Wednesday, April 26, 2006

The Real Friends and Enemies of Wage Earners: An Intellectual Challenge to the Left

The reaction to my article on the United Automobile Workers and GM , confirms how many people—namely, "liberals," "moderates," socialists, communists, syndicalists, "mutualists" and others—believe that businessmen and capitalists are the enemy, and labor unions and labor legislation, the friend, of wage earners. This is an enormous error, with devastating consequences. The integration of Austrian and Classical economics carried out in Chapters 11 and 14 of my book Capitalism: A Treatise on Economics proves the exact opposite of this belief. It proves that businessmen and capitalists are the friend, and labor unions and labor legislation, the enemy, of wage earners.

Here, in briefest essence, is how.

The greater is the respect for the property rights and economic freedom of businessmen and capitalists, the greater is the degree of saving in the economic system and thus the higher is the demand for labor relative to the demand for consumers’ goods and thus the higher are wages relative to profits. At the same time, the greater is the demand for capital goods relative to the demand for consumers’ goods, and the greater are the incentives to develop and introduce improved products and methods of production. The result of this combination is continuing capital accumulation and a rising productivity of labor.

The effect of the progressive rise in the productivity of labor achieved under capitalism is a progressively increasing supply of consumers’ goods relative to the supply of labor and thus progressively falling prices of consumers’ goods relative to wage rates. (In the face of an increasing quantity of money and rising monetary demand for both labor and consumers’ goods, the result is wages rising faster than prices. Either way, the result is rising real wages.)

The rise in real wages, the result of the saving and innovation of businessmen and capitalists, and of wage earners who become businessmen and capitalists, is a growing ability of wage earners to afford to work shorter hours, and to dispense with the labor of their children, and also increasingly to afford improvements in working conditions of the kind that do not pay for themselves through increased productive efficiency. In this way, the saving and innovation of businessmen and capitalists are what are in fact responsible for all of the improvements in the conditions of wage earners typically, and utterly mistakenly, attributed to labor unions and labor legislation.

Labor unions do not even know how to raise real wages. All they are concerned with is raising the money wages and protecting the jobs of the members of their particular union. Since labor unions do not control the quantity of money or volume of spending in the economic system, the only way that they can raise the money wages of their members is by artificially reducing the supply of labor in their field. But the effect of this is to correspondingly increase the supply of labor and reduce wage rates in other fields. In other words the success of any given union is obtained at the expense of the loss of wage earners in the rest of the economic system. And the losses necessarily outweigh the gains, because an essential aspect of the process is workers being forced into jobs requiring less skill and ability than the jobs from which they are expelled.

If the unions, or the unions plus minimum-wage laws, succeed in raising wage rates throughout the economic system, the effect is corresponding unemployment in the economic system, as well as higher prices because of higher costs and reduced production. If the unions can succeed in having the government and its central bank increase the quantity of money in pace with their wage demands, the unemployment may be avoided but the effect is still rising prices along with the rising wages, and no rise in real wages. Moreover, the undermining of capital accumulation that results from the policy of inflation serves to reduce and, if great enough, reverse the rise in the productivity of labor and real wages.

The efforts of unions to protect the jobs of their members is a policy of actively combating the rise in real wages of workers throughout the rest of the economic system. As should be clear from what has already been said, the way real wages rise is not from the side of the average worker earning more money. Earning more money is the result merely of the increase in the quantity of money, or of the reduction in the supply of labor available in the market by forcing part of it into unemployment.

Real wages rise as the result of capital accumulation and the rise in the productivity of labor, which operates to make prices fall relative to wage rates. In combating the rise in the productivity of labor, unions actively combat the rise in real wages. Thus, for example, when the printing unions opposed computerized typesetting, and thus the resulting lower costs and lower prices of printed matter, they were combating the rise in real wages of workers throughout the economic system who otherwise would have obtained printed matter for less money and had correspondingly more money to spare for other things (which workers displaced from printing could have helped to produce). Identically the same thing is true any time any union opposes labor saving improvements: both the buying power of wage earners throughout the economic system and the supply of goods for them to buy are held down.

Yes, a union may behave this way out of fear of the difficulties its workers will have in finding new jobs. But those difficulties would be far less if money wage rates in the economic system were lower and thus the quantity of labor demanded were greater. And what would make that possible is the absence of coercively imposed union pay-scales and of minimum wage laws.

