Tuesday, November 13, 2012

The Free Market Fallacy

Many conservatives contend that the free market can give people everything they need for a price.  That price is this mystical arbiter as to who gains what access to what resources.  And while that sounds all find and good on paper, it's never the case in the real world.

Now, with that in mind, let's look at jobs.  The job is the centerpiece of our society.  Without a job, you're condemned to a menial existence of public assistance, favors, handouts, and charity.  And to be clear, I'm not denigrating people who are on public assistance, as I have been myself...but it's no way to live as a life's ambition.  Anyone who's on assistance will tell you it kinda leaves you feeling worthless because you're not working for what you want or have.  At least, that's how I felt personally.

Because the job is the centerpiece of our society, this means that all the benefits and access is derived from that job.  For example...in a well-paying middle class job, you have health benefits, paid time off, a pension with employer matching your contributions, and other societal benefits.  Steadily, however...those benefits are disappearing for several reasons.  Companies in the United States are becoming less profitable because of outsourcing and extremely one-sided wage competition from abroad.  With new trade agreements in effect with nations like China, the ability of domestic manufacturing to compete with electronic and appliance manufacturing has diminished greatly.  Furthermore, domestic firms have been adamant in not bringing their profits home or sharing their earnings as much as they used to with the employees who helped build wealth for those companies.

***A strong middle class is the path to economic and social prosperity.

***Offshore manufacturing has hurt the middle class.

***Obscenely low tax rates have contributed to businesses not paying their employees more.

***The cost of living has increased while wages have stagnated.

***Local manufacturers can't compete because it's like asking an American to out-compete a sweatshop on costs related to labor.

***The loss of wages has resulted in less tax revenue for the government, reduced work benefits for the middle class, less class-mobility for all citizens, and severely low prices on goods that should be much more expensive.

***Low wages have actually caused increased use of the social safety net for families resulting in higher spending in this area of Government.  This is literally a self-perpetuating problem.

***Reduced wages have caused the cost of healthcare to increase as a percentage of a family's disposable income.

***Productivity is at an all time high, with wages being at all time lows, and getting smaller.

***Small businesses can't compete with large conglomerates because the costs are so severely different.  Large multi-nationals can import at rock bottom prices, while local ma/pa shops are restricted to buying from local suppliers leaving them at a severely sharp disadvantage.

***The middle class is shrinking, and we risk having a huge demographic of people being pushed from middle-class status to low-middle class or working poor.  Small businesses used to be able to pay livable wages in most cases, now many struggle to pay minimum wage because of the severe and fundamental disfunction of the economy.

***Local governments suffer from this severely big shock of incomes by decreased tax revenue, reduced job security, increased poverty, increased use of public services, increased use of charity services, and lack of access to necessary facilities for education, health care, and transportation.

The fundamental problem is wages are too low, as well as tax receipts.  A huge middle class means more people paying taxes.  A shrinking middle class with low top marginal rates means the rich hoard their wealth like dragons in caves burning up anyone who'd dare to try and steal from them.  We have a severe problem in revenue collection.  If this problem does not get rectified soon, we will see ourselves in a world of hurt socially and economically.

Conclusion: Industry needs to come back, free trade needs to end with low-cost manufacturing countries, and the wealthy need to learn their place.  Their place being that they are men and women as much as the rest of us, and they don't have the right to use the poor and middle class as ladder rungs on their way to wealth.  Wealth can be earned through honesty, hard work, and fairness.  Employees are companions in business, not trash, not "hired help" and not a "cost".  They are people who work just as hard as owners and operators of a business.  That loyalty and compassion for the common working man means a society that cherishes the business that cares and works hard to build up it's employees to a class of citizen that is experienced and secure in his or her job.  These principles are the fundamentals of American Business.  We work hard, play fair, have compassion, and treat each other right and we all win.

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