Fears of a "Brain Drain"

Sarbu's points are well taken, especially the point that government can do very littly to enhance conditions where human capitol accumulates. Almost all attempts to do so end up stifling accumulation of human capitol because governments simply cannot resist trying to control the creative process. This leads, inevitably, to supression of creativity, inducing the migrations that Sarbu describes.

This comment in another thread...

But unfortunately the US government is known to spend much more money for killing people than for their charity: $410 billion alone were spent for the DoD in 2006, and $439.3 billion are planned for 2007 according to the official US budget
"each B-2 bomber costs approximately $2.2 billion, while each F-117 fighter costs approximately $45 million; the U.S. fields 21 B-2s and 54 F-117s." (source: answers.com)
Or that F-35 Joint Strike Fighter program which is about to cost $256 billion! How much help would be able to give with this amount of money being spent for an IMHO totally unneeded thing.
The Iraq War has cost approximately 350 billion dollars until now - for that money they could have provided almost 17 million students four-year scholarships at public universities, or could have hired about 7 million additional teachers! Or have could have provided medical help or re-building in a lot of places and ways. So when you see this (and everyone in the world can see this, at least by searching the internet), is it still so ungrateful to say "Hey there is so much money you're throwing away, so why do you spend only a small part of it for good reasons? Throwing away that amount of money shows you are able to spend much more for Charity instead!"?

...made me think of the following article. Lou Dobbs would probably agree with Ninjadwarf--gov't spending is OK as long as I agree with what they spend it on.

But, since of course people disagree what to spend the stealin's on, sometimes you get newgen nukes, and sometimes you get teacher salaries. Hey, if people just kept what they earned, to spend as they wish, do you think more of them would choose to spend it on teachers? Or do you think they would choose to spend it on newgen nukes?


Lou Dobbs Thinks You're a Fool

By Angelo Mike

Lou Dobbs has made himself a crusader for the middle class on his CNN show. He's just written a book, War on the Middle Class, in which he describes government, corporate, and special interest groups which have unofficially declared war on the middle class and told working people where to go.

I, for one, am totally stunned at his book and his claims. In it, Dobbs manages to say that he supports American individualism, individual rights, capitalism, free markets, and a good work ethic, but that these must be upheld by policies of price and wage controls, corporate taxes, subsidies, government control of education, protectionist tariffs and trade agreements, and mass democracy.

Huh?

It's hard to know where to begin in the mess of contradictions that begins right on the book jacket itself, which says, "The war is nothing less than an all-out assault on the middle class, waged by a government that has become the instrument of corporate and special interests, by a business culture that is driven by the profit motive above all other considerations…." Dobbs analyzes every aspect of the decline of the middle class and traces each of them back to a dysfunctional government working hand in hand with unfettered capitalism." (Emphasis added.)

This Marxist delusion — that the state is the great enabler of capitalism — is the dominant theme on his show and in his book. It makes a review like this so difficult because I have to agree with him nominally on many points, disagree with the diagnosis of what causal forces are at work and his antiquated, mercantilist solutions, and then properly explain what forces and institutions should be removed to bring about true capitalism and prosperity.

So I'm bewildered as to where to start with Dobbs. He goes back and forth throughout the book, confusing capitalism with mercantilism, blaming mercantilism for bad policies that he calls capitalism, and blaming free trade for the consequences of protectionist policies … and then there's his actual understanding of politics itself. I hesitate to say what his understanding of economics is because there isn't any economics in War on the Middle Class. There's a lot of talk about how this nation was founded on a principle of economic opportunity, but that's as close as Dobbs comes.

Dobbs begins:

America has become a society owned by corporations and a political system dominated by corporate and special interests, and directed by elites who are hostile — or at best indifferent — to the interests of working men and women of the middle class and their families.

Corporate America holds dominion over the Republican and Democratic parties through campaign contributions (who else will?), armies of lobbyists that have swamped Washington, and control of political and economic think tanks and media.

I think many of the Mises Institute's readers, including myself, would largely agree. The way Dobbs states some of this makes him sound like he's reversing causation of who is truly to blame for bad government policy, but what he says here is very much worth noting, and Austrians and libertarians condemn such interplay of business and government, whether to the detriment or favor of business.

But Dobbs is for the government having all the power he doesn't want them to abuse. And by abuse, Dobbs means that the government should enact only policies that he supports. Well, the problem is that the political entrepreneurs, those enabled to get to the top, believe the very same thing.

Dobbs complains in his chapter, Class Warfare, about how entrepreneurs and CEOs make way too much. He never explains why these profits are too much, except as a disparity between CEO income and what people like me make.

In saying that they make too much, he also says that mobility up the economic ladder has declined, while at the same time, CEOs are becoming richer by running their businesses better. But, that this is done at our expense. Somehow. He never explains how they do that. He merely gives statistics on corporate wages, profits, and job cuts, and expects us to join him in his economically repudiated theories of exploitation of the workers.

Little does Dobbs know that the savings and profits of entrepreneurs are what enable the very existence of wage earners because entrepreneurs give current goods (wages) in the expectations of future goods (profits).

Along the same lines, Dobbs complains that labor unions are ineffective and are threatened with dissolution. Those unions, however, are vested interests who depend on government grants of privilege to be able to extort employers out of hiring non-union workers.

Dobbs does recognize part of this problem (even if he won't properly diagnose it at the fundamental level) when, in chapter nine, he complains that teacher's unions insist that teachers be paid based on length of employment and not on merit.

Only one system alone pays based on merit, or more precisely, marginal productivity, and that's unfettered capitalism, where all property is privately owned, and the government's role does not extend beyond the protection of private property. No government grants of privilege, no subsidies, no price or wage controls, and no tariffs. Employers compete for employees by bidding up wages and other work-related benefits, and employees compete for employers by acquiring skills, educating themselves, and offering competitive prices for their labor.

