28. Living Wages?

Controversy is arising around the world on how to deal with the widespread problem of the bitterly low wages being paid to the unskilled workforce. This is compounded by the sky-high pay being awarded to those at the top and the increasingly large differential between those at the top and the bottom; by the mounting replacement of workers with robots; and by the ideological opposition of corporations and neo-classical economists to any state interference in determining pay.

When The Economist dares to write that “weak wages dent Britain’s economy,” you know that there’s trouble. Indeed this staunchly pro-capitalist weekly admits that “productivity gains no longer translate into broad increases in pay.”1 Cleaners, mechanics, bar and hotel staff and most others in the service sector have done particularly poorly in this recession. One has not heard much empathy for their plight from political leaders. Contrast this with the outspoken pronouncement by President Franklin D. Roosevelt 80 years ago: “No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.”2 The world sorely misses such outspoken leadership today.

Although exactly what constitutes a “living wage” continued to remains unspecified, both Britain and the United States have taken painfully small and slow steps to rectify the problem. In October the National Minimum Wage rose by 12 pence to £6.31 ($10) per hour in the UK. A fifth of Britain’s 25 million workers are paid less than the £7.65 ($ 12.50) proposed by the Labour Party leader, Ed Miliband. For the close to a million workers who earn just £6.31 per hour this would represent an increase for the low-paid of £2,500 ($4,000) per year. In the United States President Obama has proposed increasing the minimum wage from $7.25 to $9 and then indexing this to inflation, but Republican opposition to this has been powerful.

In theory what happens when wages go up should be simple, but some studies have found that higher minimum wages increase unemployment. On the other hand different studies show that companies might save money from a rise in pay because there is less employee turnover as a consequence. The direct results of minimum wage legislation are clearly mixed. New studies have found that companies tend to raise their prices in response: for example, fast food restaurants pass along their extra cost to customers. And then there is also the “ripple effect” in which all those enjoying higher wages will also have their rates of pay increased. I find the balance of the arguments between those who tend to favor minimum wage laws and those opposing to be astonishingly close.

Even those in favor say “it encourages efficiency and automation” (and thus lowers employment!) and “increases technological development” (increasing the numbers of those already earning higher wages!). Those who argue against it contend that it can result in the exclusion of certain ethnic and gender groups from the labor force, that it hurts small businesses more than big business, results in jobs moving to other areas or “overseas,” and makes it harder for young workers entering the market to be recruited. Those against also argue that such rises in minimum wages are more damaging to business than other alternatives.

Most of the big corporations now have the choice of whether to employ people or invest in machines. Most large employers prefer to buy an automated answering system to hiring receptionists. As a result many of the low skilled jobs that used to be the first rung on the employment ladder are being priced out by higher wages.

A number of economists and political commentators propose that alternatives like a basic income or a guaranteed minimum income are superior ways of addressing the issue of poverty because these would not reduce employment, would distribute the costs more widely, and would benefit a broader population of wage earners. A basic income would provide each citizen with sufficient money or credits to sustain them.3 Such proposals usually stipulate a willingness to seek work or to perform community services.

The extraordinary excesses of pay to those at the top also has produced social and political concern. The Swiss have just rejected a referendum which would have restricted the pay of top earners to 12 times the wages of the lowest workers. In Spain the Social Democrat opposition have also adopted the 12:1 ratio as part of their economic platform. And in France, the increasingly unpopular Francois Holland is pushing for a cap on pay at state owned firms to 20:l.

Capitalism, as it has developed over the past two centuries, has never been based on differentials or on fairness. It has been based on profit. This has worked in so far as to provide work to billions of people and in getting masses out of a feudal agricultural base. Now, however, this economic system is being increasingly challenged by the political system in which it operates. Workers competing with machines and robots are losing out to capital. The low pay and lack of job prospects are now being taken more seriously by the popularly elected representatives. When one percent at the top in the United States earn more than two thirds of those on the bottom, serious confrontations seem inevitable. Consequently a “Living Wage” for all is going to be a prime issue in deciding our future direction.