Yes, there are times when employers treat their employees disrespectfully, indeed, may even treat them as essentially valueless. But what causes such conditions is an excess of the supply of labor available over the quantity of labor demanded. In such conditions an employer need not fear the loss of an employee because he can be immediately replaced from the ranks of the unemployed, and the employee will be ready to accept abuse out of fear that he will not be able to find another job.

But what causes this situation is wage rates held too high relative to the demand for labor. It arises under a system of fractional reserve banking, when credit expansion is followed by financial contraction and wage rates have not yet fallen to the point required by the contraction. Let wages rates fall and the quantity of labor demanded increase to equal the supply available. At that point, the scarcity of labor will be felt and the employee will cease to be instantly replaceable from the ranks of the unemployed. Plus, he will be able to find other jobs, and thus not be prepared to accept abuse. The solution is again a free market. And ironically, to the extent that labor unions and minimum wage laws prevent the adjustment of wage rates to the demand for labor and thus the market’s natural achievement of essentially full employment, they are responsible for the bad treatment of workers that their supporters complain of. (Be sure to watch for the mirror image of the phenomenon of someone being treated as valueless, the next time price controls are imposed on gasoline. Then, as in the early ’seventies, there will be a shortage of gasoline and surplus of customers, who will appear to be economically valueless because instantaneously replaceable from a waiting line, and ready to accept abuse because of no where else to go to be supplied.)

The fall in wage rates needed to eliminate unemployment serves to increase production at the same time that it reduces the costs of production. It thus serves to bring down prices. It also eliminates the burden of supporting the unemployed. As a result, it is almost certain that it soon results in a rise in real take-home wages.

There are people who produce so little per hour that they must work many hours to provide for their minimum necessities, and even use the labor of their children as a source of additional earnings. It is of no more help to such people to compel them to work less, and to do without the labor of their children, than it would be to compel Robinson Crusoe to work less or Swiss Family Robinson to work less and to do without the labor of its children. Crusoe and the Robinson family do the work they do because that is what they need to do to live. Compelling them to work less is to compel poor people to be poorer than they need to be. It is the same in the conditions of society. It is no consolation that those who cause the greater poverty of the poor say that they have good intentions and want to help. They cause harm and need to learn to stop.

As shown, what actually reduced the working day and abolished child labor was not destructive state interference but the dramatic and progressive rise in the productivity of labor brought about by businessmen and capitalists. That raised real wages and made it possible for more and more workers to be able to afford to accept the comparatively lower earnings of jobs with shorter hours and to eliminate the need to send their children to work. As a growing proportion of wage earners came to prefer shorter hours, the effect was the same as a growing proportion of workers coming to prefer any one set of occupations over another, namely, a fall in the wages of the preferred occupations relative to the wages in the occupations not preferred. Thus, the wages of jobs with shorter hours incur a discount, while the wages of jobs with longer hours gain a premium. This makes it profitable for employers to shorten the hours of work. This is how the free market shortens hours.

My challenge to the left is to read and study these ideas at length and in depth in my book Capitalism: A Treatise on Economics, Chapters 11 and 14 in particular. I say to the left, take the risk of giving up the fallacies you presently regard as knowledge, in order to gain the satisfaction of having actual knowledge. Stop supporting the enemies of economic progress and the harm they do to wage earners and give your support to the actual friends of economic progress and of wage earners. The transformation of you leftist intellectuals into advocates of capitalism would actually help greatly to change the direction of the world and, if it is the overcoming of poverty that you want, move it in the direction in which you say you want it to go.

This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book and provided that mention of the author’s web site is included. (Email notification is requested.) All other rights reserved. George Reisman is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics.

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Friday, April 21, 2006

Graphic Artistry

One of the pleasures of writing a Daily Article for the Mises Institute is the satisfaction of having one’s article accompanied by a well-chosen graphic. However, none of my previous experiences of this kind could have prepared me for the absolutely brilliant graphic that accompanied my most recent article “Where Would General Motors Be Without the United Automobile Worker’s Union?” This is a graphic that deserves the kind of commentary usually reserved for paintings, and in fact is more deserving of commentary than are most paintings.

Consider the starting point of the graphic: the actual logo of the UAW (whose use was suggested by Jeffrey Tucker). Contrary to the intent of those who created that logo (but true to its actual meaning), its presence in conjunction with my article depicts a collection of goons linked arm to arm, in a mindless circle.

