Minimum Wage Debate

A recent post by Cynicus Economicus has sparked a debate on the merit of the minimum wage between Tiberius and fellow commentator (and prospective Conservative councillor) Steve Tierney.

For practical reasons, the exchange has been moved here.

Tierney:

You ask: “Do you support the Minimum Wage?” and then suggest that if I don’t I must not be humanitarian.

Well, clumsily as ever, that is not exactly what Tiberius meant to suggest: it depends on what grounds a person rejects the Minimum Wage.

In practical terms, Tiberius’ own view is that, within the current system as it stands, a person cannot both object to a ‘Minimum Wage’ and defend that objection on humanitarian grounds.

Cynicus himself accepts this moral compromise in his post on benefit reform, where he writes:

At this stage it would be easy to characterise this point of view as heartless […] as a reader you have to either accept the economic rationale behind what I have said, or condemn me as a heartless monster.

And though Tiberius wouldn’t use such emotive terms, he cannot but describe as ‘non-humanitarian’ the following sentiments:

The UK can simply not support the ‘luxury’ of a system that lets people stay idle on benefits.

So what happens to those who exceed their allowance of one year of benefits? Quite simply, they will need to fall back on charity, friends and family. In the traditional usage of the word, they will be destitute.

What about a young person who is having trouble finding their first job? I have already outlined the education system in my previous post. If a person is unable to find a job then they will have the option of continuing education, provided they can be funded for this. If they can not either find an educational opportunity or work, they will be destitute and reliant on charity, friends and family.

That, to Tiberius’ mind, is no way to set out a road to a healthy society.

[Note: What Tiberius admires about Cynicus is his intellectual honesty in this regard: he diagnoses the problem, he acknowledges that his prescription will not be popular, yet he proposes the treatment anyway.

But does Tiberius agree with him? No, the more of Cynicus’ work Tiberius reads, the more he realise the fundamentally disagreement in their outlooks – economically, politically, and socially.

This, however, is precisely why Tiberius enjoys reading CE’s blog so much: he learns far more by listening to people with a perspective so opposed to his own than he ever could visiting sites where his own political biases are simply confirmed.]

Returning to the Minimum Wage, Tiberius believes that in this system as it stands you either accept that the labour of each citizen has minimum value that cannot be undercut, or you do not. Now, at a more abstract level, he also reject a Minimum Wage – but only on the same grounds that he rejects all forms of wage-slavery: that one cannot put a price on human labour, and man should always be an ends, and not a means. But that is purely theoretical economic system and probably has no relevance for what we are discussing.

[As a (possibly) interesting side note Tiberius’ position is not even a particularly radical one; a person of a more revolutionary persuasion may would agree with the argument that we should scrap the Minimum Wage ( and other forms social security) but for the opposite reason implied by Cynicus’ example.

What such a person may argue is that all forms of forms of social benefit ultimately serve as nothing more than a States’ buying-off of it’s people’s ‘revolutionary potential’.

An analogy would be that people in the Capitalist system are born into a prison of servitude which they are ‘naturally’ averse to. Therefore, in order to keep their inmates pacified and less inclined to riot, it serves the gaoler’s interest to furnish the cells with a few ‘luxuries’ to distract the inmates from their predicament. Take these away these provisions and the incarcerated masses begin to notice the bars of the institution, and begin to fight for their emancipation.

The more pure ideologues would go further than this and say this is the only way a free, equal, ‘revolutionary society’ can be born.

Tiberius puts little stock in such “out of the ashes” rhetoric, however, he does have sympathy for the argument that anyone seeking to eliminate all kind of State subsidies, is unwittingly or not, promoting a revolutionary agenda; this is why some on the ‘far-left’ supported Ron Paul presidency ]

To return to practical matters though: removing any of the government provisions that ensure people have enough money to feed themselves, that families do not go destitute, that people are able to maintain a minimum standard of living, cannot, Tiberius believes, be morally defended. (An illustration of this point was provided last year when a Ron Paul-supporter wrote to Noam Chomsky saying that: “I really can’t find differences between your positions and his” and was politely schooled by the Professor on the vast gulf in the men’s beliefs; it is worth reading it full here.)