This means an inexorable tendency towards paying employees the rate of their marginal revenue product — the returns they provide their employer for each additional unit of labor provided.

Unions systematically disrupt this system by demanding privilege with the backing of police power. They demand from the government the power to forbid employers from hiring non-union workers to do the same work they may refuse to do at a lower rate — or at all if they're on strike.

Union organizing doesn't raise wages. All it does is ban from working those marginal workers whose marginal productivity is less than that of the legal minimum. In the case of union regulations, it is banned from those fields in which they work, and those marginal prospective employees now go into other, lesser paying jobs, increasing the supply of labor in those fields they enter, further depressing wages and escalating the demand on government to do something and, in Dobbs's view, stop ignoring the problem.

Again, when unions abuse this power, in Dobbs's view, that's bad. So why give them this monopoly-backed police power to force their will over the objections of anyone they like?

Dobbs also has a further problem with credit card companies and other financial institutions trying to hold debtors to their claims. For instance, he blames the Bankruptcy and Abuse Prevention and Consumer Protection Act of 2005 for forcing people to pay their debts without protection of bankruptcy laws. This is particularly egregious because "the leading cause of personal bankruptcy is the medical and health care costs incurred by catastrophic illness."

This is all true, and I don't know the substance of the law he talks about. But bankruptcy laws themselves are yet another disordering of capitalism in which debtors are granted government protection against having to pay their debts. It nullifies valid contracts, and all the sympathetic circumstances in the world couldn't change the fact that it's just a way of enabling theft from creditors.

But even by Dobbs's own measure, if unfortunate circumstances make it necessary for the law to discharge contracts and make it artificially more profitable to go into debt, isn't it important to look at the causal forces at work that determine why health care is so expensive in the first place? Dobbs does not make a single mention of how the government has induced the cost of medical care to be so high and for the quality to become increasingly more poor.

Take the example of health insurance. In chapter ten, Dobbs complains, "The United States is one of the only industrialized nations that doesn't provide health care to all its citizens, yet we still spend more on it than any other country. Right now, forty-six million people in this country do not have health insurance…."

I'll leave it to the readers to figure out how, exactly, it is that we can't afford health care now, yet once it becomes universal it will be free and affordable.

The problem is that the government makes it perfectly sensible for these forty-six million to not get health insurance. If they do purchase a health insurance policy, the government will force them to subsidize people in unlike classes of risk. And, the government forces us to insure things that are inherently uninsurable because we are either in direct or partial control over them — such as whether we are employed or not. And much of our health is partially or entirely under our control, making a regular check-up uninsurable.

The insurance system has become a system of wealth redistribution. To use Hans-Hermann Hoppe's illustration of this point, if a firm offered insurance against accidents that cause bodily injury to a professor, and the same policy to NFL football players, would he agree to such a service?

The biggest work-related risk faced by a writer and desk jockey is his chair collapsing underneath him. If this happened and he needed medical care, his insurance provider, using the premiums pooled from him and other clients, will give compensation to him for his medical costs.

But an NFL player obviously is in a much higher class of risk, and is much more likely to be injured and receive compensation. University professors would likely be paying higher premiums so that compensation could keep being awarded to NFL players, while the professors continue working in a relatively safe profession.

In a free market, NFL players would tend to pool risk as clients of insurance firms with other NFL players, desk jockeys with other desk jockeys, etc. Yet this kind of policy is exactly what the government disallows.

Then there are the costs of paying for doctors and drugs, which are much higher than they would be on a free market, despite whatever conception Dobbs has of such a state of affairs. Some of the special interests that Dobbs never criticizes are doctors, medical schools, drug companies, and the FDA, which are insulated from any competitor that the government does not approve of and license.

In creating a cartel in health care and drugs, the government artificially restricts the supply, insulating the higher wages of people in these industries from outside competition and innovation, reducing the amount of health care we can get, and the quality of it.

Dobbs doesn't devote a word of criticism to any of these programs and monopolies. Instead, he uses the problems they create as the pretense for criticizing businesses for cutting medical benefits to employees, when the government makes it more profitable to engage in such a cost-cutting procedure.

Now we turn to a central theme in the Dobbs oeuvre: his claims that the cost of free trade is too high, and that middle-class jobs are being outsourced by greedy companies to other countries while lower and lower paying jobs are being created. In particular, he focuses on jobs in the manufacturing industry, which presumably needs more influence in Washington to lobby on behalf of its special interests.

Hence the futility of Lou Dobbs's criticisms of our political system for bending to the will of corporations, but at the same time having to ceaselessly regulate and determine whose interests are most sympathetic, and which classes of people deserve special protection.

In a way, Dobbs's criticisms here are so dull and antiquated that not much needs to be said to refute his protectionist fallacies. In the chapter titled "Exporting America," he claims that job outsourcing to other countries is bad, and our manufacturing class of workers are being especially hurt. He cites statistics we all know are true about the number of jobs outsourced, and hopes that we're all nationalist enough to want to protect the interests of that class at the expense of everyone else.

Manufacturers, then, are yet another special interest that Dobbs wants the government to bow to, but, by virtue of being selected as instrumental to this country's well-being, they're a good special interest. See the pattern?

If jobs can be provided more cheaply in another country, it is in part because the consumers and clients of the firms practicing outsourcing decide that they do not want to foot the bill to see their fellow countrymen have jobs at higher rates than what could be paid in another country. This will never be fixed by a government decree, which can only hinder the desires of the heartless consumers, who only seek their own interest above all else.

Moreover, the loss of jobs from one area or industry to another is, in a free market, symptomatic of the fact that conditions ceaselessly change, and that our desires are unlimited as consumers. We will always want something better and cheaper that can be consumed more directly for our satisfaction. If the manufacturing industry isn't doing that in a manner in which the consumers approve, this simply means that the labor that manufacturing employees lose will be freed up to enter other, more highly valued and productive markets.

