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War of the Whales


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Posted on May 31, 2010
Flickr / Kai Henry (CC-BY)

We already recognize that teamwork is fundamental to just about every product and service sold, so why aren’t we paid accordingly?

By Moshe Adler

Bon Jovi charges $1,875 for a front row seat and fan Jim Leaman bought a ticket. “I have money,” Leaman told The New York Times, “and I don’t care if it costs $100 or $1,000.” But is it his money?

Leaman apparently makes his money from a propane distribution company that he owns. Of course, Leaman does not produce propane. By himself, he most likely does not produce anything else either. Such a company no doubt employs workers who fill the propane bottles, phone operators who take orders, technicians who maintain the equipment, forklift operators who load the bottles on trucks, drivers who distribute them to customers, and a manager who coordinates these activities. 

The bottling and distribution of propane is a team effort, as is the production of almost everything else. A bus driver and a bus may deliver 40 passengers, but the driver without the bus would deliver no passengers, and neither would the bus without the driver. A surgeon operates on a patient who was prepped for surgery by others; she uses tools that were sterilized and are handed to her by nurses who also operate machines without which the surgery would not have been possible. The team that produces a high-rise is bigger still. 

How is the income that a team generates divided among the members? In 1776, Adam Smith explained that the factor determining how income is shared is bargaining power, and that this power consists of the ability of each side to hold out for a better deal and to harness the support of the government. On both accounts the employers are stronger: First, they are richer, and, therefore, “in all such disputes, the masters can hold out much longer.” But the government also sides with them: “The masters ... never cease to call aloud for the assistance of the civil magistrate, and the rigorous execution of those laws which have been enacted with so much severity against [the unions] of servants, labourers, and journeymen.” A third factor that determines bargaining power is, of course, the availability of replacement workers. When several workers compete for the same job, and these workers are not protected either by a minimum wage law or a union, masters once again have the upper hand.

If the owner of a business takes for himself a large enough share of the income of the team that he can afford $1,875 concert tickets without thinking twice, isn’t it fair to ask whether the money is justly his? In the latter part of the 19th century, workers raised this very question. The government responded with violence: Workers were killed and labor leaders hanged—the Haymarket Massacre was one of those events. John Bates Clark, a Columbia University economics professor, responded by denying the validity of the question itself. Had the question been valid, Clark explained, workers would have been justified in rebelling:

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But the question was not valid, Clark argued, because production is not carried out by teams, and power does not determine rates of pay.

If not by teams, how is production carried out, then? Each worker and each machine produces all by itself a small quantity of product, Clark argued. An employer adds workers one by one, each time comparing the value of the product of the additional worker to the wage. The process of adding workers stops when the value of the additional product is just the same as the additional wage that this worker will earn. Since workers are interchangeable, each worker can be regarded as the last worker hired, and hence each worker gets paid the value of what she adds to production.

The only problem with this description of the production process is reality. A bus and its driver produce an income of $100,000, and the wage of the bus driver is $25,000. Is it because the driver without the bus transported 10 passengers and the bus without the driver transported the other 30? Production is carried out by teams, and this is why individual contributions, of either workers or machines, cannot be measured.

Finding an example of a production process that does not involve a team is nearly impossible. Every restaurant, grocery store or construction site is an example of team production. In the face of this obvious reality, how is it possible that generations of economists have been brainwashed into believing that each person is paid “what she is worth”? It has taken the current Great Recession to shake the hold that this view has had on both academic and public discourse about how wages and executive compensation are determined. The opportunity is now here to have theories that are based on the real world.

In reality, production is carried out by teams, and the income that this production generates should be divided among the members fairly. Two laws would facilitate this greatly: One would set a ratio between the highest and lowest rate of pay in any firm or corporation, and the other would set a ratio between the pay of labor and the pay of the owners of the corporations who provides labor the machines and structures that it works with.

We need laws that help us fairly divide what we produce as teams.

This article is based on Moshe Adler’s book “Economics for the Rest of Us: Debunking the Science that Makes Life Dismal” (The New Press). The book just won an IPPY (Independent Publisher Book Awards) Gold Medal.


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By Inherit The Wind, June 3, 2010 at 10:29 am Link to this comment

Anarcissie, June 3 at 2:21 pm #

But, ITW, the property laws, the class system, or some other part of the general arrangement of things, may in effect deny a large number of people the opportunity to fend for themselves, to, in your words, pick a job off the tree.  These days, if you go out in the woods to live by digging up roots, someone will arrest you for trespassing.

There is a similar problem with housing.  Destitute persons can easily construct shelters in parks, on vacant lots, under bridges, and so forth, but the better-off won’t let them.  So you could argue that these owe those something for depriving them of that opportunity.

********************************************

These things are certainly true and I fully agree they are a problem and represent inequities that should be addressed.

But a squatter in a public park or under a bridge can make the claim that as a citizen, he’s entitled to use it for temporary shelter. Yet squatting on private property (like in my back yard) is going to get him run off, as it should.

BUT THAT DOES NOT CREATE A SINGLE JOB!