That being said, Tiberius is always interested to hear from others who do not believe that this is the case…

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Cynicus Prognosticus

Just a quick note:

After recent comments, some may be left with the false impression that Tiberius disagrees with a lot of what Cynicus Economicus writes; he doesn’t.

In actuality, the man is Tiberius’ secondary authority on all things economic (and this is no mean feat since Chomsky is Tiberius’ primary authority on pretty much everything.)

An article in last week’s Spectator gives a dramatic justiciation to why Tiberius thinks Cynicus is so good at what he does. After reading it, it may be enlightening to read Cynicus’ (now two-month old) account of why this was probably going to happen. Either the man is psychic, or he has a great understanding of the underlying forces at work.

And, when it comes to explaining those dynamics clearly, lucidly, and in layman’s terms, nobody does it better.

/gushing

Cynicus Chomsky-us

Tiberius recently posted a comment piece regarding a recent article by Cynicus Economicus.

Though the two agree in most respects, the comment attempted to identify the root cause of their diverging viewpoints via a tasty analogy.

Cynicus himself was kind enough to respond to the post directly and what follows is an attempt to clarify (and rebut) some of the points he makes – so unless you’ve read the original comment and Cynicus’ reply, it will mean very little to you (but you can catch up here)

In his reply, Cynicus (politely) suggests that the difference in approach is due to a misunderstanding on Tiberius’ part:

The error in your critique is as follows; the current system of interventions and bailouts is what allows the unholy alliance. Take away the guarantees, the special position of particular banks, the bailouts and so forth, and you have a different situation. That is a situation where the politicians and banks at the top do not have the power to win.

However, while Tiberius understands that the “system of interventions and bailouts is what allows the unholy alliance”, what he disagrees with is that this system is ‘current’ – if this word is used to imply that there used to be a different system.

Tiberius does take this to be Cynicus’ meaning as he goes on to say: “Take away the guarantees, the special position of particular banks, the bailouts and so forth, and you have a different situation” – which, by implication again, suggests that these phenomena are new and that, by removing them, we shall be returning to another system which Cynicus regards as preferential (the ‘different situation’)

If this is indeed what Cynicus is implying then it is,  Tiberius believes, an error – an understandable error no doubt, as many people (especially economically-minded people) believe in the myth of the free market – but an error nonetheless.

What Cynicus calls the ‘current system’ of Capitalism is in fact the only system of Capitalism that has ever existed in the Western economies; the ‘unholy alliance’ he identifies is, therefore, not a new arrangement, but rather, as old as Capitalism itself (and, in differing forms, a great deal older that that).

Taking, for the sake of argument, this to be Cynicus’ position – that this system of interventions and bailouts is new – Tiberius will now attempt to show why he believes it to be a mistake. Or rather,  he’ll get the world’s leading intellectual to do it for him.

Cynicus Chomsky-us

In a recent interview , Noam Chomsky discusses the bailouts in the US and the need for the newly-nationalised banks to become more regulated. At one point the interviewer, agreeing with Chomsky, adds: “Especially when it’s all public money that at this point is running the system!”. Chomsky’s response [starting 4m39s in] is revealing:

Chomsky: Well the fact of the matter is that it almost always is public money. So take, say, the richest man in the world, Bill Gates, how did he become the richest man in the world? Well a lot of it is public money. In fact, places like where we’re sitting right now [MIT – Massachusetts Institute of Technology] – that’s where computers were developed, the internet was developed, software was developed – either here on in similar places it was almost entirely publicly funded…

The way the system works fundamentally is that the public bears the cost and takes the risks, and the profit is privatised

Interviewer: Which is what we’re seeing now with the whole banking bailout…

Chomsky: Well there’s alot of talk about it now because it’s the financial institutions and it’s very visible – but it happens all the time.

