Edge of Chaos is a political podcast starring Joe Ryan and Neurotoxin. Its aim is to have a free-flowing discussion of news and current events that also examines the empirical outcomes of public policy, avoiding biases based on ideology and policy intentions. Listener discretion is both advised and encouraged.

Friday, December 6, 2013

The Minimum Wage Protests: Pure Idiocy

Color me insensitive, but I have 0 sympathy for the recent explosion in protests and strikes by retail and fast food workers in their push for minimum wage hikes. While this may be surprising to some readers, I'm quite empathic to unskilled laborers getting paid low wages and having difficulty making ends meet for themselves and their families. I'm a social worker and I'm well aware many people are the victims of circumstance and don't get the opportunities afforded to others. But that being said, trying to sell the policy suggestions of these strikes and protests based on that emotional empathy is the pinnacle of economic ignorance. Similar to the Occupy sit-ins and the WI union protests - which accomplished NOTHING as I predicted - these are organized and supported by well-meaning people with 0 grounding in empiricism. Their arguments and demands make this lack of competence so vivid that I'm forced to question the intelligence of anyone that takes them seriously.

Take minimum wage hikes, for example. There is absolutely 0 reason to believe these actually increase the standard of living for minimum wage earners. The moment the minimum wage is raised - which States and the Federal government have done over and over for decades - the same corporations employing these minimum wage earners raise their prices and pass those costs on to consumers. Seeing as minimum wage earners also make up a disproportionate amount of the consumers of their own employers' services - the equation for them remains virtually unchanged. However, like any policy that artificially fuels inflation, minimum wage hikes invariably take a bite out of the middle class. Namely, small businesses that compete with corporate minimum wage employers often cannot afford to raise their prices at the risk of losing clients - and are forced to either lay off workers or reduce their volume of operation. For this reason, many corporations such as retailers that compete with small businesses actually SUPPORT minimum wage hikes and lobby for them, because this destroys their competition. Economic leftist protesters' heads explode when I explain to them they're on the same side of an issue as a large corporation - but it's reality and I couldn't care less if those ignoramuses are uncomfortable with it. As for professionals, skilled workers, and other middle class salary and wage earners, the inflation cycle takes time to catch up with them which means these policies effectively reduce their standard of living via higher prices. The kid flipping the hamburger now makes an extra $.50 an hour, but the hamburger is more expensive so he is breaking even. Meanwhile, I'm paying more for the hamburger with my unchanged middle class salary, and I'm forced to go to McDonald's because the mom & pop burger shop closed down - so McDonald's is raking in greater profits.

"But wait," says the impassioned aged hippie in the protest, "we need to force the corporations not to raise their prices! Redistribute the wealth! Cap their profits! Higher taxes! Socialism!"

The aged hippie expects equally dumb passion in return, calling him names and comparing him to Marx and Stalin - because then he can marginalize me with Fox News pundits and continue to live in his fantasy world. But I'm an empiricist, and I calmly ask the fatal question to any economic liberal "how?" - fatal because I have yet to hear an answer that is in any way realistic or viable. Not that most of the people in those protests understand the first thing about economic policies that would actually attempt to bring about the outcomes they want. On the contrary, most of them just want the delusion of a higher paycheck that ignores the reality of accompanying higher prices and the thrill of a march with some 'anti-corporate' chants. But let's assume our hippie actually has policy suggestions as a minority of the supporters do - to raise/marginalize corporate tax rates, to set caps on profit margins and executive-to-employee pay ratios, to nationalize 'essential' industries from energy to health care, and so forth. The next 'fatal' question is "OK, where the fuck has this actually worked?" and the empirical answer is "NOWHERE".