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By Fat Freddy, June 3, 2010 at 10:29 am Link to this comment

Anarcissie,

I would say that Keynesianism is another means of protecting fraudulent banking practices. Fractional reserve banking is not a function of free market Capitalism. It is fraudulent by nature. Banks are allowed to loan what is not theirs to loan, and what they do not have. It is fraudulent to loan something which is not yours. Even children understand that concept. It is that simple. If you deposit $100 into a demand deposit account, like a savings account, the bank is legally allowed to loan $90 of it. All banks are insolvent. Every single one. That is the root cause of almost all of our market ills. It is also responsible for inflation (debasement of the currency), and the transfer of wealth. Most people, including mainstream economists, do not understand this. Many investors do not understand this.

Did you know that economics students, even at the PhD level, are not taught finance? Only 6% of high school students are taught personal finance, forget about business or banking finance. We are an ignorant society, especially when it comes to money.

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By Anarcissie, June 3, 2010 at 10:21 am Link to this comment

But, ITW, the property laws, the class system, or some other part of the general arrangement of things, may in effect deny a large number of people the opportunity to fend for themselves, to, in your words, pick a job off the tree.  These days, if you go out in the woods to live by digging up roots, someone will arrest you for trespassing.

There is a similar problem with housing.  Destitute persons can easily construct shelters in parks, on vacant lots, under bridges, and so forth, but the better-off won’t let them.  So you could argue that these owe those something for depriving them of that opportunity.

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By Inherit The Wind, June 3, 2010 at 10:11 am Link to this comment

Society has no right to withhold a job from anyone.  Work is the primary, essential, inescapable condition of staying alive on Earth for creatures cursed with having stomachs to feed.  To withhold work is to murder people.

Economics 101 is this: If bear no pickee berries then bear no eatee berries, if bear no catchee fish then bear no eatee fish, if bird no catchee worms then bird no eatee worms.  Food does not just fall into our mouths while we lay about.
************************************

These two concepts are contradictory.  If not, go pick the job off the tree you think it grows on.

A “job” implicitly defines a task that needs to be done. Without that need “job” is a meaningless word.
A task to be done is something that adds value, whether it’s rendering a waste disposal device sanitary and safe (ie, scrubbing a toilet) or creating a sophisticated new piece of software to manage a communication satellite.  There has to be a NEED, and that can be expressed by the VALUE it has to another person.

Anyone selling a house frequently thinks “My house is worth more than this”.  No, it’s not. It’s not worth one cent more than the MOST somebody is willing to pay for it. 

That’s what competitive markets are all about.  It’s why labor unions are SO important for workers: They give bargaining power so a small actor can compete with big ones.

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By Anarcissie, June 3, 2010 at 8:53 am Link to this comment

Fat Freddy, June 3 at 7:37 am:
‘Anarcissie: “But we can’t stop there.  We have to ask why that expansion of easy credit was thought desirable, even necessary, given its obvious risks.”

I believe I answered that question on another thread. According to Keynesian Theory, expansion, or inflation, of the money supply fuels employment during a period of recession. Full, or close to full, employment is desirable for obvious reasons. However, once the level of desired employment is reached, the money supply must be scaled back, to avoid investment bubbles. However, cutting back on the money supply could cause another recession, and there aren’t any politicians who want to be responsible for a recession. ...’

Exactly.  Keynesianism is sold as a scheme to make capitalism kinder and gentler by evening out the business cycle.  But it’s actually needed to drive the economy closer to the edge.  Like any dynamic system with plenty of feedback paths, a capitalist economy is open to a variety of breakdown scenarios.  In a pre-Keynesian system, smart investors took this into consideration; but once you remove some of the risk, the investors took less consideration.  It’s called homeostasis of risk—if you make things safer, people will take bigger chances.

So it turns out—skipping over several steps here—that a capitalist system can’t function without busts.  Probably, a fascist (what you call “socialist”) system can’t either.  Proggies don’t believe this yet.  The problem with Keynesianism is not its granularity or lack of subtlety, but the fact that people will inevitably drive it off the edge. 

By the way, I noticed you said credit was not money.  I think it is.  In fact, today there may not be any other kind.  Ever read W. F. Hummel?

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By Fat Freddy, June 3, 2010 at 7:06 am Link to this comment

Xavier Onassis

You have some strange views about what money is. Very simply put, money is a universally accepted means for the exchange of goods and services. Without money, humans would be forced to use a barter system for those exchanges. Credit is not money, and money is not capital.

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By Fat Freddy, June 3, 2010 at 6:16 am Link to this comment

Lilith

Social entitlement programs you speak of would by acceptable if they actually functioned the way that they were intended to; as a safety net. Unfortunately, they do not, and as long as the government controls them, they never will. Social programs garner votes and funding for politicians the same way that tax subsidies and deregulation do.

There are those that believe many of the New Deal programs actually extended the Depression. There was much more to the New Deal than just social programs. There were subsidies, price and wage controls, and rationing, also.

