A Humane Economy

View 711 Saturday, February 04, 2012

Roberta has now got my cold, and I am not recovered from it so I can’t do much to take care of her. We’ll manage, but it’s not going to be fun around here for a few days. I used my nose pump this morning to clean out my head and that helped, but I am still nowhere near In good shape, which I fear will affect what I write. I don’t feel very sharp.

I have a number of responses to my notes on Deserving and Undeserving Poor. Some have gone into the letter bag and I’ll get to them when I‘m up to that. One was a reference to an on-line essay the correspondent wrote. It wasn’t well organized and I had trouble following the argument, if there was one; most of it was a well written tale of success followed by unemployment due to the incompetence of his employers. So far as I could see the point was that we ought to have an economic system that let him have his job back. He had done everything right, got his college education, and it wasn’t his fault that his employer had ruined the company, nor was it his fault that no one he could find needed his particular skills. He had been unemployed for a while now, and he had been on unemployment, and he preferred employment. He hadn’t signed up to be unemployed.

It’s easy to have great sympathy for someone with that story, as it is easy to have sympathy for the mill worker who has been in the same job for 20 years and established himself in the middle class, with suburban house, children in college, and the whole American dream – and now it’s all gone. The mill is closed, the town is fading out, half the fast food places have closed and the rest of them have far more fry cooks than they need, and there’s not even yard work to be had. This is the very definition of “Deserving Poor”, and if anyone deserves government help this is him. This is what Roosevelt meant by folks who need a hand up not a handout. I grew up during the Great Depression. My father used to give something to anyone who asked.

They used to tell me I was building a dream, and so I followed the mob,

When there was earth to plow, or guns to bear, I was always there right on the job.

They used to tell me I was building a dream, with peace and glory ahead,

Why should I be standing in line, just waiting for bread?

Once I built a railroad, I made it run, made it race against time.

Once I built a railroad; now it’s done. Brother, can you spare a dime?

Once I built a tower, up to the sun, brick, and rivet, and lime;

Once I built a tower, now it’s done. Brother, can you spare a dime?

“Give to him that asketh thee, and from him that would borrow of thee turn not thou away.”

But that is from Matthew, not the Declaration of Independence or the Constitution of the United States. Matthew may not distinguish between the Deserving and the Undeserving Poor, but all the Poor Laws from Medieval times to present certainly do. It’s not entirely clear how one acquires a legal obligation to help someone out because he needs help, and the state acquires a right to send an armed man to collect alms from you and if need be sell your house at public auction to acquire the money to give to a formerly employed college graduate who can’t find a decent job.

My correspondent quotes me and then comments; I dislike that form of dialogue, in part because it doesn’t require that the critic demonstrate he has understood what I said, but I’ll reproduce it here to save time:

There’s the following: “We all know how to get more poverty. That’s elementary. If you want more of something subsidize it.  If you want people to be poor, pay people to be poor.  It’s simple, it’s effective, and it has been demonstrated year after year. Make poverty pleasant. Give the poor a right to other people’s money. It works every time, and the larger the subsidy – the transfer of money from those who have it to those who don’t – the more people you will have apply for the position of being poor for a living.” – Jerry Pournelle

Of course, there is another quite simple way, as well, and we are all witnesses to its effectiveness.  Put economic policies in place that ultimately lead to the complete elimination of several million jobs in a period of a few months, and we get lots and lots of poor people (and many homeless, as well) without any subsidies (if one doesn’t count tax breaks for the rich as a subsidy).  I’m not sure how many of those newly poor actually applied for the position of being poor for a living.

And: “There’s another way to increase unemployment. The simple formula is make it more expensive to employ someone. Raise the minimum wages. Make it harder and harder to fire people. Give people with some conditions various protections and rights. Make it expensive enough to hire someone and potential employers will do without.” – Jerry Pournelle

I know of only two real ways to increase unemployment that will always work.  One is to significantly increase efficiency.  The other is to have one’s sales reduced sufficiently by a large enough decrease in consumers.  A retailer has no reason to maintain a large sales force if he has very few sales.  A manufacturer has no real reason to keep building things he can’t sell to wholesalers and retailers; the owner of a services company has no real need to keep people on the payroll if there are no calls for his services.  Of course, idiotic higher management decisions can also lead to unemployment (we all have probably seen examples of this).