As a member of the human race, I find it offensive that top executives feel free to oppose minimal increases to the pay of the lowest earners of the population but refuse to confront the inequality of the ever larger payments they give to themselves. A more balanced approach to this glaring economic differential is essential. When any small group in society, whether it be oligarchs, bankers, or robber barons, accumulates excessive wealth at the expense of the majority, the time is historically ripe for a correction. That time is now approaching.

1“Labour pains,” The Economist, November 2, 2013, p.73

2June 16, 1933. FDR went on to explain that “By business I mean the whole of commerce as well as the whole of industry, by workers I mean all workers — the white collar class as well as the men in overalls, and by living wages I mean more than a mere subsistence level — I mean the wages of decent living.” It took five years and a hard battle through the US Supreme Court to get a constitutionally accepted minimum wage law enacted. The Fair Labor Standards Act set 25 cents an hour as the national minimum wage!

3Seeee: Yorick Blumenfeld, “The Brave New World of Credits” in Dollars or Democracy, (2004) pp.139-151

27. Misunderstandings of the Market

All over the world everyone is constantly referring to “The Market” which purportedly rules our economic lives. Hardly any non-believer dares to challenge the infallibility of this revered expression of the NeoCon secular religion. Many see this latter-day sect as an ideological endorsement of capitalism. More revealing for our times is that almost no one can define exactly what this “Market” is and what it does.

I have previously written extensively about the myths surrounding the “Market” in my book, Dollars or Democracy.1 However, this year’s Nobel Prize in Economics has gone to three top economists for their work on the operation of the market. What is of note here is that their views on the market vary substantially: Prof. Eugene Fama does not believe that the “Market” has economic bubbles. Fama does not even believe they exist! And Prof. Robert Shiller of Yale is a firm believer
in housing bubbles and technology stock bubbles. Prof. Lars Peter Hansen is disturbed because his macro-financial model of how the market operates at times is thrown by the irrational exuberance of the way people invest their money.2

Perhaps economists find it hard to agree on “The Market” because there are so many varieties: The labor market, the bond market, the stock market, the global market, the energy market, the derivatives market, the housing market, the silver and gold markets, ad infinitum. Specifying each market helps in conversation, but similarities in the mode of operations combining the divergent theories dealing with services, communication, exchanges, distribution, and financial risk-taking are not so evident. Ordinarily when confronted with the term, we gravitate towards thinking about the far simpler, traditional “marketplace” as originally viewed by Adam Smith when first describing its social and economic functions more than two centuries ago.

The University of Chicago’s School of Neo-economics, led by such prominent figures at the end of the past Century as Milton Friedman, maintained that the market correctly prices shares, property and even derivatives in line with neo-economic models of behavior. As long as the stock market was on the rise, such faith in the market was applauded. The tech crisis which hit early on in the 21st Century started to undermine the certainties of the NeoCons. The wild mispricing of assets in housing and banks started to erode its much-hailed natural balancing abilities. As the Nobel Prize laureate Paul Krugman wrote in 2009 “the economics profession went astray because economists, as a group, mistook beauty, clad in impressive looking mathematics, for truth.” I would say that economists mistook greed and the booming profits to be made from derivatives and other wild forms of gambling for that best of all implausible worlds, “The Market.”

Even today, four years after the economic crisis of 2009, there is still a widespread belief, among hardened Republicans in the US and die-hard Tories who maintain their staunch faith, in the long-term benefits of “The Market.” I would like to poke fun at such NeoCons by imagining some challenging questions to which I am also providing brief, imaginary responses:

Q: How does the market cope with poverty?
A: Poverty is best left to charity. The market is correct in its balance that people who end up as poor must deserve to be poor. Let’s face it: Poverty is inevitable. If we turn a blind eye, it’s perhaps because there is so little profit to be made from the poor.