The artist—Chad Parish of the Mises Institute—has taken a liberty, however.

He’s had several of the goons detach themselves from their mindless circle to go and do some good old-fashioned union dirty work—the kind of work they do best. (Some might say that it’s the only kind of work they do. But that would be an exaggeration.) Using nothing but GM’s logo, as representing the whole actual company, he shows the goons busy at the work of destroying the company. This is communicated by their act of tearing down the logo, which looks as if it’s ready to fall. One goon is on the ground, pulling on the logo with a rope that is hooked around its top, and another is standing on top of it, in a triumphant posture, holding what looks like a rifle; or perhaps it’s only a club. A third goon is just completing his graffiti message announcing “UAW WUZ HERE” Two other goons seem to have no function. Perhaps they are included in deference to the UAW’s insistence on the employment of unnecessary workers, represented here by the employment even of unnecessary goons.

In every way, down to its misspelling of the graffiti, this graphic is an incredible visual depiction of the mentality that has decimated or destroyed one American industry after another and is now on the verge of destroying what was once the leading manufacturing corporation in the United States and in the world.

This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book and provided that mention of the author’s web site is included. (Email notification is requested.) All other rights reserved. George Reisman is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics.

Wednesday, April 19, 2006

Where Would General Motors Be Without the United Automobile Workers Union?

This is a question that no one seems to be asking. And so I’ve asked it. And here, in essence, is what I think is the answer. (The answer, of course, applies to Ford and Chrysler, as well as to General Motors. I’ve singled out General Motors because it’s still the largest of the three and its problems are the most pronounced.)

1. The company would be without so-called Monday-morning automobiles. That is, automobiles poorly made for no other reason than because they happened to be made on a day when too few workers showed up, or too few showed up sober, to do the jobs they were paid to do. Without the UAW, General Motors would simply have fired such workers and replaced them with ones who would do the jobs they were paid to do. And so, without the UAW, GM would have produced more reliable, higher quality cars, had a better reputation for quality, and correspondingly greater sales volume to go with it. Why didn’t they do this? Because with the UAW, such action by GM would merely have provoked work stoppages and strikes, with no prospect that the UAW would be displaced or that anything would be better after the strikes. Federal Law, specifically, The National Labor Relations Act of 1935, long ago made it illegal for companies simply to get rid of unions.

2. Without the UAW, GM would have been free to produce in the most-efficient, lowest cost way and to introduce improvements in efficiency as rapidly as possible. Sometimes this would have meant simply having one or two workers on the spot do a variety of simple jobs that needed doing, without having to call in half a dozen different workers each belonging to a different union job classification and having to pay that much more to get the job done. At other times, it would have meant just going ahead and introducing an advance, such as the use of robots, without protracted negotiations with the UAW resulting in the need to create phony jobs for workers to do (and to be paid for doing) that were simply not necessary.

(Unbelievably, at its assembly plant in Oklahoma City, GM is actually obliged by its UAW contract to pay 2,300 workers full salary and benefits for doing absolutely nothing. As The New York Times describes it, “Each day, workers report for duty at the plant and pass their time reading, watching television, playing dominoes or chatting. Since G.M. shut down production there last month, these workers have entered the Jobs Bank, industry's best form of job insurance. It pays idled workers a full salary and benefits even when there is no work for them to do.”)

3. Without the UAW, GM would have an average unit cost per automobile close to that of non-union Toyota. Toyota makes a profit of about $2,000 per vehicle, while GM suffers a loss of about $1,200 per vehicle, a difference of $3,200 per unit. And the far greater part of that difference is the result of nothing but GM’s being forced to deal with the UAW. (Over a year ago, The Cincinnati Enquirer reported that “the United Auto Workers contract costs GM $2,500 for each car sold.”

4. Without the UAW, the cost of employing a GM factory worker, including wages and fringes, would not be in excess of $72 per hour, which is where it is today, according to The Post-Crescent newspaper of Appleton, Wisconsin.

5. As a result of UAW coercion and extortion, GM has lost billions upon billions of dollars. For 2005 alone, it reported a loss in excess of $10 billion. Its bonds are now rated as “junk,” that is, below, investment grade. Without the UAW, GM would not have lost these billions.

6. Without the UAW, GM would not now be in process of attempting to pay a ransom to its UAW workers of up to $140,000 per man, just to get them to quit and take their hands out of its pockets. (It believes that $140,000 is less than what they will steal if they remain.)