The horse and buggy industry suffered terribly from competition with the automobile industry. Was their interest in making a living not more important than our desire to drive cars? There is nothing unique about the position which horse and buggy employees suffered due to cars, just as there is nothing unique about the loss of manufacturing jobs. These people's livelihoods are temporarily disrupted (again, assuming a free market where there are not the current prohibitions, regulations, licenses, subsidies, etc., which hinder people from freely entering other professions or working for themselves), but this is always the case for any economy in which the consumers have freedom to decide who serves their desires best.

It was just as true of fabric makers hundreds of years ago who made petitions to stop new looms from making their work more productive, serving the consumers of fabric better, and eliminating from their work force those workers whose marginal productivity did not justify their employment in their current jobs.

It may be objected that the benefits of job protectionism outweigh the costs. But while the supposed benefits of protectionism are clearly seen, the bad consequences are pernicious but unseen. The loss of jobs on a market are plainly visible and painful, but the complex economic phenomena at work are not.

Consequently, protectionist policies give benefits that are seen but impair the satisfaction of the desires of consumers by depriving them of the goods that could be produced if the newly unemployed were put to work in other industries. It also externalizes the cost of protection onto consumers by forcing them to pay higher prices for a lower supply of goods from the protected industry, goods that are not necessarily of the same quality as those from foreign competitors. These effects are all unseen.

Lou Dobbs is not a fresh voice of opposition to the government. He does not offer us anything more than antiquated notions of mercantilist policies of protection, which plunder the many consumers in order to protect his favorite class of people. He supports the very policies of destructionism, economic nationalism, and protectionism that create more and more economic crises, for which the tax payers need to be shaken down again and again to foot the bill and subsidize the pet industries of guys like him.

Dobbs says he is a straight shooter, and while I have no reason to doubt the sincerity of his intentions, the policies he desires are not the sum of good intentions, but of their own consequences. He does not understand the forces at work in creating the unsatisfactory conditions he often quite correctly notes. He just lists seemingly random, disconnected data, and once he's done laying out the data in chapter after chapter, the blame typically lands on business, capitalism, and free trade while playing on notions of class warfare and how the well-being of entrepreneurs is opposed to the consumers they have to serve if they want their patronage.

One can imagine such a thing as free-market populism. But populism in the hands of Dobbs has yielded a case for all-around economic regimentation and growing impoverishment, which will not stop the war on the middle class but rather decide it in favor of the state.

---

Cordially,
Rush

elrushbo2@theobviousgmail.com
Remove the obvious...

I wonder how many people (on ALL sides) will be killed in Iraq this Christmas day?
How many of those grieving families know that fact TODAY?

In that no official UN sanction was given for this "war" and therefore in International Law it was illegal, can we please change the word "killed" ... to
"MURDERED"?

Happy Christmas y'all!!!

This comment in another thread...

But unfortunately the US government is known to spend much more money for killing people than for their charity: $410 billion alone were spent for the DoD in 2006, and $439.3 billion are planned for 2007 according to the official US budget
"each B-2 bomber costs approximately $2.2 billion, while each F-117 fighter costs approximately $45 million; the U.S. fields 21 B-2s and 54 F-117s." (source: answers.com)
Or that F-35 Joint Strike Fighter program which is about to cost $256 billion! How much help would be able to give with this amount of money being spent for an IMHO totally unneeded thing.
The Iraq War has cost approximately 350 billion dollars until now - for that money they could have provided almost 17 million students four-year scholarships at public universities, or could have hired about 7 million additional teachers! Or have could have provided medical help or re-building in a lot of places and ways. So when you see this (and everyone in the world can see this, at least by searching the internet), is it still so ungrateful to say "Hey there is so much money you're throwing away, so why do you spend only a small part of it for good reasons? Throwing away that amount of money shows you are able to spend much more for Charity instead!"?

...made me think of the following article. Lou Dobbs would probably agree with Ninjadwarf--gov't spending is OK as long as I agree with what they spend it on.

But, since of course people disagree what to spend the stealin's on, sometimes you get newgen nukes, and sometimes you get teacher salaries. Hey, if people just kept what they earned, to spend as they wish, do you think more of them would choose to spend it on teachers? Or do you think they would choose to spend it on newgen nukes?


Lou Dobbs Thinks You're a Fool

By Angelo Mike

Lou Dobbs has made himself a crusader for the middle class on his CNN show. He's just written a book, War on the Middle Class, in which he describes government, corporate, and special interest groups which have unofficially declared war on the middle class and told working people where to go.

I, for one, am totally stunned at his book and his claims. In it, Dobbs manages to say that he supports American individualism, individual rights, capitalism, free markets, and a good work ethic, but that these must be upheld by policies of price and wage controls, corporate taxes, subsidies, government control of education, protectionist tariffs and trade agreements, and mass democracy.
...

This Marxist delusion — that the state is the great enabler of capitalism — is the dominant theme on his show and in his book. It makes a review like this so difficult because I have to agree with him nominally on many points, disagree with the diagnosis of what causal forces are at work and his antiquated, mercantilist solutions, and then properly explain what forces and institutions should be removed to bring about true capitalism and prosperity.

So I'm bewildered as to where to start with Dobbs. He goes back and forth throughout the book, confusing capitalism with mercantilism, blaming mercantilism for bad policies that he calls capitalism, and blaming free trade for the consequences of protectionist policies … and then there's his actual understanding of politics itself. I hesitate to say what his understanding of economics is because there isn't any economics in War on the Middle Class. There's a lot of talk about how this nation was founded on a principle of economic opportunity, but that's as close as Dobbs comes.

Dobbs begins:

America has become a society owned by corporations and a political system dominated by corporate and special interests, and directed by elites who are hostile — or at best indifferent — to the interests of working men and women of the middle class and their families.

Corporate America holds dominion over the Republican and Democratic parties through campaign contributions (who else will?), armies of lobbyists that have swamped Washington, and control of political and economic think tanks and media.
...