...the Roosevelt New Deal despite its many faults could not be described as fascist. But definitely the New Deal was corporatist. The architect for the initial New Deal program was General Hugh Johnson. Johnson had been the administrator of the military mobilization program for the U.S. under Woodrow Wilson during World War I. It was felt that he did a good job of managing the economy during that period and that is why he was given major responsibility for formulating an economic program to deal with the severe problems of the Depression. But between the end of World War I and 1933 Hugh Johnson had become an admirer of Mussolini’s National Corporatist system in Italy and he drew upon the Italian experience in formulating the New Deal. It should be noted that many elements of the early New Deal were later declared unconstitutional and abandoned, but some elements such as the National Labor Relations Act which promoted unionization of the American labor force are still in effect. One part of the New Deal was the development of the Tennessee River Valley under the public corporation called the Tennessee Valley Authority (TVA). Some of the New Dealer saw TVA as more than a public power enterprise. They hoped to make TVA a model for the creation of regional political units which would replace state governments. Their goal was not realized. The model for TVA was the river development schemes carried out in Spain in the 1920’s under the government of Miguel Primo de Rivera. Jose Antonio Primo de Rivera, the son of Miguel Primo de Rivera, was the founder of Franco’s National Syndicalism.

Corporatist regime typically promote large governmental projects such as TVA on the basis that they are too large to be funded by private enterprise. In Brazil the Vargas regime created many public enterprises such as in iron and steel production which it felt were needed but private enterprise declined to create. It also created an organized labor movement that came to control those public enterprises and turned them into overstaffed, inefficient drains on the public budget.

http://www.sjsu.edu/faculty/watkins/corporatism.htm

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By Fat Freddy, June 3, 2010 at 3:37 am Link to this comment

Anarcissie

But we can’t stop there.  We have to ask why that expansion of easy credit was thought desirable, even necessary, given its obvious risks.

I believe I answered that question on another thread. According to Keynesian Theory, expansion, or inflation, of the money supply fuels employment during a period of recession. Full, or close to full, employment is desirable for obvious reasons. However, once the level of desired employment is reached, the money supply must be scaled back, to avoid investment bubbles. However, cutting back on the money supply could cause another recession, and there aren’t any politicians who want to be responsible for a recession.

Any Socialistic style central planning of the economy (macro) is impossible. Human behavior can not be reduced to, or controlled by, a set of mathematical equations. Second, even if it could be, the numbers change too fast, and the effects of changes take too long. Not to mention, the difficulty in even being able to define what the actual numbers are. Define for me, CPI or PPI. What gets factored in, and what doesn’t?

The Federal Reserve bank and its activities were not dropped on us by the Martians.

Do I need to give you a history lesson on the Federal Reserve? After the Panic of 1907 (bank run) the American people were tricked into believing that a “lender of last resort” was desirable to prevent further bank insolvencies. But like I said, it all falls back on the fraudulent practice of fractional reserve banking. You have read “The Creature From Jekyll Island”, yes?

Perhaps this video will help:

http://www.youtube.com/watch?v=iYZM58dulPE

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By Fat Freddy, June 3, 2010 at 2:59 am Link to this comment

nemesis2010

First of all, I never meant to imply that free market capitalism is perfect. Markets are made up of people, and like people, markets occasionally fail to meet the demands of all of the people. Thing is, the same is true of Primitive, Mercantilist, Socialist and Communist systems. They all suck if your standard is perfection (which is what Capitalism is always compared to by statists of all stripes).

In the end, Free Markets at least stimulate private initiative, capture creativity and innovation, and grow real wealth. And note that we *all* agree that it is wise to subject them to reasonable regulation. In the vast majority of cases, however, “reasonable” regulation should have as light a touch as possible so as to avoid squashing individual initiative and realistic risk assessment.

What isn’t reasonable or intelligent is to propose alternatives to market solutions that share all of its weaknesses and that also kill initiative, creativity and the ability to generate real wealth.

For example, you might think that for all of its failures with respect to generating wealth for its people, the old Soviet Union might at least have been a wise steward of the environment. There has to be *some* win, right? But the fact is that the old Soviet Union had horrible environmental practices. Modern China has the same problem. And if you complain, you are subject to the arbitrary power of the state to shut you up.

Your “apples” analogy is false. Monopolies are not a function of free markets. Free and fair competition is a necessity in free markets. When the government takes over private enterprise, then you have a monopoly. Price and wage controls have historically led to the very shortages you speak of. Perhaps you can name me one monopoly that has existed in this country, for any extended period of time, that was not the result of direct governemnt intervention in the market?

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By Lilith, June 2, 2010 at 10:38 pm Link to this comment

All this theorizing back and forth is nice, but reality tends to make mincemeat out of theories, even the ones with best intentions or goals in mind.

I am starting a new and potentially wildly successful company in the next four months. In the next year or more I will have a small crew of employees to help run the business. I am looking forward to implementing the ideals and theories I have stated here, BUT I am perfectly aware and anticipate that the reality of the situation is going to rise up and bite me and my theories in places I had not anticipated. I will have to take what I learn, reassess, and move forward, over and over and over again to make it all work. What I will not change is my intent, nor my goals for fairness, equity, and mutual respect in the work place, as well as a sharing of the profits.

Most of the ideas stated here will work in the lab and on paper, reality is another whole issue.

There are choices we can make to implement, or force these ideas into action:

1) Government rules, regs, and enforcement. Never works as well as we thought or intended most of the time. Many nasty unforeseen side effects and outcomes.

2) Dictatorships.

3) Revolution, anarchy, the will of the mightiest wins the day.

