1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar

The Ludwig von Mises Institute

Advancing Austrian Economics, Liberty, and Peace

Advancing the scholarship of liberty in the tradition of the Austrian School

Search Mises.org

Occupied by Government

Mises Daily: Tuesday, October 11, 2011 by

A
A
"The big problem with the honest Left is their absolute and obstinate refusal to learn the most basic economic principles."

I have to say that I share most — if not all — the goals of the honest Left, which would be embodied in a constantly rising standard of living for the lowest economic classes. I often find myself watching Democracy Now for its antiwar, free-speech, and anti-death-penalty stances. But the big problem with the honest Left is their absolute and obstinate refusal to learn the most basic economic principles. The "Occupy Wall Street" movement is no different, and it is a real pity that all this energy and frustration can't be put to use toward achieving their goal.

Many demands are being made, but sadly, if these were ever implemented, they would make problems worse by lowering the standard of living for all — especially for the poor! I will proceed to address some of the demands in plain English, hoping to reach out to them.

Raise the Minimum Wage to $20

If this were a solution, why not raise the legal minimum to $50 an hour, or maybe to $1,000 an hour? If this were a real solution, why not go to a poor country and legislate a minimum wage of $1,000 an hour and let the wealth flow!

Hong Kong, which enjoys one of the highest standards of living with almost no unemployment, didn't have a minimum-wage law until 2010, and it was passed because of pressure from the Communist government in Beijing. Switzerland has a very similar story of creating amazing wealth with low unemployment for its population without a minimum wage until very recently.

With the minimum wage you are creating an obstacle for hiring people if their labor doesn't produce more than the minimum wage. For example, if a teenager without experience produces only $5 an hour, the employer will not hire him at $20 per hour, because it would represent a loss of $15 per hour. The employer will instead not hire at all, hire a more experienced and productive person, or purchase a labor-saving machine.

Every single time a minimum-wage law is passed, or the minimum-wage rate is raised, unemployment figures rise, and they rise mostly among the most vulnerable in society.

Free College Education

What do you mean by "free"? Are the costs going to magically go away?

Perhaps what they mean is that they want somebody else to pay for their education. They protest against the plundering on the part of bankers, which is a correct stance, but instead of advocating for honesty across the board, they just want to plunder themselves.

Guaranteed living-wage income, regardless of employment

Everybody would like to do something fun and get paid for it, but reality is different.

If you are a poet or literature graduate and are not getting paid enough, it means that people are not interested enough in what you are doing, or that there are too many other people trying to do what you are doing. If you are not being paid enough you are not in a field that serves and meets the needs of your fellow citizens. Your low pay is a signal; pay attention to it.

Ending "free trade" and opening immigration

Do you not see the contradiction in these two demands?

If you want a high standard of living, you need free trade. Import restrictions may seem like common sense, but all they do is create economic distress. This is why economic sanctions are put in place against enemy regimes: these sanctions are meant to hurt them, not benefit them. Why would you want to impose economic sanctions upon yourselves?

Immigration is always positive because it increases the division of labor, which makes society more productive; but it doesn't work if you offer immigrants "free" services, because then people do not come with a job in mind but rather with the promise of free goodies. This type of policy always creates racial tension between the immigrants and the population at large.

Immediate across-the-board debt forgiveness for all; Outlaw all credit-reporting agencies

These two demands, if passed into law, would be rewarding debtors and punishing savers, rewarding risk takers at the expense of prudent people. Need I say more?

Of course, the corrupted system by which the banks create credit out of thin air, creating bubbles in the economy, has to end.

One trillion dollars in infrastructure spending

If this were the solution, why not do 2 trillion? Why not 100 trillion? Why don't poor countries just spend more?

Economics is pretty much like most other sciences: 2+2=4 here in North America, just as 2+2=4 in Siberia or Argentina. This means that if you compare your own household's economic workings with the national economy you can make very accurate assertions and learn many things. Keeping this in mind, when you and your family are broke, do you spend more? Does spending create more wealth for you as an individual? The answer to those questions is of course a resounding no.

Then, ask yourself this: What makes me better off? What measures bring my economic house in order? When you have the answer to those questions, not only will you — hopefully — understand that the government cannot possibly help; you will also know what you need to do.