Thursday, October 28, 2010

The Proof’s in the Pudding/Results – Socialism Simply CANNOT Work.....

We’ve seen the failure of the Command Economies of the former USSR and Mao’s China, and today we’re seeing the failure of big government, Keynesian economic policies and the vaunted "Public/Private Partnership" called Corporatism.

Sad economic experience has shown us over and over and over again that, as well-intentioned as they may be, public sector/government workers can’t grow food, produce clothing, cars, housing, etc, at even half the efficiency of the private sector...because the private sector is CONSUMER-driven (focused on benefiting the customer), while the public sector is worker-driven (focused on benefiting the worker)...and THAT is why the command/government-run economy CANNOT work.

It’s not the workers fault, it’s the fault of the orientation of each system. The most motivated private sector worker would probably become a “me-first”, “pay me more, for doing less” public sector worker if he/she wound up working for the government, where there are no incentives for those who work harder and smarter and work isn't anchored to productivity and generating wealth.

And yes, under the right conditions an unmotivated public sector worker could become a highly motivated private sector worker, if given both the motivating incentives and the fear of losing one’s job should you fail to produce, but all too often we see many potentially good workers debilitated by the “worker-driven ethos” of the public sector.

Of course, today in America, as in most of the West, we have a “private sector” that is so tethered to and partnered with government that this semi- or pseudo-private sector has adopted most of that public sector ethos and that is the disaster we're seeing all around us today.

Commerce is merely another term for a mutually beneficial exchange, generally a sum of money/currency in exchange for a given product or service. Commerce is predicated on buyer and seller being able to come to a consensus or “meeting of the minds” in regards to things like quality and price.

Ideally, every customer would like goods of the highest quality at the lowest possible price (approaching zero) and likewise, the merchant or seller wants to get the highest quality price for the least quality (cheapest to produce) goods and services. The same sort of dynamic goes on when each of us looks to buy and sell a buyer, we want the most (or highest quality) house at the lowest possible price, while as seller, we want the reverse, we want the highest possible price for our home regardless of its relative quality or value.

In that regard and for that reason, every would-be worker is a salesperson of an inanimate commodity (his skills or labors) and each job, or skill has its own “optimum price”, the price at which the most exchanges will take place, sustaining consumer demand and maintaining an optimum profitability for both the worker and the entity he/she works with/for producing specific goods and/or services.

As an example, if a farmer grows peas, for instance and can sell 100% of his peas at 68-cents/pound, when he pays his field workers (pea-pickers) $5/hour, or 92% of his peas at 88-cents/pound when his workers are paid $6/hour, or 80% of his peas at $1.04/pound when his workers are paid $7/hour and 64% of his peas at $1.27/pound when his workers are paid $8/hour...his workers are really WORTH somewhere around $5/hour as that’s the optimal price of their labor that’s most beneficial to their primary customer (the farmer) and his customers (all those pea consumers).

In that light ANYTHING that raises the cost of that farm labor (and subsequently the price of peas, and thereby decreasing demand for those peas) is “BAD”.

It’s bad for the farmer (because fewer of his crops get sold), it’s bad for the pea consumers (as the price of peas and dinner goes UP)...and ultimately its bad for all those pea-pickers who’ll soon see a decrease in the number of pea-picker jobs, as pea production falls in response to that falling demand.

That should illustrate why every worker is merely a salesman of an inanimate commodity called labor (the sum total of the skills and effort that worker can bring to the job).

Given that, it follows that no worker has a “right” to any job or any set salary UNLESS that’s agreed upon as “optimal” by those buying that labor so that they can maximize the sales of the end product that they provide.

A worker selling a commodity called skills/labor can no more demand that his commodity be bought at a given price over the duration of his/her choosing, any more than the local merchant demand that his customers buy all those peas at whatever price they’re being sold at. In each case the customer (the pea-shopper in the store and the labor consuming business) has a right to “refuse to buy” at the elevated price.

If consumers didn’t have that freedom to use their money as they see fit, then even jobs that no longer need doing would be protected by unilateral “worker demand”!

For instance, let’s say that Jay is an expert saddle maker...his father was an expert saddle maker and so was his grandfather, but Jay (unfortunately for him) lives around the turn of the last century, when cars are quickly replacing horse-driven transportation.

Jay is working for the Acme Saddle Company, which has been paying top dollar for saddle makers (the equivalent of $110,000/year in today’s currency), but cars are eroding demand...and government has piled on lots of new “safety regulations for saddles”...and lots of “workplace safety” regulations, as well, so even IF cars weren’t dampening demand, all those costly regulations have combined to DEVALUE Jay’s commodity – his expertise in saddle making.