Q: Can environmental pollution cause problems for the market?
A: It does this naturally by diminishing corporate profits. The best way to combat pollution is by taking a freer, “laissez fair” approach to the environment. In essence: free the corporations from government intervention.

Q: What causes market failures?
A: Government intervention blocks informed and rational choice in a free market.

Q: Does a projected global population of 9 billion concern the market?
A: Growth has always been at the center of a thriving market. The more buyers, the greater the profits. Every politician around the globe embraces growth in these difficult times and consequently also embraces our free-market ideology.

Q: How does growing inequality affect those subjected to market discipline?
A: It permits some people to become rich and others to stay poor. We have effectively learned this lesson from the equilibrium displayed in economic history.

The neo-classical economists proceed from the misguided assumption that the market is an autonomous, self-regulating entity. Adam Smith never saw it this way. His approach to the market was radically different from the way it was to develop in the 19th Century. Following the French and American Revolutions, the idea of freedom as equality before the law – the so-called ‘isonomic freedom’ was promoted with complete disregard for the material concerns of the legally protected citizens. For Smith, the ‘Market,’ in singular or abstract terms, did not exist. What was real were the different forms of markets historically configured as a result of political options. Markets were the result of state intervention. It did not make sense therefore to oppose ‘the state’ to ‘the market’: Laissez-faire, or freedom for the markets, has been politically constituted through the steady intervention of the state. Today all markets that have emerged have done so with the aid of state intervention. Moreover, as John Maynard Keynes wrote: “Capitalist markets, regardless of their origin, need constant regulation because of the inherent instability of capitalism.”3

The meaning of the word ‘market,’ because of its semantic broadness, is largely dependent on the use to which it is put. To make sense out of the widely divergent interpretations is so challenging that it would seem to be a fitting subject for Oxford’s philosophers of language. The truth is that its complexity entails mathematics, politics, sociology, psychology as well as philosophy. Perhaps the inherent ambiguity of its meaning has been of the essence for economists themselves, unclear as they are about the complex overall functioning of the global economy. They may prefer to engage with the broad spectrum of possible meanings. Whether this may be to cover up their own uncertainties, or challenge those of others is unclear.

What is certain is there is nothing spiritual or moral or ethical involved in the word. It speaks not of humanity but of a moral vacuum. Adam Smith cautioned that the principal determinants of decision making in the market were among others: price, profit, greed, possession, availability convenience, speed, security, and information.4 I should very much like to encourage economists and linguists to carefully consider their use of the word and to come up with more exacting terminology in the interest of understanding the genuine workings of our increasingly complex global economic system.

A brilliant and outspoken economist, Mariana Mazzucato, contends in her latest book, The Entrepreneurial State (2013), that “rather than relying on the false dream that ‘markets’ will run the world optimally for us ‘if we just let them alone,’ policymakers must better learn how to efficiently use the tools and means to shape and create markets – making things happen that otherwise would not.”

1Yorick Blumenfeld, Dollars or Democracy, (2004)
2“Methods for all moments,” The Economist, p.81, October 19, 2013
3Quoted by Mariana Mazzucato, The Entrepreneurial State, p.30, (2013)
4Yorick Blumenfeld, Dollars and Democracy, (2004) pp.50-51

26. Character Assassination’s Dangers

Any psychologist can tell you that what those Republican diehards in Congress ranting about killing “Obamacare” really want is not the destruction of a complex health program but to get rid of the President. Openly declaring that one desires killing the President would constitute a serious criminal offense. Merely saying that one wants to get rid of Obamacare hardly will get noticed.  Psychologically, the transference is painfully obvious, but the reality must also affect the President in many troublesome ways.

I find the whole program of veiled attacks on the President of the United States as well as the long running and quite open character assassination of Obama a national disgrace.  Character assassination can also degenerate into open criminality – like plotting a real assassination. The Secret Service of the United States whose job it is to protect the President does not disclose the figures nor the details but they reportedly intercept way more than 30 death threats to Obama every day.

