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RE: Minimum wages, competition and 200 years of success.
A little more on minimum wages, competition, and the role of govt.
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This is in reponse to Kush's contribution:
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.
a) Before one can make the poor rich, one must have money. Money,
unfortunately, can only be created by the production of goods
and services. Workers are usually semi-literate, semi-skilled
and even unskilled folk who cannot produce wealth on their own
no matter what you give them. You and I (at least I) are workers.
We cannot produce wealth no matter what. The process of
production of wealth requires special guts and special kind
of a brain. That of a entrepreneur and industrialist.
Please do not rebel against industrialists.
Your and mine existence in this country called USA
is being supported ONLY by the work of people like Edison,
Ford, Bill Gates, and others. Cut out industry in this country
and it becomes poor. The moment it becomes poor, people will
start blaming all their ills to "brown" immigrants and others,
and all of us will get kicked out, back to the streets of India.
b) If anyone can call an average US worker today
as being "exploited" then he/she must consider the case
of slaves (even India had them), feudal exploitation of virtually
landless workers (and their families), and the killing of
millions of innocent workers in USSR, China, Vietnam, North
Korea, and other places. The average US worker lives a much
higher quality of life than our Cabinet Secretary in India,
than our Supreme Court Chief Justice, and even comes close to
the lifestyle of a clerk in the Delhi Development Authority.
c) There is nothing in the world called a free lunch. Therefore
workers have to produce more than what they get paid for. That is
the fundamental law of business. The person who creates a plant
or factory takes immense risk. He/ she borrows huge amounts of
money, spends enormous time and effort bringing the raw materials
together, then arranges to sell his goods, then gets his industry
passed by all kinds of inspectors, then keeps his accounts,
then pays the taxes, and then at the end of it he could
have the fate of Compaq, which sold $5 billion worth of goods
in the last three months and made a profit of only $14 million.
The businessman could often have done much better by simply
putting his money in the bank and going to sleep. As I mentioned
above, you and I (at least I) are mere ordinary workers. We don't
have the guts to set up an industry. Then why do we criticize
the industrialist? Please, please, first of all look around you.
Almost all the wealth in the USA and in the West has been
created by industrialists.
> 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.
Please forgive me, but if you were to rank the following nations,
which ones would you call as being closest to free market economy
and perfectly competitive economy?
USSR China N. Korea S.Korea Singapore USA Japan
Which of these has succeed in showing outstanding results
in the past 100 years?
If you remember, in the "Preamble" to the Manifesto, I had
stated clearly that pure capitalism is not perfect. I have
nowhere stated that you do not need to check monopoly power,
or that oligopolies are an ideal solution to the growth problem.
I thought we were intersted in developing an ideal society
and economy for India. Do we want a 1.7% per capita growth
of income for 30 years since 1960, or do we want 7% growth
that India should have achieved and can easily achieve?
We want to be like Japan, S.Korea, Singapore, USA, and even
our arch-enemy, England. Not like our blood brother, USSR.
> 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.
If you would be more specific, we could talk. For example,
village roads, highways, donation of property to private
university efforts, and more. These are things called
public goods. I have neither discussed these things here,
nor do I deny the role of govt. in these things. I
thought we were trying to artificially strangle the
concept of a market system by imposing minium wages. That's
what I dispute, very seriously.
I have much material on the justifiable role of govt. in
my book whose preliminary version is on the web. I do
not want to bring in too many points from that here. But
I will definitely propose some points, now that you mention it.
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.
Precisely my own thinking, and points, Kush. Why do we
seem to be disagreeing somewhere, then?
You want competition? I want competition.
You want to control monopoly? I want to control monopoly.
You want good government? I want good government.
You want real liberalization? I want real liberalization.
What is it you want, then, that I don't want?
> 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.
Whoa!! What was that?
You see the problems as arising from a corrupt government?
And so you want more government?
Again, the points you raised, viz., infrastructure,
public health, environment, etc., are the ones where
I fully agree that govt. has a role. But I was only
rebelling against minimum wages, not against
government itself!
The key point I have been making (and you seem to agree),
is that corruption starts from socialistic
policies, and that we can only cure it by minimizing
(not eliminating) government.
Minimizing government means transferring a lot of work
back to the people (also known in political jargon as
the private sector). Let the people set up their
own universities (i.e., privatize education) like they
did in the USA. The Ivy league is mostly private. All
without government funds. The industry (including
defence industry) here is run by the people. Science is
supported by ... guess whom? Government!
So, we want to let government fund basic research (since
industry will never do that), run primary and secondary
education, and do things which it should. But return
everything else (including the manufacture of clothes)
back to the people. That is called providing good
government, not imposing minimum wage laws (Am I persistent!).
> 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.
We don't have to worry about corruption.
Indians are not genetically born with corrupt genes.
Believe me, there are even IAS officers and others who
are completely free of corruption (Ripley might not
believe it, so bad is the image of IAS officers!). I offer
you a case in point by "flaunting" my poverty to you.
But the fact remains that I have seen all around me, tons
and tons of corruption. All arising from great power given
over our people (economy) by our foolish legislators who
went and legislated on things they had no business to do,
such as nationalizing our banks, textile industries, etc.,
etc. Why should an IAS officer produce silk cloth? Are
we cloth merchants? But unfortunately, that is what many
IAS officers in Assam do! And others in India go about
producing virtually everything you can think of. What!?
Are we so smart (IAS officers) that with our B.Sc. degrees
(that is what is required to enter this job), we can
outperform highly skilled private sector engineers and
managers?
The moment you remove socialism, you would have
** almost entirely **, and instantaneously, eliminated
corruption.
Thanks for your contribution. I hope we now agree on more things than we
seemed to agree at the beginning, and that we can proceed by specifying
more of the specific tasks that need to be done. The nitty gritty of
getting rid of socialism and controls over the people.
The debate over minimum wages was fought vigourously to defend a
principle, of non-interference in the market unless absolutely necessary.
Economics defends intervention in monopolies, and even in oligopolies.
Not in the case of the wage market. Not in the case of banks by
nationalizing them. Not in the case of cloth industry by giving it to
English literature graduates (IAS officers) to run.
The West has gone through the debates we are having on this list, about a
hundred and fifty years ago. They then adopted the staunch principle of
supporting competition and free markets. Modification, in minor ways, here
and there, of the free market principle is not the same as throwing out
the market economy.
Did I not offer the compromise earlier? Have a **very low** minimum wage
if you think you cannot persuade people against it? I am willing to
negotiate and compromise with people and move ahead.
The principle of non-interference in markets has been defended, and
largely won (I think!). The principle of promoting liberalization and
competition in a real sense has been established. The principle of
returning nationalized businesses to the people has been established. The
principle of establishing large numbers of private universities (with no
limits on fees) has been established. Many other things were established
in the previous weeks, based on Utkarsh's points.
We are now fully ready, I think, to move ahead.
Sanjeev