are good things, but the ironic truth about viewing the economy in Leftist terms is that although industry most certainly does produce wealth and stability, people are much less likely to get the jobs and lifestyles they want when they think of jobs as an end in themselves. For instance, one of my favorite economists, Ludwig Von Mises, once stated that there are only two ways a wealthy society can be created.  First, the actual wealth–product, not money–must be produced (which is fairly obvious to everyone).  Second, the resources of the community must be directed toward the production of the goods that people want the most, which is determined by no one other than the people themselves, and the choice is made with their own personal money.  In this free-market economy, the business solely exists to produce a good or service and yield a profit.

This is a profoundly different worldview than that of the Leftist, who from the State’s perspective effectively (though not always statedly) believes that the true benefit of industry is the jobs themselves. This is very different from a capitalist’s perspective because the buyer’s satisfaction and his pocketbook do not necessarily matter to the Leftist.  Rather, employment will be pursued by the state’s power at the buyer’s/public’s expense, which will eventually cause problems in the worker’s market.

We see this attitude most clearly displayed toward the union, because when companies struggle and fail due to inflexible wages and benefits, the concern isn’t for the quality or the loss of service provided to the people, but rather for the workers involved.  Naturally, as excessive union power results in a decline in both the quality of both price and service, buyers will and should be able to look elsewhere, and the organization will be replaced by international competitors unless given governmental support.  If our national trade deficit is a clue to anything, it is the overly-powerful union.

We also see this attitude displayed when politicians promise to force the lending industry to lend, because the purpose of the banking system–according to the Leftist–is to stimulate the economy and produce jobs.  Recently, our government has been threatening to punish the banking industry because they received bailouts, and haven’t been lending on a scale that governmental officials recognize as “acceptable.”  In real life, however, the bank makes money only by making secure loans, benefiting the economy and then getting you a job.  And in case nobody noticed, Leftist lending requirements have already resulted in the tech and housing bubbles of yesteryear, which resulted in our present-day recession.

But that’s not where this absurdity ends: we can see the mentality even in the way so-called “conservative” politicians behave, with Alan Greenspan (under George Bush’s leadership) artificially and indirectly lowering interest rates on home loans, thereby having funds flock not to the industries which our citizens and the world wanted, but rather toward housing speculation.  Although funds did flow into our economy,  the overall wealth of society decreased, as an economy predicated upon the government’s support will inevitably become less productive and effective than economies which fund industries people naturally desire.  The same happens with the bailouts and stimulus packages: both political parties approve to make our economy less productive, all in the name of jobs.

We also see this in the American attitude toward our car industry, when Americans will not buy a product because it is higher quality and/or a lower price, but rather because it supports overpaid American workers.  If a car industry cannot stand on its own, then it is not making something that people want.  When the overwhelmingly larger population of buyers is shortchanged because of the workers, Americans can rest assured that their policies–regardless of how philanthropic they may seem–ultimately serve not just to undermine the strength of the company and the workers, but also to cheapen quality of life for the populace.  An economy which will not replace failed companies with newer, stronger ones is not a capitalistic economy, and we should not expect it to rebound like one.

And what of taxation? A low taxation rate absolutely allows the economy to succeed, but only if you’re not spending more than your income.  By promoting irresponsible taxation for the stated purpose of increasing jobs, our leaders from both parties have severely undermined the positive effects of low taxation, and gotten us into a bind far worse than high taxes allow: we now have a crippling deficit, and one that can only last until spending radically decreases below our income or the republic collapses.  If the American people had any integrity, they would match their spending with their taxes and vote to lower spending before wanting the jobs which irresponsible voters don’t deserve.

As such, we can conclude that two self-destructive economic viewpoints are that the economy exists to produce jobs, and that the government’s duty is to stimulate the economy.  As with all other proper morality, we must understand that the moral value of an economic decision is not necessarily determined because of what you want (as all people pursuing economic plans want a healthy economy), but rather how you try to get it.  Because of this, it is absolutely important that we view industry in the most proper way possible, as our perspective must necessarily affect the moral path we choose and eventually the health of our nation.

If Americans cannot think properly about production, then they will not be productive, which means they will not have a successful economy.  Contrarily, when we learn that jobs are a byproduct of a productive economy and not an end in themselves, with God’s help America will soar once again.

So where do we go from here?  Here is my eight-step plan to an American economic revival (social changes will complement this, but will be covered elsewhere). 

1) End governmental protection and regulation of unions: allow our businesses to produce.

2) End all industry and finance bailouts: let new companies take the place of failing ones instead of depleting the nation’s investment capital.

3) End egalitarian lending laws: let banks lend to the people who they know will pay them back

4) Make a law ensuring that taxation levels are reset bi-annually, and must directly match spending levels: if we don’t like the taxes, we can vote to lessen services (when in the act of war–not to be confused with military occupation–then military spending will be judged under different rules).

5) End the Federal Reserve: let people direct funding to the companies which produce the things we want

6) Establish a gold standard: allow people to save their money, keep inflation from harming the public, and maintain the dollar’s worldwide reserve status

7) Engage in aggressive trust-busting and legislate stricter merger laws: is a company getting too-big-to-fail?   Then it is too big for the American people.

8) End progressive taxation: treat all men equally, and allow people who either have funds or can get funds to start their own businesses.  

For incredibly interesting information on production, I highly recommend the following video and articles: 

Production and the Firm

Mises and Production (By Howard Katz)

The Political Chances of Genuine Liberalism (by Ludwig Von Mises)

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