Scanning the internet for such threats to Obama, I found close to a dozen videos on Google about a “predicted” assassination of this “anti-Christ” on the 22nd of November! This projected attack by a white assassin, who himself would immediately be shot, was portrayed in gruesome detail. So were the consequences of such a horrid scenario.

Assassin originally was a Muslim word for intoxication from hashish. In the middle ages the word became used by a select order of murderers in Islam operating in great secrecy. Today there also is little “Freedom of Information” when it comes to the possible physical attacks on the President. It is to be feared that some radical opponents of Obama might contend that because of his “socialization” of health care and his opposition to the Constitution when it comes to gun-control and other issues, the President might be selected for a “targeted killing.”1

Editorial writers would say that shrugging off such dangers is part of Obama’s job, after all some of the greatest leaders, like Lincoln and Kennedy, were shot. But nevertheless this background and heritage could well gnaw every evening that Obama says good night to Michelle and his daughters. Nor do the nation’s media devote space or time wondering how all these expressions of hatred and possible plotting might be affecting the President.

In some ways the United States is a country still recovering from the Civil War. Many southerners find it hard to acknowledge that their ancestors lost the war over freedom for blacks. Obama’s color, education, intelligence and ability all are an embarrassment to a sizable minority of Americans who simply cannot accept that a descendant of slaves could become President.

This has manifested itself in polls which show that about a fifth of registered voters still think Obama is a Muslim. This rises to a third when just conservative Republicans are polled. Among evangelical Americans a sizable number consider Obama to be not only a foreigner but even an embodiment the anti-Christ!

“Obamacare” is a racial flashpoint for many evangelical and Tea Party voters,” writes the political scientist Stan Greenberg.2 His health care program stands as a flag being waved at such bigots symbolizing everything about him they cannot accept. “The word they’re most likely to use to describe him is ‘liar’. But their hostility goes beyond his policies and pronouncements to a deeply rooted suspicion of his authenticity,” writes the columnist Gary Young. I find this most curious because it is hard to imagine that after reading Obama’s best-selling autobiographical books one could question his authenticity.

But then most of his critics are not known for reading serious books.

Nor do I think Obama was ever covering up some hidden agenda or program for America. His opponents proclaim that he is promoting ever greater dependence on government through healthcare-like programs which they assume disproportionately favor minorities. The President’s purportedly socialist inclinations are attacked on a daily basis on attention-seeking talk shows. Obama’s predecessors in office, were also attacked by left and right for their “being” (as well as their programs): George W. was portrayed by the left as simplistic, inept, and lacking in authenticity. But there was no concerted attempt at broader character assassination of the kind being funded by the Koch brothers who are under-writing much of the right-wing lobbying fringe in Washington.

However, the electorate is beginning to wonder whether the continuing desperate attacks by the Tea Party on “Obamacare” are motivated by racism. I suspect that if Obama had introduced a “school care” program, Republicans would have tagged his name on to that and would have attacked it ferociously.  After associating health care with his name the Tea Party members could not resist trying to savage it. Trying to kill “Obamacare” in the Congress without having the vote to do so has proven to be sheer folly. But trying to pull the rug from under the Presidency has damaged the image of the United States of America and that of the Tea Party Republicans. Steadily draining away the energy from efforts to move the country forward over the past three years, in principle, should condemn to oblivion those radical obstructionists who express such thinly veiled hatred of the President of the United States of America.

1Today there is a distinct legal difference between assassination and “targeted killing” such as is performed by the Obama administration’s steady use of drone strikes. Contentious disputes arise as to the legal basis for its application, who qualifies for such an “hit list,” and under what circumstances can such killing be employed globally. In 2010, with Obama’s approval, Anwar al-Awlaki became the first U.S. citizen to be publicly approved for targeted killing by the CIA. Awlaki was killed in a drone strike in September 2011.

2Inside the GOP, quoted by Gary Younge, The Guardian, October 23, 2013