[From Bill Powers (2002.10.25.0818 MDT)]
Samuel Saunders (2002.10.24.2020 MDT)]
A small point that I think Bill and Rick are overlooking as that people move
back and forth between being employers and employed. Some of those who
become unemployed get back into the economy by opening contract welding
shops, machine shops, pizza places, corner bars, mailbox centers, etc. It
is easy to overlook the fact that small business acconts for a major part of
employment, and the barrier for access to small business
management/ownership is not that high.
That's true, but it's also true that a significant fraction of small
businesses go broke (don't know the number offhand), so it's not quite as
easy as you say. Also, small businesses do not generally pay high wages --
they tend more toward the minimum-wage end, and complain about even that
floor. Some seem to pay as little as possible, zero if they can get away
with it, as some have done. One person may benefit greatly from starting a
small business, but those who are forced to compete for jobs in that
business must scratch in the dirt for pennies. Just look at the "Living
Wage" movements, and the screeching protests they draw from small businessmen.
A job is not really what counts. What counts is the wage paid -- that's
what determines buying power and standard of living. Layoffs in times of
recession do not generally result in moving workers to equivalent jobs;
they move to lower-paying jobs. It's hard for those who are well-off to
understand the desperation of people who have suddenly had their income cut
in half, or in many cases have had it reduced to zero, when they have never
been paid enough to build up savings. It's basically a very cruel system,
I'm sure you see this every day in your work on the reservation. Going to
work for Uncle Moe at $5.50 per hour ($11,000 per year) is no substitute
for doing construction work at $20 per hour ($40,000 per year). And even at
$40,000 per year, you don't accumulate enough capital (if any) to start a
small business. Most small businesses fail from undercapitalization.
>Another important point that seems to have gotten little consideration is
that it is not usually that case that there is an across the board downturn
in employment. The steel industy may be laying off thousands, but at just
that time the petro-chemical industry may have more openings than
applicants. It is not much fun to be caught in the process, of course, but
this is one of the ways a market economy re-allocates resources to meet
changing situations.
That's the cold-hearted economic theory, but "not much fun" doesn't really
capture the consequences of being the victim of this process. It's the kind
of gut-wrenching disaster that should never be allowed to happen to anyone.
Anyway, the real point in my view is that the present system simply doesn't
consider economic suffering to be important: what's important is that those
at the upper end of the scale, owners, lenders, stockholders, and so
on, maintain their income, even if this means that those at the lower end
have to receive nothing at all. "That's business," they say.
From the macroeconomic point of view, it's clear that what producers pay
out to consumers is identically what consumers have available to purchase
the output of the producers. The producer payout has to equal consumer
income, on the average, in constant dollars or yen or whatever, and over
the whole economy. The real battle is over the division of the payout
between those who work for it and those who don't. Those who work for it
are the ones doing the actual producing; those who don't are either owners
and lenders and so on who receive the bulk of capital income, or pensioners
like me who receive a smaller portion. When those who don't work for their
income demand a larger share of the total producer payout (and that group
includes the ones who decide how the money will be split), a lesser share
is available for those who work -- which means, to spend on the products
they themselves produce. The result of this arrangement has always been
that those who work are driven toward the lower limit of income, so that
some live below the subsistence level and must struggle simply to stay
alive, and many live at or just above the bare subsistence level, where
they can get by, but barely. At the other end, of course, the owners of
wealth wallow in more buying power than they know what to do with.
This is simply the result of the way we have organized our social system.
Those who live at the upper end of the scale love it and think of all kinds
of reasons (beside the real one) to keep things the same. Those who live at
the lower end are not so eager to see it continue the same way, and would
welcome any change that might improve their lot. particularly relative to
the way they see the rich people living. One doesn't have to be an advanced
student of reactive propulsion to see how the design of this social system
is guaranteed to result in conflict between people. It's simply an
amateurish design, which is not surprising since it was put together by
naive and greedy people (our ancestors) who just knew what they wanted and
went after it with little regard for the kind of system they were bringing
into being.
Rick Marken (2002.10.24.2200)
I agree with you, of course. But I think that the remedies you propose will
fail for the same reason the remedies my father proposed, and those that I
have proposed, would fail. They require strong governmental actions that
would be energetically, even violently, resisted by those who would be
required to relinquish a large chunk of their wealth and income -- not to
mention that the resistors would also be those who have lawmakers in their
pockets, due to bribery being considered equivalent to free speech, as you
have pointed out.
There is only one approach that will work, in my opinion. That is to build
up a correct model of the system as it is, which shows exactly how the
system works when it works and how it fails when it fails. Economists have
not done this, largely, I think, because they have either been solidly on
the side of capitalism and thus unable to analyze it objectively, or
solidly against it and just as unable to analyze it objectively. Either
way, the analysis becomes biased and the argument obfuscatory whenever the
facts seem to be leading to unwanted conclusions. What we need are people
who can analyze the economic system without caring how the result comes
out, except for being determined that it be correct.
I was extremely disappointed with my father's approach when he went beyond
his quite remarkable analysis of the system and started saying what we
should DO about it. The analysis was far from complete, and it was by no
means evident what actions could be taken that would make the situation any
different, not to mention any better. We must complete the analysis and
develop the model that will show BEYOND DOUBT the nature of the system and
the means by which it can be altered, or for that matter be preserved.
And then we must tell people about it. It's all too easy for people to grow
up thinking that the economic system around them is simply a fact of
nature, as unchangable as the courses of the planets. As long as people
think of economics that way, no force can produce any changes. Changes must
come from understanding how things are, and thus seeing how we could make
them more like the way we want them to be. Those who are in the system,
those who ARE the system, are the only ones who can change it, be they rich
or poor. If they understand what is going on, they will see what they have
to do. I have no doubt whatsoever that once they see what it is, enough
people will do the right thing. Seeing what the right thing is is the hard
part.
Best,
Bill P.