How so?

Because again, there is an optimal cost to Jay’s labor at which the amount of saddles produced by the Acme Saddle Company can be sold. As the cost of Jay’s commodity (his skills/labors) rises, either through his own salary demands or via “outside influences” (ie. government regulations, taxes, etc.), the demand for what his labors produce diminishes. That means the Acme Saddle Company needs less saddle that case it sucks to be Jay!

But while the Acme Saddle Company has every right to adjust to changing market conditions (lower demand due to competition and innovation, added costs from government, added worker demands, etc), poor Jay DOES NOT have any “right” to a job. Jay does not have any more “right” to demand that the Acme Saddle Company pay him whatever salary he needs to survive, whether they need his labors or not, any more than our local retailers can force us to buy things we neither want nor need.

Jay’s employment, like that of all workers is contingent upon him producing more value to the entity purchasing his labor, so that the final product that entity sells can be sold at a price that keeps both them in business and completely sells out their inventory.

IF Jay thinks of himself as “a victim of the Acme Saddle Company” or worse yet, “a co-owner” he’s going to wind up very unhappy and unemployed man.

IF however, he realizes that he’s really an independent seller of an inanimate commodity (his skills/labors), then he’ll quickly realize that just as the business he works for must please its customers by delivering the best value at the lowest possible price...he must do the same for the entity he works for. Jay must find ways to “work smarter” to help innovate new saddle ideas, etc., to keep Acme profitable...that’s IF he wants the saddle making business to stay viable and he wants to continue to find work there.

In other words, as competition erodes Acme Saddle Company’s market share and government adds costs to his existing labor costs, Acme will have to shed cost to compete (actually, to even stay solvent), so they’ll trim the workforce, reduce work-hours AND pay!

Other than just docilely accepting all that, Jay’s got few other choices. One would be learning new skills so he can get a job making those new fangled cars, another would be to innovate the saddle to such a degree that sales don’t fall off...OR perhaps going into business for himself making vintage saddles, BUT one thing’s for sure, Acme has no obligation to Jay once their exchange is no longer mutually beneficial.

The consumer-driven economy is what provides intrinsic value to any given work. It’s also why some skills (patent law, for instance) are valued very highly and others (like agricultural work, as one example) are valued very cheaply.

But that’s not, in and of itself, a bad thing and Jay’s way of looking at things is the key. If he sees himself as a victim of malicious “others” he’ll seethe with an indignant rage that’ll ultimately sap and distract his mental strength and acumen and erode his natural ability to innovate.

If, however, he sees how markets work and how changes in competition and other outside factors can change his own viability, he’ll be more involved to make sure government doesn’t overstep its bounds and he’ll also be freer to innovate and create and see new opportunities when old ones disappear.

Once a person understands this dynamic...everything else about the employer/employee dynamic falls easily into place.


Skunkfeathers said...

Ah, but the libtards keep believing that THEY -- and only THEY -- can shape and control human behavior, and through dumbing down and establishing a firmly-controlled 'dependency' class, they can make humans in this society be, do, think and act as their failed ideology requires.

And if they could get every last human in this society to sign on...that signals the death knell of this society, and the end of the Founding Fathers' grand experiment with freedom and liberty, as well as their recognition that the human spirit cannot be stifled.

Good thing for the Founding Fathers that the great majority of Americans -- while being fooled now and again -- resist the demands to submit to command and control, and will never accept giving up freedom and liberty to the fails-everytime socialist-progressive-communist model.

Seane-Anna said...

Hey JMK! Good post! A succinct, layman's explanation of way socialism fails and free markets succeed. And if the election today is any indication, the American people get it. Let's just hope the people we've sent to Congress get it, too.

Seane-Anna said...

Hey JMK! Yes, I'm feeling better. Finished chemo on October 6, which was a HUGE relief. Now I'm doing radiation and should finish that by December 20, then I'll be done with all my treatments, just in time for Christmas. Couldn't ask for a better gift! Have a good one tomorrow and thanks for stopping by SB.

Joe said...

There is a proverbial fly in the proverbial ointment: government workers, who produce nothing of benefit to the economy, earn more than their private counterparts.

That needs to stop, as it is bringing us a plethora of unmotivated "employees."

Anonymous said...

It is amazing to me, that after the thumping that the democrats all over the country got, their leadership still refuses to accept blame for what happened. I say, keep up the idiocy. It will only serve to help you lose in the next election.

A great post sir. Glad I read it.

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