FRONT PAGE CONTRIBUTOR
Poverty and competition
Think of this as a companion piece to “Poverty and Free Will” from yesterday, because now President Obama has jumped on Pope Francis’ remarks and used them to bash capitalism, so there’s more to say on the subject.
Obama loves to use the language of markets and choice, stealing the trappings of capitalism to conceal socialist compulsion and political corruption. Challenged on the point, he would probably portray himself as a champion of capitalism… the right kind of capitalism, that is. He doesn’t like the free-range variety. He thinks it has to be hemmed in, limited, and controlled, made subject to the superior wisdom of the Ruling Class. There are so many noble and important things free people must be forced to do, because they cannot be trusted to understand the vision of the Ruling Class and cooperate voluntarily! But once that stuff is out of the way, you can enjoy your economic liberty in whatever portion of the heavily taxed, regulated, and mandated economy the government deems safe for its children. To someone like Obama, the “free market” is a small playground surrounded by very high walls, chaperoned by an almighty State.
Obama-style socialism is particularly concerned with protecting the free market’s “losers.” Individual welfare now reaches well into the “middle class” – it’s about protecting lifestyles, not feeding the hungry. Corporate welfare on a mind-boggling scale takes care of politically favored companies that cannot compete effectively, from General Motors to the long string of hugely expensive green energy disasters Obama forced us to finance.
Virtually everything activist government does is anti-competitive. The effort to ensure there are no “losers” is anti-competitive by definition. No losers means no winners. There’s a big difference between providing a safety net for the destitute and trying to outlaw failure, especially when the latter is done at the corporate level, with gigantic bailouts and subsidies.
Anti-competition is very valuable to big-money interests. It’s how they prevent smaller competitors from muscling into their business. One of the silliest fairy tales in American politics holds that Big Business supports small government. That’s absolute nonsense. Big Business loves Big Government – they do a lot of business with each other. Big Government imposes laws and restrictions that hurt small operations far more than they hurt Big Business, which makes the pain very tolerable for the latter. Government can crush up-and-coming competitors merely by requiring they meet standards which large, established corporations already surpass, or can much more easily afford to comply with. These standards are often sold as liberal-populist measures, but they’re music to the ears of big-bucks donors in corporate boardrooms.
For example, to turn back to the big story of the year, ObamaCare includes a provision that limits the profit insurance companies can realize in any given year. This sounds like a populist exercise of punitive liberalism, which makes it appealing to the dupes and suckers the Left relies on for its power. Yeah, sock it to those greedy corporate bastards! Limit their profits! Never mind what’s happening to me and my family – as long as some rich fat cat loses a million bucks, I’m happy as a clam!
But in reality, this rule is a godsend to large, established corporate players in the insurance industry, because it keeps new competitors out of the market. Start-ups generally lose a lot of money in the early days. Investors and entrepreneurs are willing to risk losses up front, in the hope of securing big profits later. Cap the profit in any given year, and suddenly the big losses up front don’t make sense any more. Large, entrenched interests, which are already long past the early, scary, money-losing days of entrepreneurial adolescence, are much more prepared to deal with profit caps. The concept is almost overwhelmingly anti-competitive… and it hurts middle-class business people and their prospective employees far more than it inconveniences fat cats with old money in the bank.
President Obama has also begun touting a minimum-wage hike, in an effort to distract from the failure of ObamaCare. That’s another anti-competitive boondoggle that hurts the people it’s supposed to be helping. Employees are hoping to sell their labor, which involves some degree of competition with one another. Minimum wages are a form of price control that interferes with such competition. By raising the cost of labor, it strangles demand and leads to higher unemployment, but that’s only part of the story.
The minimum wage also hinders the ability of employees to win salary increases and promotion based upon merit. You might think, “Well, who cares? I’d rather start at $15 dollars an hour than work for less, and hope that maybe one day I’ll get a raise to $15.” That attitude is poisonous to the work ethic, because it removes all incentives for employees to achieve and try harder. If everyone gets hired for $15 and nobody gets a raise, it’s foolish to do anything more than the minimum necessary to avoid termination… which, as anyone who ever made a payroll will tell you, is a very difficult proposition.
That’s another reason higher minimum wages are anti-competitive: employment is a huge risk for the employer, made greater by the difficulty of terminating employees. Each new hire requires a considerable investment in training up front. It usually takes a while before new people are producing work value in excess of their salary cost (which is far higher than their gross pay, due to benefits and administrative expenses.) Activists calling for a $15 “living wage” for fast-food employees should understand that workers hired for the current minimum wage – which they’re never stuck making for long, if they’re any good - already cost the employer more than $15 an hour. Even in the lowest-skilled positions, a new employee must accumulate considerable experience before their work product is worth more than what they get paid.
When the minimum wage is raised, it therefore becomes more difficult for a competitive job seeker – an aggressive salesman of his own labor – to persuade employers to take a chance on him. The difficulty is even greater for low-skill positions that cannot easily be won by flashing academic credentials and an impressive resume, which is probably one reason why ivory-tower academic theorists see nothing but upside to minimum wage increases. It’s great to be a credentialed professional in high demand who has to fend off corporate headhunters. But most of us go into a job interview with the basic goal of convincing the management to take a chance on us, make room for us, give us an opportunity to show them what we can do. And we want them to hire more people than they absolutely need, because that’s how a job market grows. We want vibrant and productive competition for jobs in an expanding marketplace, not today’s grim slog, in which every employer is trying to figure out how they can make do with fewer human resources.
With that in mind, I propose that competition is a vital component of prosperity, which means it’s an indispensable weapon against poverty. Competitive capitalism is the best way to allocate resources – the Obama years are but the latest lesson in the hideous inferiority of ideology and Ruling Class diktats. Competition matches supply to demand, terminates unsustainable business models, and produces healthy jobs that last, instead of make-work positions that disappear when subsidies dry up. A competitive job market brings out the best in every person, giving us incentives to reach higher and achieve more… which, in turn, creates the wealth necessary to finance a safety net for the truly needy.
Furthermore, the notion that capitalism leaves nothing but excessively wealthy “winners” and destitute “losers” is a product of the limited socialist imagination. That’s how their statist ideology works – the Ruling Class chooses winners who benefit, and extracts financing from submissive losers. In the free market, “win” and “loss” are highly relative terms. A scrappy competitor can do very well for himself without “vanquishing” anyone. Look at Apple, a company often referenced in Obama’s speeches. They’ve done good business in the computer world without coming anywhere near defeating or destroying Microsoft’s dominant position. Apple, in turn, is the big dog in the world of iPhones and iPads, but plucky competitors are doing very good business by running against them.
Private investors have a keen eye for good opportunities. That leads to the kind of business growth that creates voluntary employment, which is far superior to doing the bidding of the State, or living on a welfare allowance. There’s really only one alternative to poverty: employment. That’s never going to be a resource that can be re-distributed according to ideological whim, even under politicians who are as wise and selfless as all of them claim to be.