HMS Conqueror wrote:We know the market level tends to move people from unproductive jobs to productive jobs and not produce wasteful "churning" because the incentives reward that. That's why you rarely hear about competent doctors or plumbers getting fired, instead it's people working in borderline obsolete industries like journalism, or dysfunctional parts of useful industries, like the Big Three.
So where does that put us at times when corporations are doing massive reductions in force, like now? Why are you so confident that the incentives
do reward only non-wasteful firing, that you won't see executives firing people based on perverse incentives like the desire to boost stock prices in a bad quarter regardless of what it does for the company in the long term?
Why? Why can't labor just be systematically underpriced by an average of, say, 30%? In that case, I still pay twice as much for an employee who works twice as hard, but I'm also still paying him less than he deserves. The fact that you can get twice as much money by producing twice as much does not mean you are adequately paid on a per-unit basis.
Because the prediction of absence of bargaining power is either weaker or no connection between wages and productivity. Ie. an employer can implement technological improvements and still pay everyone the same, because they cannot go elsewhere. It doesn't predict a constant lower level that rises in line with productivity.
Why not? All I see linear scaling proving is that
at best I have to pay you twice as much to get you to do twice as much,
on average. Without separating out productivity and wages by industry, by income (it's possible for average wages to remain constant as a function of productivity when only the managers are getting meaningful raises), and without dissecting
what a given unit of productivity entails and how much people are paying for it, you don't know what the scaling constant is between productivity and wages.
Without knowing the constant, there is no way to know whether workers are being underpaid except by taking it on faith that they are not, because 'that would be silly.'
Except perverse incentive structures are
not silly; they are a routine part of all economies, market and command alike. That's how monopolies are born even though they lead to price gouging. That's how snake oil salesmen survive and thrive even though they are selling a product of zero utility and therefore zero value. That's how we wound up with absurdly overleveraged banks.
I think you're being awfully quick here to rule out the possibility of a perverse incentive structure, because that would imply a need for someone to step in to do something about it.
These 'levels' are determined not by labour freedom, but by investment freedom, &c. Capital will tend to be directed at any industry with unusually high returns, until it become saturated to the point where it no longer has unusually high returns.
Excepting, of course, industries where the returns are not easily collectible (national defense), and bearing in mind that industries may have exceptionally high returns because of a bubble...
For instance, you chose Walmart as a particularly labour-exploitative company. Let's see if it has high returns? The answer is no, it makes about
3-4% net profit on revenue, which is a low yield even for a AAA bond, and not all of that will be returned as dividend. Its price to earnings ratio are also consistent with a fairly low risk, large business. Walmart doesn't make megaprofit by squeezing its employees; in fact it operates on quite low margins, and its employees are low paid because they just don't contribute a lot of value.
But we could equally well turn that around: Wal-Mart charges the lowest possible wages
in order to charge the lowest possible prices. In consequence they can outbid virtually any other retailer who doesn't duplicate their methods.
Is that a net good or not? If the retail sector were a relatively insignificant one to the overall economy, probably yes- having a handful of very low-paying jobs in a large community of people who do something else, in exchange for letting the rest of the community buy more and better goods at lower prices, would work.
But in modern America this is not the case; many people depend on retail jobs to earn a living. And the practical consequence of supplanting a high-wage model with a low-wage one is that while abstract measures of economic efficiency may have improved, you also wind up with a relatively poor lower class- forcing them to work more hours a week to stay above water, and limiting their prospects to advance out of the situation they are in.
Whether the US is better off for switching to this retail model cannot be answered just by saying that Wal-Mart's profit margins are low.
In other words, you accept the mainstream competition theory that I'm arguing for. But you clearly think there is some magical barrier that is crossed when you gain skills. There isn't. Your productivity goes up, so you can command a higher salary. That's it. The low paid jobs are still competitive, they just don't produce a whole lot, so the limit to how high companies will bid for labour is commensurately lower.
The mainstream competition theory works IF you incorporate the nonlinear effects of buyers' and sellers' markets. Commodity prices skyrocket in a seller's market (see what happens to the prices of essential goods immediately after a natural disaster) and plummet in a buyer's market (see the effects of monopolies).
As long as there is a relative symmetry in the positions of buyer and seller, market forces work fairly well at producing an outcome society can live with, that will have no disastrous consequences. When the two positions become asymmetric, that model breaks down. Sellers who have more information about their product than the buyer can cheat the buyer; buyers who have the
option of not choosing to buy can extract much lower prices from sellers for whom making the sale is a matter of life and death.
That kind of inequality can be induced by intervention in the market (force buyers to buy whether they like it or not, and sellers can jack up prices), but it can also be induced by non-government forces acting on the market (arbitrary discrimination against certain types of customers, incentive structures for CEOs that favor laying off workers to boost stock prices over the long term viability of the company).
Once inequalities distort the market, we start getting marked instabilities in the price of the good being bought and sold, and/or prices reaching levels that lose touch with the public interest. Ideally and over the extreme long term the market
should self-correct, but there are often consequences of market instability that the market cannot take into account- such as a generation of children growing up undereducated because of the hardscrabble life led by their parents. This can impair the market-oriented society's ability to recover from economic crises that would otherwise be a mere hiccup.
There are other reasons for authoritarianism and interventionism than those stated in the official propaganda. Personally, I am indeed a quite extreme believer in freedom (an anarchist), but my beliefs are not based on blind faith, no.