Dobbs complains in his chapter, Class Warfare, about how entrepreneurs and CEOs make way too much. He never explains why these profits are too much, except as a disparity between CEO income and what people like me make.

In saying that they make too much, he also says that mobility up the economic ladder has declined, while at the same time, CEOs are becoming richer by running their businesses better. But, that this is done at our expense. Somehow. He never explains how they do that. He merely gives statistics on corporate wages, profits, and job cuts, and expects us to join him in his economically repudiated theories of exploitation of the workers.

Little does Dobbs know that the savings and profits of entrepreneurs are what enable the very existence of wage earners because entrepreneurs give current goods (wages) in the expectations of future goods (profits).

Along the same lines, Dobbs complains that labor unions are ineffective and are threatened with dissolution. Those unions, however, are vested interests who depend on government grants of privilege to be able to extort employers out of hiring non-union workers.

Dobbs does recognize part of this problem (even if he won't properly diagnose it at the fundamental level) when, in chapter nine, he complains that teacher's unions insist that teachers be paid based on length of employment and not on merit.

Only one system alone pays based on merit, or more precisely, marginal productivity, and that's unfettered capitalism, where all property is privately owned, and the government's role does not extend beyond the protection of private property. No government grants of privilege, no subsidies, no price or wage controls, and no tariffs. Employers compete for employees by bidding up wages and other work-related benefits, and employees compete for employers by acquiring skills, educating themselves, and offering competitive prices for their labor.

This means an inexorable tendency towards paying employees the rate of their marginal revenue product — the returns they provide their employer for each additional unit of labor provided.

Unions systematically disrupt this system by demanding privilege with the backing of police power. They demand from the government the power to forbid employers from hiring non-union workers to do the same work they may refuse to do at a lower rate — or at all if they're on strike.

Union organizing doesn't raise wages. All it does is ban from working those marginal workers whose marginal productivity is less than that of the legal minimum. In the case of union regulations, it is banned from those fields in which they work, and those marginal prospective employees now go into other, lesser paying jobs, increasing the supply of labor in those fields they enter, further depressing wages and escalating the demand on government to do something and, in Dobbs's view, stop ignoring the problem.

Again, when unions abuse this power, in Dobbs's view, that's bad. So why give them this monopoly-backed police power to force their will over the objections of anyone they like?

Dobbs also has a further problem with credit card companies and other financial institutions trying to hold debtors to their claims. For instance, he blames the Bankruptcy and Abuse Prevention and Consumer Protection Act of 2005 for forcing people to pay their debts without protection of bankruptcy laws. This is particularly egregious because "the leading cause of personal bankruptcy is the medical and health care costs incurred by catastrophic illness."

This is all true, and I don't know the substance of the law he talks about. But bankruptcy laws themselves are yet another disordering of capitalism in which debtors are granted government protection against having to pay their debts. It nullifies valid contracts, and all the sympathetic circumstances in the world couldn't change the fact that it's just a way of enabling theft from creditors.

But even by Dobbs's own measure, if unfortunate circumstances make it necessary for the law to discharge contracts and make it artificially more profitable to go into debt, isn't it important to look at the causal forces at work that determine why health care is so expensive in the first place? Dobbs does not make a single mention of how the government has induced the cost of medical care to be so high and for the quality to become increasingly more poor.

Take the example of health insurance. In chapter ten, Dobbs complains, "The United States is one of the only industrialized nations that doesn't provide health care to all its citizens, yet we still spend more on it than any other country. Right now, forty-six million people in this country do not have health insurance…."
.
.
.
.

One can imagine such a thing as free-market populism. But populism in the hands of Dobbs has yielded a case for all-around economic regimentation and growing impoverishment, which will not stop the war on the middle class but rather decide it in favor of the state.

Well, for you were quoting my posting, I think I am supposed to put my view on this. I never read Dobbs or heared of him before, but I think he (and not that Angelo Mike) is right. Here in Germany, unions are (though declining in their power) responsible for higher wages. There are tariffs for almost every profession (even though I wish there would be tariffs for management people too), and the government have industry and union come together to discuss the new tariffs every couple years. That's the good thing.
And to the point of CEOs making way too much - wasn't it Gerald Ford (that guy who produced the Thin Lizzy) who stated that the incomes of the management should be kind of limited? Where is a good reason that a CEO should earn some hundred times of a workers wages? That's not envy, but pointing out an unfairness. Work done should be paid equally. No matter what, no matter where - everyone who does the same work like another one should be paid as much as the other one. In my opinion, tariffs are absolutely useful - and satisfied workers work better than dissatisfied ones, causing more turnover for the companies...
Mentioning the "confusing capitalism with mercantilism" - I think there is not that much a difference: though capitalists want an unregulated market, regulating itself by the "law of evolution" (=social Darwinism) while a regulated market with strict rules (tariffs, price limits, etc) is much better for a fair competition, enabling also the entrepreneurs of small companies to remain.
I think any government which is serving the needs of the vast majority of their citizens (and in 99,9% of all cases it's the workers and small business) instead of those few with the big money can be counted as a good government.

I often said, our (German) government should enforce that each company had to pay their workers according to the tariffs,and that there be tariffs for each single profession, even top-managers, to grant a minimum and maximum income for everyone. That they should change laws that no company could be allowed to close down and move abroad, that companies should pay taxes the same way like private persons, and that there have to be free education and health-care for every-one (and it could be paid if the companies and the rich ones were taxed fair).

---

Account frozen...

Well, for you were quoting my posting, I think I am supposed to put my view on this. I never read Dobbs or heared of him before, but I think he (and not that Angelo Mike) is right.

Did you even read the article? Dobbs makes glaring errors, positing his opinion as economic reality.

Here in Germany, unions are (though declining in their power) responsible for higher wages. There are tariffs for almost every profession (even though I wish there would be tariffs for management people too), and the government have industry and union come together to discuss the new tariffs every couple years. That's the good thing.