So, Chomsky is suggesting that the bailouts to which Cynicus objects – far from being a bastardisation of the current system- are in fact an integral part of that system; they are endemic to it; the system could not have gotten to this point without them.

That most people do not recognise this is testament to the propagandised view of the world that these Captains of Industry and Barons of Finance would have us believe in. It is, nonetheless, a fantasy and Chomsky elaborates on this basic point at some length in a lecture called ‘Free Market Fantasies’ which you listen to here.

So, when Cynicus says:

As such, ‘yes’, the freemarket system does work. ‘Yes’, those at the top are profiting. ‘No’, they do not do so due to a freemarket system but as the result of interventions and distortions by the government.

He is creating a false dichotomy – there is no ‘freemarket system’ in the West; never has been, probably never will be. This is not to say that a freemarket system has not been tried elsewhere – it is forced on the developing world through IMF conditionalities – but it is not what we have here.

Furthermore, when Cynicus says:

…it has nothing to do with free markets. It is the close relationship between banks built upon regulation, and the mutual interdependence of the government and banks that is the problem

He is only half right: he correctly identifies the problem, but mistakenly (Tiberius believes) implies that it is due to an error in the system, rather than something that is, in reality, integral to it. Simply put: No Western Capitalist system exists (or has ever existed) other than the one he (correctly) identifies as problematic.

Chomsky again, elsewhere:

As for Adam Smith and the Wealth of Nations, well, first of all the idea of an unsubsidised – not state-subsided – capitalism we don’t even bother talking about that. It has existed: it exists in a good part of the third world – which is why the third world looks the way it does.

It has never existed in any developed society for a very simple reason: the wealthy and the powerful won’t allow it – just as Adam Smith understood. They will use the levers of power to make sure that State power subsidises them – that’s why England developed, that’s why the United States developed, that’s why France developed, that’s why Germany developed, that’s why Japan developed; and in fact every developed society has developed just that way. That’s one of the clichés of economic history.

So we don’t talk about that anymore – because it’s non-existent, it never will exist except for people who have it rammed down their throats.

Now am I in favour of it? That’s another question – like in some mythical world would I like to see laissez-faire capitalism?

Well, only under the conditions described by Adam Smith [..] and, if you look at his argument for markets it’s pretty clear (maybe the argument’s right, maybe it’s wrong) but it’s clear what it was: that under conditions of perfect liberty markets will lead to perfect equality – that’s why markets are good; they will lead to perfect equality and they will not force people to subject themselves to outside orders – so they become less-than-human

Well, if that were possible, maybe so. But it’s not on the cards – and I don’t know if that argument works anyway, it probably doesn’t; the argument was fallacious.

But the goal was clear: the goal was a society based on enlightened values..

There is no way that Cynicus can say “‘yes’, the free-market system does work” because, the fact of the matter is, we don’t have one – so how could he possibly know? He may add the words ‘in theory’ to the statement, but then ‘in theory’ can even make Communism seem plausible.

So, while Cynicus says:

Take away such interference and there is no unholy alliance.

Tiberius would say:

“such interference” is the system, “the unholy alliance” are the system; and no one with the institutional power to do so is going to ‘take away’ anything – you may as well hope for a turkey to organise your Christmas dinner this year!

To put this in the most simple way possible:

Cynicus & Chomsky both agree that the current system stinks.

Where they disagree is that while Cynicus thinks this is due to political interference with what is a healthy underlying economic model, Chomsky would says it is that very economic model itself (when seen for what it truly is and not what academic text books may propagandise it to be) that is the root of the problem (and that the problem is exacerbated by the creation of a political system that the economic model favours, i.e. fascism, totalitarianism, sham-democracies, etc.).

In this respect, Chomsky out-cynics Cynicus.