Looking at representative democracies that have actually engaged in these policy lines - we discover that while they do often achieve greater equality in the short-term, the penalty is an immense inefficiency that leads to bankruptcy and the collapse of civil society. It turns out that people who make large amounts of wealth don't simply hand it over to the government for "redistribution"; they find ways to move it to other parts of the world where their governments can't take it or otherwise hide it. And they are driven by self-interest and have the resources to accomplish this task, so they will always be ahead of the bureaucrats charged with enforcing those laws that are allegedly driven by the public good, and constantly strapped for funding. This is observable reality proven by decades of data, ideological discomfort with it isn't worth the crap stuck under my shoes. Over the long term, this effect destroys the middle class's desire to be productive and moves too much of the rich people's money to other countries; leading to widespread unemployment, crippling debt, and eventual civil unrest that overwhelms and destroys the system. Look no further than Western Europe for an example of this exact scenario playing out. Sure, the effect is exacerbated in countries like Greece and Italy in which corruption reigns supreme and adds massive weight to the inefficiency, but even countries like Germany and the Netherlands that are known both for their efficiency and their low corruption ratings are experiencing the same economic slowdown and resulting political problems, just more slowly. Anyone who screams "socialism!" ought to actually READ the works of their propagators Thomas Moore and Daniel Webster. Those guys were empiricists like me and not emotional idiots like the protesters, and they realized and openly acknowledged that the only way such a system could work is if it were GLOBAL - which isn't happening n our lifetimes.

At this point my hippie is probably frothing at the mouth, throwing out all the token 'successful' socialist economies in the world like Canada, Australia, the Scandinavian countries, and accusing ME of omitting inconvenient facts when these 'successes' are exceptions in a sea of failure that he refuses to acknowledge. But don't worry, I HAVE accounted for those examples. The effect I'm describing DOES apply to the countries in question - places like Norway and Australia are colossally inefficient in their resource distribution and there's plenty of socialism-induced middle class sloth and upper class resource drain. It's just that those places all have very small populations and immensely natural resource wealth, so even squandering with socialist inefficiency they still have enough for most people to lead a prosperous life. It also helps that their cultures are extremely intolerant toward corruption, and that they are far less diverse than the US or even their unsuccessful counter-parts. In other words, socialism may in fact be the best system for countries like Norway and Finland, and I'm nobody to challenge the economic sovereignty of the people in those countries a world away. But discounting all the differences between there and the United States (resource wealth, corruption levels, diversity, population size, etc.) to pretend their system can be successfully exported to the US is a denial of reality bordering on psychosis.

Equality is simply not feasible using the means the leaders and participants of these protests espouse, and America lending an ear to their lunacy is not simply stupid - it's dangerous. These means are not harmless and well-intentioned attempts to assist the poor and underprivileged as a common fallback position implies. They culminate in economic attacks on the middle class for which the poor are organized to be the patsies of the rich and those in power. Hence, people who believe this on ideological grounds don't deserve to be treated as having a "differing viewpoint as good as mine". Their emotional folk claptrap can't hold a logical candle to my empiricism, and its spread threatens to 'accomplish equality' by reducing me to the economic level of an unskilled laborer as opposed to raising him to mine. I'm defending my economic well-being, and in doing so I will continue to expose these ideologues as blithering idiots and thrashing them ruthlessly to keep others from listening to them. I frankly don't give a shit how offended anyone is.

A reasonable question at this point might be what I DO suggest for decreasing inequality, seeing as I HAVE acknowledged it and that this economic system does not necessarily give everyone the same opportunities. The purpose of this post was to respond to the strikes and protests and explain why I'm against them, but a very short answer is a reference to a genuinely free market, Austrian School economic model. Eliminate the grand majority of regulatory bodies (especially at the Federal level) that restrict the economy and protect the largest players under the guise of 'consumer protection'. Make the large corporations that are colossally inefficient in their own right actually compete with small businesses without corporatist regulations, subsidies, bailouts, etc. It would also help to restrain the government from overstepping its Constitutional bounds in social policy. All those binges of defense spending, incarceration, surveillance, drug prohibition, border militarization, airport strip-searching, and so forth are not only human rights violations, they're also colossally expensive and produce absolutely nothing. In a truly free market system that respects civil liberties there will invariably still be some inequality, but there will be LESS than in the existing system and LESS than in the clusterfuck these imbecilic socialist suggestions actually create. My proposal doesn't have to be a utopia, it only has to have better OUTCOMES than the ones it's competing with, and we've already seen their outcomes are disastrous. Comparing the INTENTIONS of your proposal to the empirically calculated outcomes of mine is the advent of naive hypocrisy.


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