Really? Can I work in Germany in a union shop without being part of the union?

And to the point of CEOs making way too much - wasn't it Gerald Ford (that guy who produced the Thin Lizzy) who stated that the incomes of the management should be kind of limited? Where is a good reason that a CEO should earn some hundred times of a workers wages? That's not envy, but pointing out an unfairness. Work done should be paid equally. No matter what, no matter where - everyone who does the same work like another one should be paid as much as the other one.

Once again, it's a principle. If it's OK for employees to bargain freely for the wages they earn, it's OK for all employees to bargain for the wages they earn. If it's OK for workers to do that, then it's OK for management personnel to do the same.

In my opinion, tariffs are absolutely useful - and satisfied workers work better than dissatisfied ones, causing more turnover for the companies...
Mentioning the "confusing capitalism with mercantilism" - I think there is not that much a difference: though capitalists want an unregulated market, regulating itself by the "law of evolution" (=social Darwinism) while a regulated market with strict rules (tariffs, price limits, etc) is much better for a fair competition, enabling also the entrepreneurs of small companies to remain.

OK, maybe this was a bad idea. There are significant differences between mercantilism and capitalism. They aren't the same.

But what I said was right: you have a problem with using gov't money to buy weapons and whatnot, but have no problem using gov't money to pay teachers. The principle is the same though: take money from people by way of force and spend that money on things they would never have spent it on.

I think any government which is serving the needs of the vast majority of their citizens (and in 99,9% of all cases it's the workers and small business) instead of those few with the big money can be counted as a good government.

Yes, this was a mistake.

I often said, our (German) government should enforce that each company had to pay their workers according to the tariffs,and that there be tariffs for each single profession, even top-managers, to grant a minimum and maximum income for everyone. That they should change laws that no company could be allowed to close down and move abroad, that companies should pay taxes the same way like private persons, and that there have to be free education for every-one (and it could be paid if the companies and the rich ones were taxed fair).

(emphasis added) This is insane. It doesn't even rise to the level of being wrong.

---

Cordially,
Rush

elrushbo2@theobviousgmail.com
Remove the obvious...

Well, for you were quoting my posting, I think I am supposed to put my view on this. I never read Dobbs or heared of him before, but I think he (and not that Angelo Mike) is right.

Did you even read the article? Dobbs makes glaring errors, positing his opinion as economic reality.

Here in Germany, unions are (though declining in their power) responsible for higher wages. There are tariffs for almost every profession (even though I wish there would be tariffs for management people too), and the government have industry and union come together to discuss the new tariffs every couple years. That's the good thing.

Really? Can I work in Germany in a union shop without being part of the union?

And to the point of CEOs making way too much - wasn't it Gerald Ford (that guy who produced the Thin Lizzy) who stated that the incomes of the management should be kind of limited? Where is a good reason that a CEO should earn some hundred times of a workers wages? That's not envy, but pointing out an unfairness. Work done should be paid equally. No matter what, no matter where - everyone who does the same work like another one should be paid as much as the other one.

Once again, it's a principle. If it's OK for employees to bargain freely for the wages they earn, it's OK for all employees to bargain for the wages they earn. If it's OK for workers to do that, then it's OK for management personnel to do the same.

In my opinion, tariffs are absolutely useful - and satisfied workers work better than dissatisfied ones, causing more turnover for the companies...
Mentioning the "confusing capitalism with mercantilism" - I think there is not that much a difference: though capitalists want an unregulated market, regulating itself by the "law of evolution" (=social Darwinism) while a regulated market with strict rules (tariffs, price limits, etc) is much better for a fair competition, enabling also the entrepreneurs of small companies to remain.

OK, maybe this was a bad idea. There are significant differences between mercantilism and capitalism. They aren't the same.

But what I said was right: you have a problem with using gov't money to buy weapons and whatnot, but have no problem using gov't money to pay teachers. The principle is the same though: take money from people by way of force and spend that money on things they would never have spent it on.

I think any government which is serving the needs of the vast majority of their citizens (and in 99,9% of all cases it's the workers and small business) instead of those few with the big money can be counted as a good government.

Yes, this was a mistake.

I often said, our (German) government should enforce that each company had to pay their workers according to the tariffs,and that there be tariffs for each single profession, even top-managers, to grant a minimum and maximum income for everyone. That they should change laws that no company could be allowed to close down and move abroad, that companies should pay taxes the same way like private persons, and that there have to be free education for every-one (and it could be paid if the companies and the rich ones were taxed fair).

(emphasis added) This is insane. It doesn't even rise to the level of being wrong.

Why is this insane? I mean, companies should have a responsibility against the country where they grew big in, so a closing down to move abroad IMHO is the same as traiting that country. I mean if I support someone enough to grow big I would have a natural interest that they remain in my territory, and be it by law. And - since I'm quite a opponent to globalism anyway, I think, each company should remain in their home-country, and either only export their products, or open subsidiaries in other countries but never should move there, traiting their home country.

---

Account frozen...

I often said, our (German) government should enforce that each company had to pay their workers according to the tariffs,and that there be tariffs for each single profession, even top-managers, to grant a minimum and maximum income for everyone. That they should change laws that no company could be allowed to close down and move abroad, that companies should pay taxes the same way like private persons, and that there have to be free education for every-one (and it could be paid if the companies and the rich ones were taxed fair).

(emphasis added) This is insane. It doesn't even rise to the level of being wrong.

Why is this insane? I mean, companies should have a responsibility against the country where they grew big in, so a closing down to move abroad IMHO is the same as traiting that country. I mean if I support someone enough to grow big I would have a natural interest that they remain in my territory, and be it by law. And - since I'm quite a opponent to globalism anyway, I think, each company should remain in their home-country, and either only export their products, or open subsidiaries in other countries but never should move there, traiting their home country.

I'm repeating this for posterity.

'Nuff said.

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Cordially,
Rush

elrushbo2@theobviousgmail.com
Remove the obvious...