All of these proposed actions deal with force. They are about blanketing an issue in the attempt to fix or cover it. In many situations, that type of action is necessary to bring about change and justice, but to force people to think and behave differently to each other through enforcement almost never works, or only for a very short time. The rise in racists and fascist rhetoric and sentiment in this country today is a perfect example of this

For the kinds of changes we are talking about here, the best way to implement them is two fold:

1) Get those in power (i.e. owners and CEOs of companies) to realize that it is in their best interest to do so, and will create a more sustainable business, thus longer term profits.

2) We, as a people, need to support those companies that do put these reforms into action. Our addiction to getting the Best Deal, no mater what is also at the heart of these problems. Consumers need to change as well. Many companies operate by both giving the customer what they want, and by manipulating the customer to want it. The customer also needs to take responsibility for this as well.

3) One thing we can demand is changing the educational system and how it is funded. I believe, as many scholars do, that we need to concentrate more on comprehension and critical thinking from early on, rather than on memorization for testing purposes.  A better education in those two skills will give the public a leg up and better choice skills in the market place and in life.

Funding right now is based on the wealth or lack of the local community. So much money is wasted on duplicating jobs district to district. The states need to pool the money gathered for education, and spend it evenly across the state. Yes, wealthier people will donate to their schools and give those schools a better advantage money wise. But that does not always equal a better education. Poorer schools with higher parent participation and support do better, so to do smaller classrooms and so forth. It takes money to create better schools, and right now our schools systems suffer from the same wealth inequities as the general public does when it comes to income.

The way schools are funded just supports and perpetuates the wealth inequities in the work place by denying the vast majority of the public a proper and good education.

I say let us start there.

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By Xavier Onassis, June 2, 2010 at 8:50 pm Link to this comment

• Either virtue is an empty name, or honor and recompense are due to the person who nobly enterprises. Horace.

It sounds stirring and wonderful, but it is just egotism and confusion. Sense tainted by emotionalism. The enterprise is for his gain, a sprat for a mackerel. We don’t need to get carried away and throw money at him in return for nothing. It is like being moved to give money to a fisherman for risking his bait. We don’t get sentimental like this about the workman’s risk, or the prospector’s risk. The credit for the fact that some people are more energetic, enterprising and active, aggressive and greedy, is due to nature, not the individual. The individual who enterprises only when there is recompense is not naturally enterprising. The natural range of energy is sufficient. It hardly helps us to impoverish ourselves to create artificial enterprisers surplus to requirements. Natural human energies are plenty sufficient to provide. We are not animals that need to hunt and eat all day.

• Men must have profits proportionable to their expense and hazard. David Hume.

Emotionally, it sounds so reasonable. The man is suffering, let him have profits proportionate. But the sentence is selfcontradictory. If he makes profits, where is his expense? And if he must be compensated, where is his risk? And what rational argument can justify taxing others to fund this pursuit of wealth? The gorilla beats his chest magnificently, and the others feel impelled to give him a banana. Instead of the modesty of the worker who risks and asks nothing, this one demands gifts when he comes home tired from the hunt. If a person opens a restaurant, and fails, as so many do, no one feels emotionally driven to compensate him. The pirate goes out and returns with plenty of Inca gold taken from Spanish pirates. Look at his fine house. Yes, he deserves it. He could have been killed.
You are poor? Ah, but you didn’t risk, you see.
A thief robs a house. You got a good haul? The owner had a gun? You could have got killed. You deserve it. If the owner hadn’t had a gun, I would have said you should give some of your haul back.

We have this inexplicable and quite mad generosity towards the rich. We swallow all their false arguments for the right to unlimited pay.
You worked 60 hours a week? My goodness, that is working almost as long as the person who grew this apple. You singlehandedly invented, designed, built, packaged, marketed, and distributed these millions of PCs? You singlehandedly created the demand for these things and thus created jobs for thousands of people? You risked US$5 million your parents gave you? You actually risked all that money? My hero! Here, take this US$50 billion. You worked 60 hours a week writing songs and performing them? Please accept this half billion with our sincerest thanks and our deep love. You swing a mean golfclub? Please, take this $100 million a year. You work 60 hours a week heading a talk show? Please, I must insist on you taking this half billion a year. You must be tired. You must keep your strength up for your wonderful work. You must have a very rare talent, because you are so wellpaid. Don’t worry. There’s plenty where that came from. I economised on protein for millions of children’s brains in Africa. I save 4cents a person by not spending on vitamin A to prevent 2 million people a year going blind. I’ve got a million new girls every year pulling in big money from sex slavery. I’ve got up to US$200,000 donations coming in from 99% of families in the world.

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By Xavier Onassis, June 2, 2010 at 8:16 pm Link to this comment

Ah, the voluntary argument, which is a chestnut of economics.  We’re happy to have an apple, but are we happier to buy an apple for the total-cost price of its production, or happier to buy it for that price marked up by an amount we have no way to know?

A contract or decision cannot be voluntary without full knowledge and choice. A choice to buy is always made with limited knowledge of the relevant facts. The buyer and the seller don’t know the exact amount of work that has gone into the product. The buyer doesn’t know the exact work-value of the product. No one does, no one can. The buyer doesn’t have the opportunity to buy at strictly fair price, ie, a price that pays for all work inputs, no more or less.