But let us turn finally to Tiberius’ cornflake box (for he knows, Weary Surfer, that you are hungry for another bowlful)

Cynicus states that: “I do believe that the cornflake packet is wrong”  and “My cornflake packet would indeed be different. I would prevent the collusion between banks and government, and also prevent the issuance of debt by the government.”

In other words, he would design a packet where the big flakes do not rise to the top.

The problem is, although Cynicus may shun ‘conspiracy theories’, the current box we all live in was actually designed by the bigger flakes themselves:  not necessarily consciously in a ‘lets think of the best design to ensure our dominance’ fashion, but rather slowly and incrementally in more of a ‘this seems to work best for us’ way – though less ‘Blind Watchmaker’, more ‘Short-sighted Bastard’.

Those bigger flakes are very happy with the box as it already is thankyouverymuch, and are not going to change it just because crumbs like us are tired of being last out of the packet.

Which bring us to the last point:  In the final analysis, the current system does work – but the pertinent question is – “Works for whom?” And that’s another story.

Disclaimer:

All the above is based on Tiberius’ understanding of Chomsky, and, though Tiberius has studied Chomsky’s work in depth and continues to follow it closely, he does not (of course) claim to speak on the great man’s behalf.

Cornflakus Economicus

In an interesting recent piece, Cynicus Economicus has expressed his anger and disgust at “the unholy alliance between the politicians, academia, the central banks and the financial giants […] leading the West down a road to destruction.

Tiberius has a few words he would like to share about this analysis, but, as ever, his reply will be somewhat tangential.

The Cornflake Effect

Since childhood we have all known that it’s a Law of the Breakfast Table that the smaller, powdery, less-desirable bits of cornflakes always find their way to the bottom of the box, while the large, crunchier, altogether-better pieces seems to gravitate towards the top.

We may have pondered on this for a while over our bowl and wondered why it is that the heavier flakes are not the ones that sink furthest to the bottom as our youthful common-sense would imply they should:

Why does this odd, counter-intuitive arrangement of cornflakes actually happen? Is there something more sinister involved? Do the larger of the cornflakes ‘conspire’ together to stay on top of their smaller brothers? Have the cornflake-makers themselves ‘conspired’ to create a box which presents their most desirable product at the top?

But then the bus arrives, we grab our bag, and it’s time for another school day.

As we get older we realise that, like most things, the explanation is a much less exciting one; the seemingly-bizarre distribution of the contents of our box was actually the inevitable outcome of a number of  fairly mundane factors:

  • Cornflakes are not all the same size and shape, and they do not tessellate well;
  • They are placed compactly in boxes of a certain size, which when shaken about causes the small pieces to break up further;
  • This increasing differentiation between the cornflakes forces an inevitable movement determined by their size and shape;
  • The smaller pieces fall between the gaps in the larger cornflakes and settle at the bottom of the box.

The inevitability of the interaction of these factors means that you will always get this same outcome and, unless you have an annoying younger brother who gets to a new box shortly before you do and slyly turns the inner-packet upside down (Tiberius: “little git!”), the first bowl of a new packet will always be the best, and the last bowl the worst (unless you’re one of those freaks who enjoys drinking his cornflakes!).

Some people use this phenomena to suggest that social stratification is, like the distribution of cornflakes in the box, a law of nature. We see this especially amongst the social-Darwinists who, using a particularly skewed interpretation of evolutionary priniciples, suggest that our current system of capitalism is the most ‘natural’ we can hope for, as it is in tune with (and sympathetic to) our supposed selfish predispositions.

This form of argument however overlooks the most crucial component of the Cornflake Effect – what we might call the systemic factor : the box itself.

What if, instead of putting them in boxes, the cornflake-makers simply poured all their cornflakes onto the floor of their factory  – how then might we expect the cornflakes to be distributed?

Or imagine if one particularly enterprising cornflake-maker got around the problem of ‘final bowl disgust’ by distributing his cornflakes in a perfectly spherical container whose sides were soft enough not to break even the most fragile of flakes – would all cornflakes be considered more equally?