I wonder how many people (on ALL sides) will be killed in Iraq this Christmas day?
How many of those grieving families know that fact TODAY?

In that no official UN sanction was given for this "war" and therefore in International Law it was illegal, can we please change the word "killed" ... to
"MURDERED"?

Happy Christmas y'all!!!

No.

And Merry Christmas to you and yours also.

A Minimum of Understanding
By James D. Miller : 10 Jan 2007


Democrats want to raise the federal minimum wage from $5.15 to $7.25 an hour. But raising the minimum wage will harm unskilled workers. If the price of gas went up by 40%, people would buy less gas. Similarly, if the wages businesses must pay low skilled workers increased by the proposed 40%, then companies will buy (i.e. hire) fewer workers. Other commentators have already explained how the minimum wage destroys jobs. This article argues that even if raising the minimum wage caused a firm to hire exactly the same number of workers as before, the higher minimum wage could still harm the company's employees.

--Fewer Advancement Opportunities

Let's say an unskilled worker, whom I'll call John, is worth $7.25 an hour to an employer. John went to a horrible school that didn't teach him any marketable skills. John, however, is ambitious and hopes to advance in the job market by getting on-the-job training from an employer.

Two firms want to hire John. The first offers him a job that pays $7.25 an hour but provides no useful training. The second pays $5.25 an hour, but offers training and could someday lead to a management position. This training is costly for the firm to provide, but the firm is willing to give John the training since it is paying him only $5.25 an hour.

A $7.25 an hour minimum wage could, however, stop the second employer from giving John his costly on-the-job training. If the business couldn't pay a lower salary in return for providing training, then the firm most likely wouldn't give John the training.

Perhaps, one might argue, the second firm would still provide the on-the-job training to make John a more valuable employee to them. But there is no reason to assume that John would stay at his job after he has received his training. And even if he did stay John would likely demand a higher wage from his employer.

Many firms offer lower wages in return for providing increased training and advancement opportunities. A minimum wage would restrict firms' abilities to offer lower salaries and so would reduce the benefit to firms of providing such benefits to their low skilled workers.

--Worse Working Conditions

I predict that if the higher minimum wage is enacted bosses will yell more at their low skilled workers. By forcing companies to pay higher wages to low skilled employees, a higher minimum wage reduces the net value of these workers to their companies.

A higher minimum wage also reduces the total number of jobs available to unskilled workers. Consequently, raising the minimum wage makes it easier for bosses to replace any unskilled workers who quit. Under a higher minimum wage, therefore, bosses lose less if their mistreatment of employees causes some workers to leave. So unskilled workers who keep their jobs after a minimum wage hike can expect their bosses to treat them a bit worse than before.

--Hire Different Types of Employees

Imagine that for some strange reason the government (A) forced Smith College to pay economists $1 million a year and (B) forbade Smith College from reducing the number of economists it employs. Well, for $1 million a year Smith College, my employer, could do a lot better than to have me as one of its economists. Under this $1 million a year minimum wage for economists, therefore, Smith would quite rationally do everything it could to fire me.

For any given wage it offers, a firm tries to hire the best workers it can. At a wage of $7.25 an hour firms will be able to attract higher quality workers than they can if they offer only $5.15 an hour. Consequently, even if the minimum wage doesn't cause a company to hire fewer workers, it will cause the firm to hire different types of workers.

Perhaps today some firm could hire either an inner-city teenager or a middle-class grandmother. The firm might prefer to hire the grandmother but, let's say, the grandmother won't work for less than $7 an hour whereas the inner-city teen would accept a wage of $5.15 an hour, so the firm hires the teen. If the minimum wage is raised to $7.25 an hour, however, the firm would quickly replace the teen with the grandmother. So even in the extremely unlikely case that a higher minimum wage doesn't reduce overall employment, it will likely reduce employment among our nation's lowest skilled individuals.

James D. Miller is the author of Game Theory at Work.

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Cordially,
Rush

elrushbo2@theobviousgmail.com
Remove the obvious...

Sorry Rush but that is the same tired excuse for not raising the minimum wage that has always been used in the past. It just doesn't really happen, and definitily not on any real scale that you imagine. I would rather pay 10 cents more for a hamburger knowing the persons making it are given something closer to a living wage.

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Account frozen...

Sorry Rush but that is the same tired excuse for not raising the minimum wage that has always been used in the past. It just doesn't really happen, and definitily not on any real scale that you imagine. I would rather pay 10 cents more for a hamburger knowing the persons making it are given something closer to a living wage.

Had you made any argument of substance, I could have replied in kind. But you don't address any of the points made, e.g., if you understand why people buy less gas when the price jumps 40%, you can understand why people hire less labor when the price jumps 40%. I mean, why not make the minimum wage $10.00? Why not $15.00, or $20?

What you are willing to do wasn't really the point of the article.

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Cordially,
Rush

elrushbo2@theobviousgmail.com
Remove the obvious...

Great Dane, Great Pain
By Henrik Rasmussen

"It is entirely possible to have a large welfare state, with generous benefits, without choking the economy," says Jonathan Cohn of the New Republic in a new series of articles, glorifying the Danish economic model. He enlists the support of several prominent economists from left and right.

Economist Kevin Hassett: "The Scandinavians show that you don't have to have a terrible economy if you have a big welfare state and high taxes."

Columbia University's Jeffrey Sachs: "A generous social-welfare state is not a road to serfdom but rather to high levels of satisfaction, fairness, economic equality and international competitiveness."

Former Treasury Secretary Robert Rubin: "I think I would like to move to Denmark."

Before Mr. Rubin starts packing, perhaps a dose of reality from someone who has actually lived in Denmark is in order.

First, let's compare material living standards in Denmark and the United States, looking at the poorest, the richest and the middle class in each society. The Economic Policy Institute estimates that the poorest 10% of Americans on average earn 39% of the US median income while their Danish counterparts earn 43% of the US median income, as Tim Worstall recently pointed out. Thus, the poorest 10% in America and in Denmark have about the same annual income (accounting for purchasing power parities and all social income transfers).