7. Without the UAW, GM would not now have healthcare obligations that account for more than $1,600 of the cost of every vehicle it produces.

8. Without the UAW, GM would not now have pension obligations which, if entered on its balance sheet in accordance with the rule now being proposed by the Financial Accounting Standards Board, will leave it with a net worth of minus $16 billion.

What the UAW has done, on the foundation of coercive, interventionist labor legislation, is bring a once-great company to its knees. It has done this by a process of forcing one obligation after another upon the company, while at the same time, through its work rules, featherbedding practices, hostility to labor-saving advances, and outlandish pay scales, doing practically everything in its power to make it impossible for the company to meet those obligations.

9. Without the UAW tens of thousands of workers—its own members—would not now be faced with the loss of pension and healthcare benefits that it is impossible for GM or any of the other auto companies to provide, and never was possible for them to provide. The UAW, the whole labor-union movement, and the left-“liberal” intellectual establishment, which is their father and mother, are responsible for foisting on the public and on the average working man and woman a fantasy land of imaginary Demons (big business and the rich) and of saintly Good Fairies (politicians, government officials, and union leaders). In this fantasy-land, the Good Fairies supposedly have the power to wring unlimited free benefits from the Demons.

Without the UAW and its fantasy-land mentality, autoworkers would have been motivated to save out of wages actually paid to them, and to provide for their future by means of by and large reasonable investments of those savings— investments with some measure of diversification. Instead, like small children, lured by the prospect of free candy from a stranger, they have been led to a very bad end. They thought they would receive endless free golden eggs from a goose they were doing everything possible to maim and finally kill, and now they’re about to learn that the eggs just aren’t there.

It’s very sad to watch an innocent human being suffer. It’s dreadful to contemplate anyone’s life being ruined. It’s dreadful to contemplate even an imbecile’s falling off a cliff or down a well. But the union members, their union leaders, the politicians who catered to them, the journalists, the writers, and the professors who provided the intellectual and cultural environment in which this calamity could take place—none of them were imbeciles. They all could have and should have known better.

What is happening is cruel justice, imposed by a reality that willfully ignorant people thought they could choose to ignore as long as it suited them: the reality that prosperity comes from the making of goods, not the making of work; that it comes from the doing of work, not from the shirking of it; that it comes from machines and methods of production that save labor, not the combating of those machines and methods; that it comes from the earning and reinvestment of profits not from seizure of those profits for the benefit of idlers, who do all they can to prevent the profits from being earned in the first place.

10. In sum, without the UAW, General Motors would not be faced with extinction. Instead, it would almost certainly be a vastly larger, far more prosperous company, producing more and better motor vehicles than ever before, at far lower costs of production and prices than it does today, and providing employment to hundreds of thousands more workers than it does today.

Few things are more obvious than that the role of the UAW in relation to General Motors has been that of a swarm of bloodsucking leeches, a swarm that will not stop until its prey exists no more.

It is difficult to believe that people who have been neither lobotomized nor castrated would not rise up and demand that these leeches finally be pulled off!

Perhaps the American people do not rise up, because they have never seen General Motors, or any other major American business, rise up and dare to assert the philosophical principle of private property rights and individual freedom and proceed to pull the leeches off in the name of that principle.

It is easy to say, and also largely true, that General Motors and American business in general have not behaved in this way for several generations because they no longer have any principles. Indeed, they would project contempt at the very thought of acting on any kind of moral or political principle.

One of the ugliest consequences of the loss of economic freedom and respect for property rights is that it makes such spinelessness and gutlessness on the part of businessmen—such amoralitya requirement of succeeding in business. Business today is conducted in the face of all pervasive government economic intervention. There is rampant arbitrary and often unintelligible legislation. There are dozens of regulatory agencies that combine the functions of judge, jury, and prosecutor in the enforcement of more than 75,000 pages of Federal regulations alone. The tax code is arbitrary and frequently unintelligible. Judicial protection of economic freedom has not existed since 1937, when the Supreme Court abandoned it, out of fear of being enlarged by Congress with new members sufficient to give a majority to the New Deal on all issues. (Try to project the effect of a loss of judicial protection of the freedoms of press and speech on the nature of what would be published and spoken.)