Oh. Fascinating. So, what's your evidence? Your evidence that anarchic or near-anarchic market systems work, and that government interventions to keep the positive-feedback loops in capitalism from blowing up the system?
Evidence that I believe that, or what? It would be quite difficult to justify my entire political philosophy in just a few lines. I might make a thread about it sometime, but not tonight.
I for one am eagerly awaiting it, because it seems to underly your entire position: the market
can not be worse than other alternatives because... something. I for one would like to know what "something" is.
And yet earlier you were implying that making America more capitalist would improve it, as a nation. Which suggests that you can cite evidence that strongly capitalist societies are better off over the long run than weakly or moderately capitalist societies.
Can you?
In a different quote-line I was saying that, which is why I said to prevent going off-topic. You seemed to be arguing that the US was quite close to the free market ideal, which it isn't, and that is what I was arguing against. I am using pretty much the entire rest of the debate to argue that free markets are preferable to statism, so I think it's unfair to attack me for not doing this even when it's not relevant to the discussion.
I'm not sure I follow the difference. See, if markets are preferable to statism, then one would expect making societies more market-oriented and less state-oriented would leave them better off. Which, as I said: "suggests that you can cite evidence that strongly capitalist societies are better off over the long run than weakly or moderately capitalist societies.
Can you?"
Ah, but my own salary is zero (I live on student loans). So does this mean he owes me money? Well, maybe that's a strawman, but at the very least he should give me a discount, as I'm poorer than him. Not only does he have an income, but he has fixed capital (a cab) and probably a state license of some sort that makes him part of the taxi cartel and allows him to push up prices. I have none of these things! What's more, because of where my university is situated I live in an expensive area (in a box room, admittedly), so he owes me even more of a discount than if he was carrying an old lady who lives in a low-income neighbourhood.
I do worry about this system, though. By divorcing the amount owed from the actual value produced you seem to introduce a fatal problem: if I owe him the same as or less than the market rate, then there is no difference, but if I owe him more than the market rate, then I can simply decline to purchase his services at all. Now you're in the socialist's classic fix: either you accept this, and the result is crippling unemployment for the poor, worsening all social problems and inequality in every way, or you must somehow force me to purchase his services, even if you don't know how I would have acted if everything were sold at the market rate, which requires a command economy. Historically the democratic West has chosen moderate amounts of option #1. The Soviet Bloc, Maoist China, etc. chose option #2. But neither are terribly appealing, are they? What's more, both violate the generally accepted right to free contract.
With respect to the first, the problem tends to be resolved fairly easily in a welfare state, where having 5% to 10% of the population systematically unemployed at one time
works because the remainder who can be profitably employed are taxed to support that fraction. It is only in systems where the unemployed are
forced to turn towards crime and permanent underclass status (for reasons racial as in France or reasons economic as in the US) that systematic unemployment is a disastrous problem.
Which leaves us with two self-consistent systems: a laissez-faire system in which the least employable citizens must somehow find a way to survive in a society that charges a flat fee for the privilege of surviving, or a welfare system in which the least employable citizens are supported by the state at cost to everyone else. We are then left to ask which system works better. Economic indicators are supposedly better in societies that do the former, while social indicators are generally better in the latter. Which is more important?
With respect to the second, can you demonstrate that this sort of forced consumption of artificially labor-intensive goods and services was in fact a major part of the Soviet and Maoist economies?
Someone in my family used to work for Asda [British Walmart subsidiary], part time. There were none of the problems you describe. It was a low paid job, of course, but why shouldn't it be? It is also a low productivity job. Walmart and its customers do not owe anyone else a living.
Here we see the core of our disagreement. I would argue that an unregulated market is
empirically bad because of the people who do not find a living, or find it only under conditions of relatively great suffering in an economy that could relieve this suffering with a trivial fraction of its resources.
You argue that this is not a bad thing because these people are not owed a living.
There is a fundamental incompatibility of attitudes here: I'm interested in the empirical outcome of the system and whether it is good or bad, not on whether I or anyone else "owes" anyone anything. A system that yields bad results
is not working and should not be emulated.
Many high-income workers also work like that. In fact, most do (so the hourly rates of the really top jobs are not often as awesome as the name-plate salary suggests, though they are still good). Wherever the work objective is completing X tasks rather than turning a handle for X hours, it does matter if you 'finish the project' on time, not just put in the hours. If everyone goes home at 5pm on a Friday regardless of whether they've delivered whatever the client wants, the company will lose in competition with what that does what the client wants on time. Of course, if you really do want pay-by-the-hour drudgery you can do that; you can even do it online, or so I am told, but the better jobs, even mid tier, don't work like that. The problem here is rather the mandatory overtime laws: sometimes the overtime isn't worth 1.5x (or whatever ratio). Sometimes the employer wants to contract you complete tasks, not to grind through a certain number of hours of dubious productivity (in the UK, builders are often allowed to go home when they've done the day's tasks, even if it's hours before the nominal end of the working day). Sometimes the number of 'official' working hours has to be flexible to respond to the actual workload. So overtime should be left as a contractual matter.
Which predictably leads to what amounts to a flat contractual salary (you are paid X dollars a week for your labor) being paid for an amount of work left up to the employer... the fault in which system becomes obvious the moment you stop trusting your boss to act in your best interests.