Not surprisingly, the top 10% of Americans are much better off than their Danish counterparts with an average income of 210% of the US median income compared to 123% in Denmark. "Rich" people in Denmark thus do not make much more than the median income in the United States.

As for the average industrial worker, the Danish Ministry of taxation estimates that American workers earn roughly 33% more than their Danish counterparts when accounting for purchasing power parities and social transfers of income.

Taken together, these numbers indicate that the 10% poorest in the United States have roughly the same standard of living as their Danish counterparts while the remaining 90% of Americans are better off than the Danes.

Anecdotal evidence and hard numbers concerning material goods support this conclusion. If we look at housing, the Heritage Foundation estimates that Danes have an average of 558 square feet per person available compared to a US average of 721.2 - almost 30% more living space. The difference is even more striking if we look at cars: According to Eurostat, America has 759 cars per 1000 people compared to 354 in Denmark -- a difference of more than 100%. In particular, large passenger vehicles such as SUVs are extremely rare in Denmark.

In addition, Danes tend to have fewer household amenities than Americans. A case in point: my wife and I recently hosted a Danish friend at our home in Virginia. During the clean up after dinner, our guest was astonished by our garbage disposal, having never seen one or even heard of one before in her life.

Ironically, the taxation system, which is designed to redistribute income for the benefit of the poor, is one of the main reasons poor and lower middle class Danes are not doing better than their American counterparts. For instance, Denmark has a value-added tax (VAT) of 25% on all goods and services, which increases prices for everyone regardless of their income. Furthermore, certain goods such as cars and gasoline are taxed at even higher rates. The sales tax on cars is 180%, and the price of gasoline is currently 6.50 dollars per gallon due to taxes. Since the poor tend to spend a larger percentage of their income on consumption than the rich, the high VAT and special sales taxes hit the poor relatively hard.

The same goes for what Cohn admits is a "lackluster" service sector in Denmark. Personal income taxes start at 39% in the lowest bracket with a marginal income tax rate of 60%, not counting the 8% tax on gross income (dubbed "labor market support") that everyone pays before any deductions can be made. With such an enormous tax-burden on labor, labor-intensive services naturally tend to be much more expensive in Denmark than in the United States. Since the poor need many services just as much as the rich, the high price of services hurt the poor more - by forcing them to spend a relatively high proportion of their income on basic services or to spend their free time trying to perform these services themselves.

Which brings me to my second point. Cohn points out that "Americans simply work more hours, don't get as much vacation, and can't take such generous pregnancy or sick leaves." True, on paper Danes and Europeans in general have much more free time than Americans. However, as Constantin Gurdgiev points out, recent research from Sweden and Germany suggests that Americans have just as much leisure time as Germans and Swedes when one accounts for the time spent on "do-it-yourself" services such as cooking, grocery shopping and home repair. While Americans spend more time on the job, Swedes and Germans spend more time working at home performing basic services that Americans pay others to do for them.

Anecdotal evidence suggests that the numbers from Germany and Sweden apply to Denmark as well. For instance, Danes rarely go out to eat compared to Americans, and shopping for groceries, clothes and other everyday items requires more time in Denmark due to smaller stores, higher prices, and a lower variety of goods. In addition, Danes tend to spend long hours stuck in public transportation due to the high cost of cars and gasoline. High taxes tend to complicate life and cut into people's free time in more ways than immediately meet the eye.

Finally, there are the "generous" non-cash social benefits of the Danish welfare state to consider, primarily the health care system, which all Danes can use free of charge. "Danish health care is no worse than the US version," Cohn states, "Yet we Americans pay far more for our system, because it's riddled with inefficiencies as insurance companies compete with one another to enroll healthy beneficiaries, rather than finance good care."

In fact, US healthcare is better than the Danish version, exactly because Americans spend more on healthcare than the Danes. As in most government-run healthcare systems, Danish patients face significant waiting times for many types of treatment that Americans can get immediately. The United States is also ahead of Denmark when it comes to employing modern technology. For instance, America has 62.1 DTX scanners (for osteoporosis) per 1 million people compared to 8.0 in Denmark. The ratio for MRI scanners is 27 to 10 in America's favor, and the ratio for CT scanners is 32 to 14.6, again in America's favor.

Furthermore, Americans have better access to many preventive drugs than Danes, who often have difficulties getting prescriptions until they show serious medical complications. Competition between insurance companies is exactly what causes this American superiority in access to drugs. Since the insurance companies work for profit, they have an interest in minimizing expenditures for hospitalizations and expensive treatment by encouraging their beneficiaries to stay healthy through preventive drugs and a healthy lifestyle. By contrast, the Danish health system is governed by narrow-minded bureaucratic interests that jealously guard their individual budgets and slow down the strategic shift from treatment to prevention that has taken place in the United States.

One question now remains: If the Danish economic model is, indeed, vastly inferior to the American model, why do most Danes continue to hold their system in such high regard?

Growing up in the Danish public school system, I experienced firsthand the kind of soft propaganda that keeps Danes loyal to the welfare state. "Denmark is a country where few have too much, and even fewer have too little" is one of the national mottos that many students are taught to take pride in. Moreover, when "learning" about the United States, students are left with a greatly distorted image of widespread poverty, out-of-control crime rates, and a culture of raw selfishness.

In recent years, however, globalization and freer movement of labor within the European Union have given many young Danes opportunities to live and work in countries with lower tax-rates than Denmark. As more and more Danes realize that high taxes are a bad deal, the political elites will either have to lower tax rates and cut social spending or face a massive exodus of the people that suffer the most in the current system: Talented and hard-working citizens with high incomes.