How about if the box remained the same, but it was decreed by law that all cornflake boxes should have designs that look the same upwards and downwards, and therefore that all packets spent as much time one way up as another: would the first bowl still be much better than the last?

All this is to imply that talking about a “natural” or “normal” way for the flakes to be distributed is itself an oversimplification. Side-stepping the obvious issue that cornflakes are not a naturally-occuring phenomena anyway, it is our human interaction with them, the way we determined they should be distributed via technologies and social arrangement that are a crucial determining factor in their ultimate fate.

So now, filled with a sustaining bowl of cornflakes inside us, lets us look again at the crux of Cynicus’ argument:

I do not buy the conspiracy theorists, or that there is a nascent New World Order. I am far more inclined to the view that incompetence and idiocy are greater drivers of events than hyper-intelligent Mr. Evils plotting world domination.

He is right: there (probably) is no New World Over in the way defined by the internet counter-culture (Alex Jones, et al), for it implies the existence of a group of people with a strong enough in-group bias to be sustainable, yet with so little compassion as to be essentially psychopathic to the rest of humanity. Tiberius does not see how this is logically possible outwith an analysis that is either antisemitic (“they are all Jews”) or insane (“they are all reptiles/aliens”). Failing this, you are left to explain a group of people who are evil enough to want to dominate the world, yet sociable enough to get along with one another in engineering the task.

Instead, Cynicus goes on to complain that:

The only explanation that fits the facts is the grubby clubbiness of the system. It is not the great New World Order conspiracy, but rather the conjunction of interests between well placed individuals. Each, in their own way, moving forwards for their own personal gain. It is not the activity of great conspirators, but rather the collective movement of little men, of people who can think only of their personal gains. Money, vanity, power. [Emphasis Tiberius’]

And again, he is right.

But wait a moment, don’t “people who can think only of their personal gains” form the bedrock of the system of liberal capitalism that Adam Smith wrote about and which Cynicus Economicus defends?

“by pursuing his own interest, [the individual] frequently promotes that of the society more effectually than when he intends to promote it.”

Adam Smith, Wealth of Nations, 1776.

“The answer to Lemming’s question, and perhaps the questions of others, is that there is no basic problem in economic growth, and no real problem in a system built around consumption.

In other words, the underlying system works.”

Cynicus Economicus, Capitalism and Consumption

The problem is that you can’t have your cornflakes and eat them too; you can’t claim a system of competetive-consumption is fine one minute, and then complain when you realise that such a system throws-up ruthless, self-serving individuals.

Cynicus is, in essence, getting angry at the big cornflakes, when he should be getting angry with the box.

Note:

At the risk of kicking a man when he is down, this seems like as a good a time as any for Tiberius to offer some thoughts on what he thinks are the underlying difference between his own and Cynicus’ analysis.

Cynicus has recently been offering his blog as a forum for others to express somewhat dissenting opinions and may be interested in hosting this. If not, they will be placed on here shortly.

Published in: on May 10, 2009 at 7:54 pm  Comments (6)  
Tags: , ,

Quantitative-Easing-Easing

Last week, the YEP issued a ‘factfile’ on the issue of the moment: Quantitative-Easing (QE).

If, having read that, you actually wish to learn something about QE I would strongly recommend reading the latest post from the always-insightful Cynicus Economicus.

Regarding the ‘factfile’ though, it appears that this is one piece of  ‘analysis’ we can’t give the YEP any credit for; it has been pointed out to Tiberius that the piece appears to be a carbon copy of a press release issued by the Press Association; you can find also find it in word-for-word form here and here, and here.

After reading Nick Davies’ Flat Earth News, nothing suprises Tiberius any more when it comes to the poor standard of journalism in the corporate media; he does, however, suspect the time is almost upon us when people demand much better than stock answers on critical issues such as QE.