RE: Minimum wages, competition and 200 years of success.

[Kush Khatri <free_voice@yahoo.com>]

It was nice to get some other perspectives on this issue--other than
the one based on economic theory.  But Charudatt must not have read
our big brother's admonition to me not to use colloquialism on this
list. But since there has been no official censure from him to
Charudatt's use of "kick in the butt" it look likes that "butt" has
not offended "ladies" and "old civil servants" on this list. (I was
told that my use of a common colloquilism was likely to offend this
group).  Well I guess "butt" passes the test and I am assuming has
been accepted by our controller and moderator.  Now that the language
issue has been partially setteled at least, let's move on to the
subject under discussion.

>From the theory perspective, Mr. Sabhlok is probably right that a
minimum wage "justification" cannot be proven or set.   However, and
fortunately, as Charudatt and Timali Sen pointed out, in the real
world issues are not decided from the economic theory alone.  Thank
goodness for that or econimists would be kings! Whatever the theories
might be we should never abandon commonsense.  Furthermore, history
cannot be ignored either.  History reveals how the monied or the
"industrialist" class have behaved ever since the industrial
revolution.  We will have plenty of opportunity to put forward very
many other instances, other than Mr. Ford paying higer wages to
produce his model T--examples abound of blatant exploitation, inhuman
treatment and pure greed.

Mr. Sabhlok I do not know where you come up with this competitive
market thing.  Yes, in theory there is such a thing as a competitive
market.  In practice, however, a competitive market cannot exist or
function optimally without the assistance of a neutral party which in
most cases happens to be the government.  In other words, without good
government, it is impossible to have a truly "competitive" market.
But Mr. Sabhlok's assertions seem to be based on the premise that
laisez faire is alive and thriving in America. The fact is that laisez
faire failed miserably in the 1920s followed by the great depression. 
"Free enterprise" in that sense is dead.
The lessons that Americans quickly learned were that economic activity
left on its own fails to produce optimum competitive markets, the one
Mr. Sabhlok keeps harping about.  
In fact, the tendency of businesses is the opposite: to undercut
competition, establish oligarchies and worse establish monopolies. 
That is why America has strong anti-trust (anti-monopoly) laws,
price-fixing laws and price gouging laws.  Not to mention numerous
other agecencies like the SEC and the FTC, so that at least some
competition can be maintained. Despite all this, in my view, the US
government fails in being a good refree.
Nevertheless the point is without good, effective government there
will be no competition.  Karl Marx did not take this fact into
consideration.  Marx and his followers did not take into account the
fact that the State could be an overseer and a fair regulator rather
than a controller and an owner of the means of production.
To overlook the role of government in the success of America (which
Mr. Sabhlok lauds) is to overlook the reality of the market place and
the real world.

Now vis-a-vis India:  I have always maintained that in India the
government is the number one problem.  GOI has always seen itself as
the controller and not the regulator.  Mr. Sabhlok is right that they
have done this behind the facade of socialism.  Socialism in India is
a facade and a fraud because as a controller the government fails to
create conditions for competition.  In fact, under the famous
licensing system, the Government of India (GOI) sold monopolies to the
avaricious seths and lalas, who willingly bought into the system.  For
the politicians and the bureaucrats selling of licenses provided a
means to hoard illegal wealth, and for the monopolists their
monopolies proved a goldmine.  The results for India, however, were
disastrous.  Indian businesses never had the incentive to improve
quality or productivity (worker wages and working conditions therefore
could not improve).  When the Soviet Empire fell, the Indian
government, to save face and an impending bankruptcy, quickly invented
another label called "liberalization". I have never been fooled by the
sheningans of liberalization.  Deep down there is no change in the
culture and modus operandi of the GOI.  The politicians have run out
of monopolies, so now they have started selling whatever they can to
whoever they can, as long as they and the bureaucrats involved can get
a cut in the deal.  Is this "liberalization?"  The control mentality
persists as does corruption.
A corrupt government has no desire to (1) produce a competitive
market, and (2) money that should go to improve the quality of life
for all, is pocketed by the few in the system.  That is why problems
of infrastructure, public health, education, environment persist
because government is simply not doing what it ought to.
Therefore, the premise that private effort alone can solve all
problems afflicting India is false.
Can India have good government? Is it possible to reform a culture of
bribery? Absolutely.  How can that be done will, hopefully, be
discussed as we go on.  Sorry for this rather long note.  I hope I did
not offend any ladies and civil servants on this list.  I was tempted
to say that with genuine reforms India could kick butt. But instead I
have used "dispassionate" language as directed by the controller and
moderator.
Regards to all.
KUSH KHATRI, DC