Any business firm today that tried to make a principled stand on such a matter as throwing out a legally recognized labor union would have to do so in the knowledge that its action was a futile gesture that would serve only to cost it dearly. And a corporation that did this would undoubtedly also be embroiled in endless lawsuits by many of its own stockholders blaming it for the losses the government imposed on it.

But none of this should stop anyone else from speaking up and making known his outrage at what the UAW has done to General Motors.

This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book and provided that mention of the author’s web site is included. (Email notification is requested.) All other rights reserved. George Reisman is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics.

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Thursday, April 13, 2006

The Actual Nature of Offshoring and of Our Balance of Trade Deficits

Few issues are more frequently commented on than the shifting of American manufacturing to locations outsides the United States, in order to take advantage of lower foreign wage rates, particularly in Asia. This shifting is what is meant by “offshoring.” With equal or greater frequency lamentations are heard concerning the United States’ chronic excess of imports over exports, i.e., its so-called “unfavorable” balance of trade.

Here’s an example that will help to put both matters in proper perspective.

Assume that an American firm is contemplating the investment of $10 million of capital, to build a factory. Construction materials and the use of construction equipment, along with the machinery to be installed in the factory, will cost $5 million of those $10 million. The remaining $5 million will have to be paid to cover the wages and benefits of 100 American construction workers for a year, at the rate of $50,000 per man.

In an impoverished country in Asia, however, the cost of equally capable construction workers is only $1,000 per man. In other words, a total labor cost of $100 thousand, instead of $5 million. The construction materials, construction equipment, and the machinery for the factory can all be shipped there. To make it simple, let’s ignore the costs of transportation and any other costs associated with set up abroad. Thus, the total cost of constructing the plant in Asia would be just $5.1 million, instead of $10 million. This, of course, is a powerful incentive for building the plant in Asia. And, then, once the plant is built, whatever the number of workers it needs for its operation can be found locally at a comparably small fraction of the cost of employing American workers.

Exactly such considerations explain why a very substantial amount of American manufacturing has moved offshore. It’s just so much cheaper.

Commentators, who are almost invariably critics, see this movement of capital offshore. But strangely, what they do not see is that the process is much more than just a movement of a given amount of capital from one place to another. That much, or, better, that little, is true in terms of monetary value, but in terms of actual physical wealth, and, in this case, physical capital, there is a substantial increase. Being able to obtain for $5.1 million what one would otherwise need to spend $10 million for, makes it possible to buy practically twice as much for the same $10 million. Our firm can build practically two factories in Asia for the price of one in the United States.

An American firm which invested in this way, would be in a position to supply its customers with approximately double the output for the same money, because it conducted its manufacturing operations in Asia rather than in the US. Even if it were the case, as is so often claimed, that displaced American factory workers must end up as mere hamburger flippers, the American economic system would still have this doubled output; plus it would have all the extra hamburgers the displaced factory workers would produce.

This sounds to me like quite an overall gain to the American economic system.

In the nature of the case, the gain enters the American economy in the form of imports. In essence, we’re getting the output of two factories in Asia instead of one in the United States, and the doubled output is coming into our economy in the form of imports. Absurdly, this gain in our wealth is what is called “unfavorable.” It’s certainly not unfavorable to American consumers. The only thing I can imagine that would be more favorable and, at the same time, would be ignorantly denounced as more unfavorable, would be imports simply washing up on our shores for free, but recorded by the customs bureau as having substantial value.

Offshoring has not resulted in a decline in the American economic system but just the opposite. It’s provided the American people with access to vastly increased manufacturing capacity, which is providing much larger quantities of goods at sharply lower prices. And this last is despite substantial inflation of the American money supply.

Thanks to offshoring, we are supplied with shoes and clothing, television sets, computers, CD and DVD players, microwave ovens, and many other goods in unprecedented quantities and at extremely low prices. In the nature of the case, this abundance comes to us in the form of imports.

What is the economic problem in this?

I say, “economic” problem, because I can imagine something arising that could cause a problem. That would be the loss of the offshore factories and the imports they provide, say, as the result of seizure by foreign governments and the inept, chaotic management the governments would impose. That would be a catastrophe.

But it cannot be stressed too strongly, the problem is not in offshoring or in imports; the problem is in anything that would threaten offshoring and the imports it provides.

This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book and provided that mention of the author’s web site is included. (Email notification is requested.) All other rights reserved. George Reisman is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics.

You Can Earn College Credit for Studying the Works of George Reisman and Ayn Rand! Click here for Details.