A voluntary situation would exist only where the buyer had in front of him the product at the price as in society, and also, beside it, the product at the exact work-value price. Necessarily, unavoidably, prices are different from costs (which are the work-value in them, including full and fair pay for principals, owners, no more or less). And that is legal theft. Unavoidable legal theft.

What is supposed to happen is that a working person’s wealth after a transaction is the same as it was before, just in different work-products. We invented job specialisation, which necessitated trade, and trade is to give out the specialised products we produce, and get the products we want. Trade shouldn’t leave us better off or worse off in work-value. The amount of work in the products we buy should be equal to the amount of work we do. Anything else is theft, that is, unilateral shift of wealth.

Even if people are perfectly honest and friendly with each other, with no desire to take advantage, to get advantage (to steal), they cannot avoid inequality between the work content of the two things exchanged. And that causes legal theft. Over many transactions, that has to cause a bell curve of net gains and losses from large gain to large loss. Just as tossing heads and tails has to result in strings of heads, and strings of tails, with longer strings rarer, but inevitable. So, ever-growing inequality (theft) is built in to transaction itself. The bell curve widens with every transaction.

And of course most people have lesser or greater will to take advantage of the ignorance of the exact work value of products to edge prices and costs in their favour. The only device we have had to minimize the inequality (theft) is caveat emptor, buyer beware. That is, beware of the will to take advantage, to try to steal, by puffing appearance of value, and increasing price above costs (including fair pay for the work of principals, owners). (Costs are ultimately all work costs. Only work produces wealth. Money only represents work-products, money only represents wealth creation by work. Work products, goods and services, are substantial wealth, money is symbolic wealth. No work means no work-products, means the money is worthless. To halve the workers is to halve the wealth. Double the amount of money with same work-products and every dollar buys half as much. All the money equals all the work equals all the work-products.)

As far as I know, no one has to-date seen this inequality built in to trade. And part of the reason is that people don’t want to see it. We find it easy to believe what we want to believe, and we want to believe in the equality of trade because we believe in the goodness of all levels of wealth. The universal idea is that more money is always better. But wealth contribution by work is limited, so unlimited fortune has to be theft. And theft is injury, and injury produces violence, ever-increasing violence, and violence gets to everyone, from richest to poorest, so more money is not always better.

Self-earned money is perfectly good, other-earned money is always bad. One injury produces an endless, ever-increasing vendetta back-and-forth of injury.

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By catmandoo, June 2, 2010 at 7:50 pm Link to this comment

This was a great short piece of writing, most
corporations and capitalists would like burned.

Of course people are not paid what they contribute. How
is moving money (someone else’s) on a computer and then
taking a cut because at the end of the day the accounts
were higher, fair? Wall Street goons do this everyday.
Is it they are smarter or better educated than anyone
else or just placed in a system, allowing them to take
unreasonable profits for themselves.

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By Xavier Onassis, June 2, 2010 at 7:45 pm Link to this comment

Full employment can be achieved at any time by having overtime pay kick in at reduced hours causing hiring of more people.  If productivity gains had been shared fairly amongst all the working people rather than concentrated in the hands of the fraction few, everyone would by now be working fewer hours and having more leisure time.  This is the natural and logical trajectory for the technologist human species.

Society has no right to withhold a job from anyone.  Work is the primary, essential, inescapable condition of staying alive on Earth for creatures cursed with having stomachs to feed.  To withhold work is to murder people.

Economics 101 is this: If bear no pickee berries then bear no eatee berries, if bear no catchee fish then bear no eatee fish, if bird no catchee worms then bird no eatee worms.  Food does not just fall into our mouths while we lay about.  It’s no different for humans than for bears and birds: the insertion of money between work and eat does nothing to change the fundamental situation humans are in.

Work is one of only 2 things: it is either the original work done for free by Mother Nature for all (like giving us our first birthright to land (humans cannot live floating in air) (this first birthright has been stolen off everyone sans compensation ever since all land became owned, which means future generations are forced to purchase their birthright from past generations) …and bees for pollination, and putting the gold and all minerals in the ground), or work is the sacrifice of an individual’s time and energies to working, to doing what creates wealth.  Proceed to the next inarguable fact that individual contribution/sacrifice is limited by unchallengeable decree of nature: we eat and sleep or we die – which leaves us limited hours possible to sacrifice to working.  Our human economic dystems – which came down to us cobbled together as much by default as by design, mind you - have tried mightily and desperately to ignore the perfectly natural inescapable limits on any individual’s maximum contribution to the pool of wealth and have therefore allowed limitless personal withdrawals from the finite pool.  Money is power: hence the human species is constantly manufacturing wealthpower giants who possess the ability to make history be what they decide it will be.  And the people continue to be cannonfoddered in their games.

This anti-natural and anti-rational practice of having everyone going for all they can get out of the pool of wealth – as opposed to having everyone going for getting out what they put in, no less and no more - is the unnoticed Mother of all human errors and the deepest taproot of 99% of all unnecessary human and planet suffering.

Fortunately this root error is easy to fix once humans get economic clarity.  There IS a fix, but only one that has no downside for 100% of people.  It can, since governments have been devoured by superwealth, only be achieved via education, via a word of mouth campaign for fairpay justice, a grassroots growth in awareness, maturity, seriousness and responsibility in the people.