There is more here, and then follows the biographical details of the writers’ unemployment. It may be my cold, but I find it hard to understand the point. I presume he is saying that making unemployment comfortable will not bring about an increase in unemployment, which is demonstrably untrue. The fact that most people prefer to keep their old jobs to being unemployed – actually applied for the position of being poor for a living – is either irrelevant or a distortion of what I said; and of course there are plenty of people who apply for the position of being poor. It’s easy enough to do. Don’t develop work habits, have babies while very young, live profligately when you get any money at all – there are plenty of ways to apply for being a pauper without filling out a form, and none of them require significant increases in efficiency.

Of course increases in productivity – increases in efficiency – certainly can cause unemployment. Increased in agricultural efficiency was certainly a factor in bringing about the Industrial Revolution. At one time far more than a majority of the population were needed as farm labor just to feed everyone. Great increases in efficiency caused them to be unemployed, and the flocked to the grim life of the soulless factories, and the world of the early industries so well described by Dickens. Out of that of course came the booms that changed everyone’s lives and made a society in which more than 10% of the population had more than enough to eat, more than one change of clothes to wear, choices in their place of residence, transportation – made all that possible. I grew up while those changes were happening. Believe me, the United States is a far different place from what it was in 1940.

Efficiencies make some jobs obsolete, and drastically reduce the need for workers in that profession. This has been the theme of a great deal of literature for a very long time. Robert Jungk portrayed the future as a possible horror story rather than a highway to progress in The Future Is Already Here, and he was neither the first nor the most eloquent. I had to read The Deserted Village in 7^th grade. Or perhaps it was 8^th.

Now if the point here is that allowing employers to use new technology to increase productivity and thus require fewer workers also gives that employer an obligation to take care of the workers who lose their jobs, then we are on familiar ground. That argument has been made by the Socialists for well over a hundred years. H. G. Wells and G. B. Shaw wrote eloquently on the subject. The problem is that if you put that onus on those who would hire people, you change the whole nature of the marketplace. I suggest reading Capitalism, Socialism, and Democracy by Schumpeter before resuming the conversation. Of course efficiency creates unemployment.

But this is to open the whole notion of a centralized command economy which will be humane and kind and gentle and also efficient and not corrupt – something which experience shows isn’t likely. Mussolini hoped to create that kind of economy, and, for a while, may have done so. Huey Long had much the same notion for Louisiana. And for that matter, that was the goal of FDR and Lyndon Johnson. Managed efficiency in investment with government protection of the workers. Regulations to protect everyone including the disabled. And here we are.

If you want unemployment and poverty, pay people to be unemployed and poor. There are other ways to bring it about, but those will work. Governments have wrestled with this problem for a long time – why do you think there were workhouses and treadmills in Dickensian times? The notion was to make life in the almshouse nearly unbearable so that no one wanted to be there, and thus ready to take any alternative. That was considered cruel, and the churches and the Salvation Army and the various missions look for ways to give alternatives. There’s a enormous literature on this.

But one thing is certain. If unemployment is caused by higher productivity and efficiency – and it often will be – then the only remedy it investment in new technologies that creates new jobs. And the best way we have found to get that is freedom. Government can cause economic growth, but the best was we have found is for it to get out of the way. See Hong Kong and the German Economic Miracle as examples.

But laissez faire capitalism is cruel and uncaring. And indeed it is. It needs mitigating. It how it shall be mitigated and regulated that we’re debating. A lot of people have thought about this. It’s a huge subject. I suggest starting with Wilhelm Roepke, A Human Economy. Google Roepke and follow your nose. You’ll learn a lot.

And it’s lunch time.

I note that you can watch all the Superbowl ads today but you have to have a Facebook account to do that. Everyone I know now seems to do Facebook, so I suppose I’ll have to before I become the last person in the world not on Facebook. We’ll see.