WSJ Article "Climate of Fear"

Prof. Richard Lindzen, a genuine climate expert from MIT, has written a very valuable op-ed piece in The Wall Street Journal describing the role of government funding and media hype in discussions of global warming. The article can be accessed at The article appeared yesterday, April 12, 2006.

Monday, April 10, 2006

Immigration Plus Welfare State Equal Police State

Illegal immigrants are overwhelming the resources of the Welfare State: government–funded hospital emergency rooms are filled with them; public schools are filled with their children. On the basis of such complaints, many people are angry and want to close the border to new illegal immigrants and deport those who are already here.

They want to keep new illegal immigrants out with fences along the border. It is not clear whether the fences would contain intermittent watchtowers with searchlights and machine guns. The illegal immigrants who are already here would be ferreted out by threatening anyone who employed them with severe penalties and making it a criminal offense not to report them.

This is a classic illustration of Mises’s principle that prior government intervention into the economic system breeds later intervention. Here the application of his principle is, start with the Welfare State, end with the Police State. A police state is what is required effectively to stop substantial illegal immigration that has become a major burden because of the Welfare State.

The philosophy of individual rights and capitalism implies that foreigners have a right to come and to live and work here, i.e., to immigrate into the United States. The land of the United States is owned by individuals and voluntary associations of individuals, such as private business firms. It is not owned by the United States government or by the American people acting as a collective; indeed many of the owners of land in the United States are not Americans, but foreign nationals, including foreign investors.

The private owners of land have the right to use or sell or rent their land for any peaceful purpose. This includes employing immigrants and selling them food and clothing and all other goods, and selling or renting housing to them. If individual private landowners are willing to accept the presence of immigrants on their property as employees, customers, or tenants, that should be all that is required for the immigrants to be present. Anyone else who attempts to determine the presence of absence of immigrants is simply an interfering busybody ready to use a gun or club to impose his will.

At the same time, however, the philosophy of individual rights and capitalism implies that the immigrants do not have a right to be supported at public expense, which is a violation of the rights of the taxpayers. Of course, it is no less a violation of the rights of the taxpayers when native-born individuals are supported at public expense. The immigrants are singled out for criticism based on the allegation that they in particular are making the burden intolerable.

The implementation of the rights both of the immigrants and of the taxpayers requires the abolition of the Welfare State. Ending the Welfare State will end any problem of immigrants being a public burden.

Of course, ending the Welfare State is much easier said than done, and it is almost certainly not going to be eliminated even in order to avoid the environment of a police state.

But the burdens of the Welfare State and the consequent resentment against immigrants could at the very least be substantially reduced by means of some relatively simple, common-sense reforms in the direction of greater economic freedom.

In a future posting, I’ll explain how not only the problem of chronically crowded hospital emergency rooms but also the whole so-called crisis of the medically uninsured, which certainly applies to all illegal immigrants, could be radically reduced, if not entirely eliminated, by introducing some simple economic freedoms into medical care.

This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book and provided that mention of the author’s web site is included. (Email notification is requested.) All other rights reserved. George Reisman is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics.

You Can Earn College Credit for Studying the Works of George Reisman and Ayn Rand!
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Wednesday, April 05, 2006

First, Witchcraft Trials; Now, Impending Health Insurance Fiasco: Massachusetts Leads the Way

Having just read today’s New York Times’ lead page-one article titled “Massachusetts Sets Health Plan for Nearly All,” I think I know what it must be like to live in some place like Caracas and participate in a popular celebration of the joyous wonders wrought by La Revolución. That’s certainly the spirit of the article.

It claims in essence to describe how the Governor and Legislature of Massachusetts have managed to make medical insurance both available and affordable for nearly all, at hardly any cost. “The bill,” The Times’ reporter breathlessly gushes,

does what health experts say no other state has been able to do: provide a mechanism for all of its citizens to obtain health insurance. It accomplishes that in a way that experts say combines methods and proposals from across the political spectrum, apportioning the cost among businesses, individuals and the government.

The Times did not print a copy of the bill, and so I have not read it. But judging from the article, I’m sure it must be one incredible mishmash of contradictions, deceptions, and distortions that are going to cost the people of Massachusetts dearly. The bill is openly touted, in effect, as being all things to all men. An alleged expert is quoted as saying, “`For a conservative Republican, this is individual responsibility. For a Democrat, this is government helping those that need help.’” So the bill simultaneously satisfies those who supposedly want to keep the government out of our wallets and those who eagerly want to let it in, those who want it to take less from us and those who want it to take more from us. (Guess which side will win, when the government is assigned a new and additional task—in this case, being sure that almost everyone has health insurance.)