Culture changes when ideas change

There is nothing but nothing that justifies or necessitates this mad practice, this genosadistic suicide accurately called unlimited personal fortunes capitalism.  No human has EVER been able to articulate one sound reason for allowing unlimited personal fortunes!  And yet, without realizing it, everyone has bovinely acquiesced to carrying this depraved encumbrance for no sensible, no detectable reason.  Crucial distinctions are not being made: between the Unlimited Personal Fortunes Capitalism we are engaging in and the Fairpay Justice Capitalism we could have…between self-earned wealth and other-earned wealth, between law and justice.  Our economic dystems are shot through with utter nonsense and myriad legal thefts.  Economics is now practically nothink but a list of attempted excuses for overpay-underpay.

I’ll leave the typo

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By Smoove, June 2, 2010 at 7:38 pm Link to this comment

1. What system will create enough wealth for 6.8 billion to live with adequate safe drinking water, shelter, medical, food, clothing, and education?
-I guess it would depend who decides how much is “adequate”? The individual? A central planner?  A combination of the two? Is it even possible given the concept of scarcity?
2. What do you propose we do with the millions of individuals, heads of households, etc. who simply cannot find work today?
- There is never a shortage of work. So we should ask ourselves what forces are preventing millions from finding work at their desired compensation level?
3. Where will the energy to produce in the very near future come from?
-Hell if I know. My best guess is where is currently comes from. But market forces can make even the best guesses look foolish.

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By Smoove, June 2, 2010 at 7:10 pm Link to this comment

nemesis,

But purchasing said apples still requires a voluntary transaction. Assuming he/she is an honest apple grower and is not illegally gaming the market, then someone purchased an apple at what they deemed to be a fair price. Both parties got what they wanted and are better off (individually), else why would they do the deal?
Now, what about the people that couldn’t buy an apple? Are they worse off? Well, if you say that then you don’t you also have to say the apple producer is also worse off because he/she didn’t have any extra apples to sell them?
Moreover, what about all the poor citrus farmers who have wonderful oranges to sell but can’t because the market only demands apples? Bless their poor little hearts,all they want to do is sell some fruit! Curse those finicky consumers!

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By Xavier Onassis, June 2, 2010 at 7:08 pm Link to this comment

“The rich get richer and the poor get poorer” means exactly this: The rich are getting more and more for a unit of work while the poor are getting less and less for a unit of work.

This ‘the rich get richer and the poor get poorer’ has been going on for a very long time, and therefore has gone a very long way. The richest are very, very rich indeed, the poor are very poor indeed. And money is power, so the richest are very, very powerful, tyrannical, and corrupt. And tyrannical means the rich do many terrible things, like murdering millions of people, more or less at will. And poverty is anger, and desperation, and violence.

The income or increase in fortune for a fortnight’s work ranges from US$1 billion to $1. That is, from a million times the average pay, to a thousandth of the average pay. A billion times as much for the same amount of work! A billionth as much for the same amount of work! I think people cannot really take that range in. It is beyond the general human powers of imagination. It is staggering. It is the mother of all facts about human existence.

Say that the range of pay for a fortnight’s work is from $1 to $1 billion and you have told the story of human existence. That fact is enough to deduce enormous violence, enormous suffering, enormous disorder, enormous waste of happiness. A perpetual storm of crisis and disaster, chaos and craziness. And yet, there is this powerful reluctance to even think of the rich as having money that belongs to others. Individual minds come to that conclusion, yes, but it makes no headway in the general thinking. And this reluctance is the cause we are wedded, welded to war. And war is escalating. War and weaponry have been escalating steadily for thousands of years, and war and weaponry have escalated very dramatically in the last century, and yet there is a lack of concern, a lack of a general search for answers. We ought to be desperately seeking the answer, the exit from this nightmare, and we are not.

At the same time, there must be consciousness of the injustice and theft, for it is that understanding that drives the violence and other disturbance. It is as obvious as obvious can be that there is enormous poverty and enormous wealth, and that this cannot be right, that is, that it must be theft, and the cause of most violence, and yet there is also at the same time a failure to grasp and face these obvious points.

Proper pay is what a person’s work would win them in a state of nature, plus an equal share of the benefits of division of labour. An equal share, since division of labour is a community effort, with equal contribution, so everyone should reap the benefits equally.  Pay justice is taking out of the social pool of work as much as you put in, as your work puts in. [We pool the workproducts because of division of labour, and trade is ideally the exchange of items of equal workvalue, in order to remix goods separated by division of labour, job specialisation, to get the mix of goods everyone wants and needs.] The variety of goods we take out is ideally of equal workvalue to the workproducts we produced in our job. Anything more or less than this is overpay or underpay, and overpay-underpay is unjust, causing tensions which escalate endlessly as people try to get justice and people tug to and fro, causing violence, war, crime, weaponry growth - which has grown for 3000 years - and brought us to superextreme pay injustice and danger, and corruption, tyranny, slavery, wageslavery, crisis, disorder, undemocracy, falling states - all our gigantic problems.