---Charudatt <charu@iced.com> wrote:
> Speaking for myself, besides being busy,  like to take some time to
formulate my thoughts. Your writings do provide a kick in the butt for
me to think about this stuff more clearly but it doesn't come as fast
> and clear since I haven't focused on this stuff for a while, and
you've been writing this book on the subject ;-).
OK, here are some thoughts in response to your minimum wage proposals:
Sanjeev Sabhlok[SMTP:sabhlok@almaak.usc.edu]  wrote:

> 	Lessons for us:
> 
> 	a)	Keep minium wages to a low level, if it is necessary to have
them at all.
> 
> I think it is a good idea (at this stage at least) to separate a
policy stands from our perceptions of practicality of implementation.
Thus this minimum wage question to me is not whether we believe it is
easy (or
> impossible) to implement a minimum wage. I think there are 2
questions here- first, do we believe that everyone willing to work is
entitled to a fair wage? By fair I mean, a wage that reflects the
value of the
> service or goods created by this work. I think that this question
has to answered independently of the second question- how can we build
a society where everyone does get a fair wage.
> 
> IMO, it is counter-productive to questions on these issues in the
form "is this program/solution a good thing?" I would prefer to
analyze the underlying problems we're trying to solve first. In this
case, I surmise that minimum wages are instituted to prevent
exploitation of workers. If the prime purpose of an employer is to
maximize profits (not an unlikely
> scenario ;-), one way to do so might be to minimize wages. If the
employer has the power to do so e.g. is unchecked by powers equal or
larger than employer such as a representative government, a trade
union, an ndustry council, local competition for workers, or threats
of boycotts, the employer will pay less. An extreme example is slavery
in
> this country 150 years ago and other places more recently up to the 
present in Sudan or even India.
> 
> If we agree that we oppose exploitation of employees by employers,
as a matter of policy, then this policy should stand independent of
the difficulty of plementing it. I take the view that to take a stand,
however unlikely the chance of success at least plants the seed of
possibility. Failure to take a stand on injustice _guarantees_ that it
will continue.
> 
> Now to the specifics of a minimum wage. I believe that we should
have a  minimum wage since it represents the principle that people
will not be exploited by employers. That the implementation is
difficult or has
failed in the past is not a good argument against the justice it
represents. If we were to scrap reasonable laws because they are hard
to implement, we would have a strong argument for legalizing bribery-
after
all laws have been on the books forever and I don't see bribery
"withering away" any more than the state apparatus was supposed to do
so in a marxist utopia.
> 
> 	This is the only fool-proof long-term way to succeed. The US has
handily beaten India **even after independence** in per capita income
growth, and
it has kept up this performance over nearly 200 years. How can one
argue with such kind of success?
> I don't think this argument is meaningful. About the time India
became independent, most of the industrial world was in post WW2 ruin
and the US had 80% of the world's manufacturing capacity enabling a
huge export
> generated economic boom under a command economy that was a
continuation of the wartime government control. The US's continued
domination of the world's economy by a number of devices but I think
it is a stretch to
> credit this to some inherent merit of it's political system rather
than a combination of accidents of geography and history. That said I
don't think such broad comparisons ( e.g. US governance vs Indian
governance) make sense where the subject matter is so large that it is
beyond analysis. I do however see value in analysis of directly
comparable models e.g. financing of local governments in the US vs. in
India.
> 
A powerhouse of competition and creativity, is this USA, which has
attracted and continues to attract hordes of Indians (most of the
people on this list, for instance); people who abandon their dormant
and subsidy
(beggary)-riddled motherland in favor of the land where you can 'make
it' if only you compete hard enough.
> 
>  I doubt think this is less a decision over the way governments work
and more a case of going where the money is. It's nothing new.
Historically  most migrations are driven by search for (more) wealth
and resources.
> A manifesto cannot be built without participation and debate. I
thought we were supposed to tap into each other's brains and come out
with points and ideas. So, please become somewhat more active ...
> Good point. 
> 
> -Charu
> 
> 
> 
> 
> 





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