If that were not enough, the article actually talks of part of the cost of the bill being apportioned to the government. That’s what allegedly helps to make the bill so affordable: the government will pay part of its cost. The article’s actual words, which bear repeating, are “apportioning the cost among businesses, individuals and the government.” This treats the government as some kind of rich fairy godmother, who is helping to take care of her people. And to be sure that this claim is not lost, the print edition of The Times brazenly states this fable in a callout set in large, bold type: “A health care plan paid for by businesses, individuals and the government.” One of the surprises apparently in store for many people in Massachusetts is going to be learning that whatever is paid for by their government is going to be paid for by them.

The article makes clear that those who have not purchased medical insurance, because they think it’s too expensive, but who are nevertheless deemed capable of “affording” it, are going to have it rammed down their throats. It will be illegal not have medical insurance.

But never mind. The bill is not always so nasty. It treads relatively lightly on businesses. “Businesses with more than 10 workers that do not provide insurance will be assessed up to $295 per employee per year.” This is probably enough to cover the cost of first-class insurance for aspirin tablets and band aids. The difference between this and any serious medical insurance will either be paid for by the taxpayers of Massachusetts or it will turn out that the whole bill is just a band aid.

There is, however, a bright spot in this bill. And that is, that if it is enacted, as is virtually certain, it will be in the state that is the locale of a major portion of the leftwing intellectual establishment. So, to that extent, it really couldn’t happen to a more deserving bunch of people. But, unfortunately, there are many, many more people in Massachusetts who do not deserve such legislation and who will suffer as the result of it.

This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book and provided that mention of the author’s web site is included. (Email notification is requested.) All other rights reserved. George Reisman is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996) and is Pepperdine University Professor Emeritus of Economics.

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Saturday, April 01, 2006

They Still Don’t Know What They’re Doing, But They Want to Do It at the Point of a Gun

Here’s a message from an environmentalist who hides under the name “Tokyo Tom.” He says it comes “off of the web page of the world-renowned Wood`s Hole Oceanographic Institute”:
[W]orld leaders may be planning for climate scenarios of global warming that are opposite to what might actually occur.

It is important to clarify that we are not contemplating a situation of either abrupt cooling or global warming. Rather, abrupt regional cooling and gradual global warming can unfold simultaneously. Indeed, greenhouse warming is a destabilizing factor that makes abrupt climate change more probable.

What this means is that “world leaders” simultaneously want to deprive people of the fossil fuels needed to keep them warm, in the name of combating global warming, while subjecting them to freezing cold. They call that government “planning.” Well, I guess they’re right: it’s par for government “planning.”

I point out such problems and say that “Economic freedom is what is required to cope with global warming, global freezing, or any other form of large-scale environmental or social change.” And I explain precisely how it would do so. (See my recent post “Collectivism, Climate Change, and Economic Freedom.”) But when I explain how a free market would solve such problems, I’m accused of simply denying the existence of global warming and refusing to face the facts. The truth is the collectivists don't want to face the fact that the free market is the solution.

And yes, the environmentalists are collectivists. They blame and seek to punish the individual for the cumulative by-products of the actions of all of mankind, as though the individual and the human race were one and the same. If such a thing is possible, they’re a lower, more lunatic form of collectivist than were the old socialists. The Marxists in Russia at least claimed to be concerned with building up the material means of production—hydroelectric stations, power plants, steel mills, and so forth, things that if built on a foundation of voluntary saving and free labor, really do enormously contribute to human life and well-being. The environmentalist witch-doctors in contrast want to compel a massive global sacrifice of means of production, in the hope that that will improve the weather. Maybe they don’t really believe in some kind of “Weather God” whom their forced sacrifice will placate, but they’re sure behaving as though they did.

This article is copyright © 2006, by George Reisman. Permission is hereby granted to reproduce and distribute it electronically and in print, other than as part of a book and provided that mention of the author’s web site is included. (Email notification is requested.) All other rights reserved. The author is Pepperdine University Professor Emeritus of Economics.

You Can Earn College Credit for Studying the Works of George Reisman and Ayn Rand! Click here for Details.