A just cap on personal fortunes beats all methods past, present, and future for preventing the circumventing of justice.  Thank you so much for your article, Mr. Adler, and please please see this remarkable page for a careful, crucial and thorough illumination of this Mother of all issues:
http://www.conceptualguerilla.com/?q=node/5194

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By Lilith, June 2, 2010 at 7:00 pm Link to this comment

To Smoove:
“You still need a mechanism that creates wealth if you want jobs, shelter, food, etc.”

You are correct. I thought that was a given. These programs (for the able bodied that is) are nothing more than a stop gap, a safety net, a way to keep things from degrading any further, and so forth. They are not meant to be a permanent solution. They must be coupled with other means of re-creating opportunities, abilities, and the supporting/rectification of those realities, such as child care and medical coverage, that help guaranty the success of such programs and so forth.

There are two problems with our country when it comes to this, oh so obvious, solution:

1) Follow through. We are big on making and/or breaking the safety nets, but we never fund the needed follow through. Or we sabotage these programs for political expediency and leave them as no longer needed wreckage afterward.

2) The Myth of Full Employment. There is a little known view or understanding of capitalism as we know it. The need for a permanently unemployed base of people in order to make capitalism not only run, but succeed as a viable economic plan. This group would be populated with either people who stay in that group forever, or just many people (a % of the whole population that is) who pass though unemployment and poverty more than once in their life time. Any politician telling you that they want and can provide full employment in our current form of economics is feeding you a myth for political gain.

I do not know very much about the Myth, nor how, when, or why, but more and more economist through the past 15 to 20 years have been speaking out about it. I would love to learn more, and see if full employment (or at least near full-employment) is indeed a myth. So far I have not seen anything that denies this.

The only solution or change I see that could work would mean cutting the world population down to 1/5 of what it is now, and to become vastly less dependent upon an energy draining dependent way of life. I do not see that happening anytime soon, nor voluntarily.

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By - bill, June 2, 2010 at 6:54 pm Link to this comment

Having just come from an excellent article by Chris Hedges I’m afraid that I don’t have the patience to deal with this one or its many comments.

I’m not a fan of the kinds of laws described at the end, though.  I much prefer redistribution of income after the fact by significantly more progressive taxation than we’ve had recently:  90% top rates may be overdoing it a bit, but 60% - 70% seems eminently reasonable and would be sufficient (perhaps even if we refuse to shape up fiscally in terms of pork and corporate welfare) to fund mass social programs that are actually decent rather than minimal or worse.

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By Xavier Onassis, June 2, 2010 at 6:42 pm Link to this comment

Mr. Adler, you are astute to prioritize pay justice and your essay is of more profound importance than anyone is realizing.

Defining pay justice would enormously strengthen your position, Sir.  We must define pay justice. How can we know how much people should rightly pay and be paid and have unless we have sound fundamental ideas and principles of pay justice to guide us?  The economics humans practice now is an affront to our values, not in line with them.  We practice the very ridiculous idea to have everybody going after getting out of the pool of wealth all they can get their hands on, and the legal thefts are myriad and it’s all patently self-harming and unsustainable, so it seems past time we take a sober look at our reality and switch to the justice idea of having everybody going for getting out of the pool of wealth the amount they put in by their own work – no more and no less – don’t you think?

James Madison said “The purpose of government is justice”. The state built on injustice cannot stand - so to be democratic, for the people to do their job of ruling, to save the governments we constitute as necessary evils for the benefits we wouldn’t have without them, to be patriotic, to love your country, to love yourself, to pursue happiness (of which pay justice is a very, very important part), you need to be able to locate pay justice. At the moment, many are saying: these people should have less, these others should have more. But how much should they have? What are the principles of pay justice? Happiness [everyone’s everything], survival, peace, order, freedom, satisfaction – all depend on justice. Those are ‘pretty important’ things, yet we look in vain for thoughtful study of where pay justice is. It should have been the focus of all education, from young age right through. People should have been very sophisticated about pay justice, able to pinpoint it by good principles. Instead, all the debate we hear boils down to: they should have less, no, they shouldn’t have less, they should have more, no, they shouldn’t have more.

Pay ranges widely while no one asks how widely it should range. How are people going to be able to say: This far and no further. This is the line between right and wrong, between fairpay and robbery, between fairpay and overpay-underpay? Children should all grow up knowing that overpay-underpay is the cause of the shaking of societies to pieces. People should worry about their society being shaken to pieces. People should know that every empire so far has been shaken to pieces by pay injustice. There is no subject closer to civic responsibility and pursuit of happiness - no subject whatsoever more worth our care and mental labour - and it is utterly neglected. Vigilance is the price of liberty – but vigilance about what? Very few can answer that question.

Pay justice is the great wallflower, waiting to give us the world average pay per hour, which is approximately US $40 per hour including paying housewives and students. Pay justice waits to give us global peace and plenty - and give us back our chance to have a future.

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By Xavier Onassis (pronounce that: Save yer Own asses, June 2, 2010 at 6:28 pm Link to this comment
(Unregistered commenter)

Adam Smith said that once a small elite had monopolized ownership of land and materials, they would drive wages down to the level of subsistence. It is the “appropriation of land and stock”—Smith’s terminology—that creates the “market force” that reduces the market value of labor.