In fact, this mass exodus is already taking place. For instance, estimates of Danes living in London vary between 35,000 and 70,000, which is roughly 1% of the total Danish population of 5.4 million. According to the leading Copenhagen business daily Børsen, the average income of these Danish Londoners is more than $100,000 per year.

To put this number in perspective, imagine the reaction if 3 million high income Americans moved to London in search of greater economic freedom. Perhaps even The New Republic would realize that there's something rotten about high taxes.

Henrik Rasmussen is an immigrant from Denmark, living in Virginia. He is currently working on a book comparing economic, social and cultural conditions in Europe and the United States.

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Cordially,
Rush

elrushbo2@theobviousgmail.com
Remove the obvious...

Sorry Rush but that is the same tired excuse for not raising the minimum wage that has always been used in the past. It just doesn't really happen, and definitily not on any real scale that you imagine. I would rather pay 10 cents more for a hamburger knowing the persons making it are given something closer to a living wage.

Had you made any argument of substance, I could have replied in kind. But you don't address any of the points made, e.g., if you understand why people buy less gas when the price jumps 40%, you can understand why people hire less labor when the price jumps 40%. I mean, why not make the minimum wage $10.00? Why not $15.00, or $20?

What you are willing to do wasn't really the point of the article.

He just said that people don't hire less just because 'the price' jumps, so the whole premise of your post is wrong. Why should he then refute it point by point?

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Reality Internet Personality

He just said that people don't hire less just because 'the price' jumps, so the whole premise of your post is wrong. Why should he then refute it point by point?

Sheesh. He could have said that Hitler was black. He could have said that up is down. He could have said anything. The fact that he said it doesn't make it true. We, of course, would never know, because there was no substantive argument.

At the margin, people do hire less when the price jumps. It is simple enough to illustrate: No one hires the guy that charges $1500 to mow the lawn. Everyone seeks to hire the guy that will do it for $0.50. If the $0.50 guy decides to now charge $1500, no one will hire him either. Why? Because the people do hire less when the price of that labor jumps.

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Cordially,
Rush

elrushbo2@theobviousgmail.com
Remove the obvious...

He just said that people don't hire less just because 'the price' jumps, so the whole premise of your post is wrong. Why should he then refute it point by point?

Sheesh. He could have said that Hitler was black. He could have said that up is down. He could have said anything. The fact that he said it doesn't make it true. We, of course, would never know, because there was no substantive argument.

At the margin, people do hire less when the price jumps. It is simple enough to illustrate: No one hires the guy that charges $1500 to mow the lawn. Everyone seeks to hire the guy that will do it for $0.50. If the $0.50 guy decides to now charge $1500, no one will hire him either. Why? Because the people do hire less when the price of that labor jumps.

Either the business needs the person to do the job or they don't. I know of no business that if they have some extra cash lying about hire staff they don't need.

So if there is a minimum wage that is what the business will pay the person and they can't force the wages down to increase profit margins.

I also don't think the minimum wage is going to be set at $1500.

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Reality Internet Personality

So if there is a minimum wage that is what the business will pay the person and they can't force the wages down to increase profit margins.

But you see that is EXACTLY the point here. Not hiring IS the same as forcing the wage down.

I have hired and fired...and I have had guys walk into an interview thinking they are going to ask for big bucks and get away with it. I show them the door and hire the best qualified at a rate that we agree on.

If the rates are such that the employees are too expensive..guess what I do? Start laying people off and implement hiring freezes.

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So if there is a minimum wage that is what the business will pay the person and they can't force the wages down to increase profit margins.

But you see that is EXACTLY the point here. Not hiring IS the same as forcing the wage down.

I have hired and fired...and I have had guys walk into an interview thinking they are going to ask for big bucks and get away with it. I show them the door and hire the best qualified at a rate that we agree on.

If the rates are such that the employees are too expensive..guess what I do? Start laying people off and implement hiring freezes.

So you think the minimum wage is too high? It doesn't seem like a huge amount to me..it is not 'big bucks' we are talking about here. It certainly doesn't seem unreasonable to want to pay your staff a living wage.

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Reality Internet Personality

Either the business needs the person to do the job or they don't. I know of no business that if they have some extra cash lying about hire staff they don't need.[quote]
Really? And what happens when that same business cannot afford the extra payroll? Can't afford the 40% jump in price? Do you think they shut down entirely, or do they fire someone? The company didn't pay that cost, the worker that got fired did, and so will the others that will have to work harder to cover that person's work.

[quote]So if there is a minimum wage that is what the business will pay the person and they can't force the wages down to increase profit margins.

Minimum wage has little to no effect on large corporations, generally they don't use minimum wage workers for anything.

Where it does have an effect is, as I said, at the margin. Smaller businesses that hire minimum wage workers may easily find it hard to stomach a 40% price jump and will discharge workers.

I also don't think the minimum wage is going to be set at $1500.

Why do you think that? It that because it's too high? If you can understand why a number is too high, you can understand why people cannot afford to pay it.

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Cordially,
Rush

elrushbo2@theobviousgmail.com
Remove the obvious...

So if there is a minimum wage that is what the business will pay the person and they can't force the wages down to increase profit margins.

But you see that is EXACTLY the point here. Not hiring IS the same as forcing the wage down.

I have hired and fired...and I have had guys walk into an interview thinking they are going to ask for big bucks and get away with it. I show them the door and hire the best qualified at a rate that we agree on.

If the rates are such that the employees are too expensive..guess what I do? Start laying people off and implement hiring freezes.

So you think the minimum wage is too high? It doesn't seem like a huge amount to me..it is not 'big bucks' we are talking about here. It certainly doesn't seem unreasonable to want to pay your staff a living wage.

It is big bucks to a small business. If I had a small business of only 10 employees earning 30K a year each, my business would have to have AT LEAST $300,000 per year in profit just to pay the employees.


And of course I want to pay my staff a reasonable wage...if I can't afford to pay the 10 employees that reasonable wage...I don't hire as many. Doesn't get any more complicated than that.

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