Missing the Boat -- Again

by Liberty and Power

[Cross-posted at Free Association.]

The blogosphere is alive with discussion of what's been happening to compensation for regular workersw over the last few years. See the several posts and comments at Cafe Hayek. I've addressed the issue here, but I want to add some points.

Libertarians constantly miss opportunities to appeal to good-faith left-leaners who are concerned that working people get the short end of the stick. Yes, they are subject to economic fallacies that should be addressed. Yes, they may misuse or misinterpret wage and total-compensation statistics. Yes, they may fall victim to demagogues, such as Paul Krugman. Yes, people generally live far better today than they lived 20 and 30 years ago -- although we don't give enough attention to how the Fed's easy-credit policies can create illusions of prosperity or how the government has inflated the price of housing, food, medicine, education, and energy. (See Jack Douglas's article.) All those things should be explained patiently and clearly.

But I fear that we miss the forest for the trees.

We live in a corporate state, not a free economy. What are we arguing about? Whether the corporte state treats workers better than the left says it does? Big deal! What does that do to advance the cause of liberty?

It seems to me that all it does is make us look like corporate-state apologists. No thanks. There are enough of those.

These two statements are consistent:

1) the middle class is doing better than ever (leaving aside the scary debt question);

2) it's not doing as well as it should be doing.

Regarding 2) the question is why. If the lord of the manor comes into some money and raises the living stardard of his serfs, we would hardly tout that fact to show that feudalism is fine. I know the analogy is overdrawn, but many libertarians are doing something similar. They debate the numbers without pointing out what those numbers paint a picture of. It's not a picture of a laissez-faire economy; it's a picture of a corporate state -- the systematic intervention largely on behalf of incumbent business interests that tamps down competition and squelches alternatives, including self-employment, for many workers.

When I say that the middle class, and those below, are not doing as well as should they be doing, I mean simply that if competition were truly free -- if all transactions were voluntary -- these classes would be wealthier. The proper "distribution" of wealth is something only the market should determine. There are no good grounds for condemning the "shares" "allocated" by the unfettered market process, because the market process is just a fancy word for the countless consensual transactions it comprises. There is no actual allocation. To object to the outcome of that process (which is always a snapshot, because it is always in flux) is to favor, at least implicitly, interference with consensual transactions; that is, it is a call for violent inteference with free exchange. That would be immoral, as well as wealth-destroying.

Libertarians: wake up! Make the technical corrections, but be sensitive to how it sounds when you leave things at that. Keep your eye on the ball!

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More Comments:

Sheldon Richman - 9/9/2006

I think we generally fail to appreciate how, over many years, the regulatory/subsidy state has incorporated (no pun) the interests of major business.

Steven Hines - 9/7/2006

Sheldon,

I should have read "Eye On The Ball" before I asked my "dumb" question. Now I know the answer.

Thank you anyway.

Steven Hines - 9/7/2006

Sheldon,

I feel kind of dumb asking this question, but I want to be sure I understand exactly what you mean by "corporate state." Do you mean it as our economy that is weighed down by excessive government regulation?

Thank you.

Anthony Gregory - 9/5/2006

I'm always alarmed to see libertarians defend whatever is happening in the economy as though it's the free market at work. Another error, which seems to happen more during Republican administrations, is to shield the government from criticism from the left, which is often misguided but not totally off. Many libertarians will defend the government, saying it's not the government's job to feed the hungry, help the poor, provide health care, and so on, without giving due emphasis to the fact that, if it weren't for the corporate state, the hungry, poor and needy would all be better off — that indeed, these are some of the greatest victims of the interventionist state.

Sheldon Richman - 9/4/2006

This is too cryptic for me. What the heck are you saying?

Sheldon Richman - 9/4/2006

Cox and Alm (Myths of Rich and Poor) show the opposite using not money wages but typical working time needed to buy various products. It clearly takes a lot less time to buy superior products than it took previously to buy inferior products. (This doesn't include products that didn't exist years ago.)

The point is not whether living standards have increased or not for average workers (they have), but whether they would have increased more in a free, as opposed to a corporatist, economy.

Steven Horwitz - 9/4/2006

Not any economist I'm aware of. Some empirical evidence and a citation please.

Roger Graham Jolley - 9/4/2006

The real wages adjusted for inflation, etc were lower in 2004 for similar labor than in the decade of the 60's, at least that what economist say.

Sheldon Richman - 9/3/2006

"Since the 1960's real wages have declined...."

How can this be true?

Roger Graham Jolley - 9/3/2006

Sheldon Richman- - ""if competition were truly free -- if all transactions were voluntary -- these classes would be wealthier. The proper "distribution" of wealth is something only the market should determine. There are no good grounds for condemning the "shares" "allocated" by the unfettered market process, because the market process is just a fancy word for the countless consensual transactions it comprises. There is no actual allocation.""

There is no actual allocation, but A strong belief, empowered by passionate emotional force and a strong dose of ignorance will focus on the idea of "allocation of wealth," as if desisions are made by some mythical "them" and ignore evidence such as the reasonable analysis and assessment that Sheldon Richman expressed so well.

Emotionally biased reasoning bnecomes strong partisanship in political matters. I am constantly "calming down" those irrational souls around me but I keep looking for new ways to awaken those deploying ignorance as a psychological weapon.

"If transactions were voluntary;" there you hit the nail on the head.

As long as "LABOR"'s involuntary part in the economy is to feed manufacturing and retailing at it's own expense and risk; and... as long as rising wages indicate inflation which require government/FED intervention in the market, which has the effect of keeping wages artificially low,then the corporate state as you say, will continue to dominate the people, the governments and comnmerce, worldwide.

Since the 1960's real wages have declined, yet our enormously successful economy, producing millions of trillions of dollars in measurable wealth, and "LABOR" gets less than ever, sharing precious little in the bounty.

I suppose those who argue the "trickle down" theory of benefits to the wealthy which "floats everyone elses boat" and improves lives in general, I suppose they haven't seen the lowland we ordinary Americans live in. As I understand it, some 70% or more of all Americans are two paychecks away from being homeless.

True, we may have two TV's a car and maybe even a boat, but the economic fix on LABOR's end of the Labor Market keeps us lowly, ordinary Americans in our place while someone else earns the profit for our time and expertise (we make .10 on the dollar we earn for a commercial entity).

The very designation of LABOR in the economic calculations of the models used by economist to model the American Economy puts a cap on the price of LABOR for just us folks trying to make a living and care for our families.

Those of us world-wide whose only interest in commerce is a job and places to shop, (I label them "just us folks,") operate at the mercy of a combined government and commerce conglomerate which dehumanizes individuals as mere LABOR, entitled to only 10% of their economic output.

Just us folks is a better descriptor then LABOR, ELEMENT of an ECONOMIC FORMULA. The idea that the labor market is fixxed will only be new those experiencing an awakening usually based on getting screwed.

chris l pettit - 9/3/2006

libertarian economic theory does just that...yet there are still libertarians...also demagogues like Krugman except with a different batch of kool aid...

its like the pot calling the kettle black...

Libertarians do a lot a good in the world...unfortunately, economics is not part of that...

CP