A thought for Labor Day

"The masters, being fewer in number, can combine much more easily: and the law, besides, authorises, or at least does not prohibit, their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In all such disputes, the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks, which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year, without employment."

- Adam Smith, Wealth of Nations

For more selections from Wealth of Nations, see “The Invisible Adam Smith”.

Pain for the low, gain for the high

Labor unrest and union activity seem to be gaining.  Some workers even they feel they have to sacrifice their jobs so that others may have it better.

"[We] know we will probably lose our jobs, but if we accept these concessions, standards for bakers and other workers will keep going down. We are taking it on the chin for workers all over." - a striking Hostess employee

"Some companies need to make cuts to say alive. Firms don't always have a choice about how to run themselves and closings and concessions are part of business," said Kurtz. ""You can't just have a visceral reaction. Both sides need to be involved in a thoughtful process." - Dave Kurtz, a partner in the Edwards Wildman's Labor & Employment Group.

"And workers are saying to companies, 'why do we have to take cuts when other parts of your business, like suppliers are not. Why is it on our backs?'" - Jim Matthews, a partner at Fox Rothschild and co-chair of the firm's Labor and Employment practice

Have you heard of many cuts in the executive suite?  How many $4,000/hour executives are willing to cut their pay by even ten percent.  That cut would provide twenty $10/hour jobs (assuming that overhead costs may match direct pay).

The above quotes are from "Beyond Twinkies: Why More Workers Are Striking", Mark Koba, CNBC, 2012-11-16.

The article also has a link to an interview with Colby Harris, a protesting Wal-Mart employee in Dallas.

See also "So you want to join a union", Part I and Part II.

Quote of the day: watering the weeds and pulling the flowers

In "The Dow has recovered, but what about 'The Doug?'" 2012-09-03, Jim Hightower wrote:

"[T]oday's corporate and political leaders are wretchedly-bad gardeners – by tending to the moneyed elites and ignoring America's workaday majority, they're watering the weeds and pulling the flowers. Where's that going to lead us?"

One of the ways that this is done is taxing dividends at a lower rate than wages.  If we tax dividends at a lower rate to encourage investment, do we discourage work by taxing labor at a higher rate?  Would anybody get dividends if there weren't people to do the work to generate those dividends?

Maybe I shouldn't complain. I am retired and derive a portion of my income from dividends and capital gains.  But how hard am I working to do that?  As for the dividends, my work consists either of having requested reinvestment by a financial institution or by typing a request to have accumulated dividends transferred to my bank account.

Sure, I'd like to pay less taxes, wouldn't we all?  But if we don't pay taxes, would we have any kind of civil society?

Humpty Dumpty and Free Markets

The Coffee Party on Facebook had a link to a CNN interview of Christine O'Donnell by Soledad O'Brien.  O'Donnell claims the Obama has made Marxist remarks.  O'Brien did call her on using the term Marxist but didn't really follow through.  Many respondents to the Coffee Party page were disappointed that O'Brien didn't press for specifics.

One commenter mentioned that the Wealth of Nations wasn't published when the Declaration of Indendence was written, and so the signers couldn't include Adam Smith's thoughts.

I added the following to the comments:

Words! Words!  As Humpty Dumpty said in Lewis Carroll's "Through the Looking Glass": 'When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean — neither more nor less.'

Worse than the misuse of the words "Marxism" and "Socialism" is the misuse of the word "Free Market".

The classical definition of a free market is:

1. Many buyers and sellers
2. Buyers and sellers are free to enter and leave the market at any time.
3. Buyers and sellers have all the information they need to make a satisfactory transaction.
4. All the costs are covered in the transaction, that is, no externalities.

Interestingly, it is "free marketers" who don't want true free markets.

We have more and more consolidations into larger and larger corporations.

Are you free to leave the health care market when your child is sick?

GMO producers and others don't want buyers to know what's in their products.

Who is covering the costs of pollution and nuclear waste?

Adam Smith's "Wealth of Nations" was first published in 1776.  Maybe the signers of the Declaration of Independence hadn't received copies yet, but I'm sure that many of the signers of the Constitution had read it by 1787.

Those who love to quote the "invisible hand" should read the other 500+ pages, including "When the regulation, therefore, is in favour of the workmen, it is always just and equitable; but it is sometimes
otherwise when in favour of the masters."

Quote of the day - labor and capital

‎"Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration."

- Abraham Lincoln, annual message to Congress, Dec. 3, 1861