Now, that doesn’t mean that certain derivative functions—management, distribution, and even investment—don’t exist, and that labor cannot contract for the delivery of those derivative functions. If you are the labor producing automobiles, or any other good or service, a sales force selling those goods and services is probably necessary. Likewise, certain organizational functions—we call it “management”—might be useful. Even “investment” has a place, since the goods and services needed to build and equip a shop must be paid for.

But notice that those derivative functions serve the labor that produces the value. It is distribution, management and investment that are “costs of doing business.” Productive labor is the business that has these costs. Our contemporary business model has stood this on its head. The “cost” is productive labor in an arrangement where “ownership” trumps “production,” and where the owner of materials and facilities is seen as the central player. Owners have a “natural right” to reduce their “costs” and maximize their profits. Productive labor is not perceived as having any such right.

But once we see through the bogus upside-down arguments it is plain that productive labor has the same, and indeed a superior right to maximize its profit, and that the laws and government have an entirely legitimate function in protecting these fundamental rights of labor—fundamental rights that have not hitherto been recognized.

Notice also that recognition and protection of the fundamental rights of labor is entirely consistent with a “market economy,” where “market forces” are understood to be shaped by certain legal and governmental constructs. The government has an absolute right and, if we are to heed justice instead of paying her lip service only, an obligation to shape the fundamental rules of the market in such as way as to guarantee labor its fundamental rights.

Economic charlatans use Adam Smith’s invisible hand for purely masturbatory purposes.  The fact is market forces do not distribute wealth in proportion to work.  Market forces do in fact and practice ceaselessly shift wealth one direction and work in the opposite direction.

Americans need the reminder that the American Dream of Freedom was never the dream of freedom to grow limitlessly rich at the expense of all the rest of the people who are your environment.

The American Dream of Freedom was the great dream of *freedom from* - freedom from the tyranny of the European moneypowers the Founders fled.  But Americans have let the dream slip away, and if we want it back it’s imperitive to define pay justice.

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By nemesis2010, June 2, 2010 at 6:11 pm Link to this comment

By MidView, June 2 at 8:57 pm

” If you don’t like the way employees are compensated, put your money where your mouth is. Start your own business and pay employees according to your conscience. ”
</blockquote>

What does one starting his/her own business have to do with the disproportionate distribution (<- that’s not redistribution) of wealth in this nation for the past 40-50 years?

Can you explain that?

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By nemesis2010, June 2, 2010 at 6:09 pm Link to this comment

By Smoove, June 2 at 9:16 pm

” I don’t doubt wealth redistribution programs lessen the impact. However, aren’t they kind of like taking Novocaine after getting your arm chopped off. Sure it lessens the pain, but eventually you’re still going to bleed to death.You still need a mechanism that creates wealth if you want jobs, shelter, food, etc.”

The world population is currently at 6.8 billion. The U.S. land mass has a maximum carrying capacity of 300 million and we currently have a population of about 325 million. Supposedly, we have reached peak oil and are beginning to move toward the downhill side of the curve. Unemployment in this nation is about 15%—give or take a few points—depending whose methodology one uses. Our manufacturing base has been devastated and what little production of goods that remain is mainly geared to warfare; weapons of destruction. Those middle class families lucky enough to have employment find it increasingly difficult to put food on the table, keep a roof over their heads and provide a half-decent education for their children without at least two incomes. Real wages for the working class in the past 40 years have declined while income for the super-wealthy 1% has increased 20-25 hundred percent.

1. What system will create enough wealth for 6.8 billion to live with adequate safe drinking water, shelter, medical, food, clothing, and education?

2. What do you propose we do with the millions of individuals, heads of households, etc. who simply cannot find work today?

3. Where will the energy to produce in the very near future come from?

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By nemesis2010, June 2, 2010 at 6:07 pm Link to this comment

By Smoove, June 2 at 5:53 pm

”Markets are NOT zero sum games. So, I’d say the simple answer is they both have an “advantage.”


So the fact that the seller’s odds of selling all his apples (as opposed to having 24 apples and only 12 buyers wanting one apple each) before any can rot due to the demand while 12 of the buyers will not be able to purchase the item that they had their little hearts set on buying doesn’t equate into an advantage for the seller, who—if he so desired—could risk raising the per unit price and still sell all of his apples at a higher per unit price before losing any to rot even if two or three of the buyers decided they couldn’t or wouldn’t pay the higher price? Interesting!

Then that would mean that during times of high unemployment when there are 30 applicants applying for a single employment opportunity the employer doesn’t have an advantage to dictate terms over the applicants because they all have the advantage. Well I’m sure that is very comforting to all those unemployed seeking jobs right about now.

I’m glad employers knew nothing of that economic theory when I was negotiating contracts in times of high opportunity and low availability of talent, because I would have lost a fortune.

There are twelve buyers who are happy, a seller who is delirious, and 12 losers with their hearts broken and suffering mental depression due to not having purchased their little apple; it’s not zero sum.

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By Smoove, June 2, 2010 at 5:16 pm Link to this comment

Lilith,

I don’t doubt wealth redistribution programs lessen the impact. However, aren’t they kind of like taking Novocaine after getting your arm chopped off. Sure it lessens the pain, but eventually you’re still going to bleed to death.

You still need a mechanism that creates wealth if you want jobs, shelter, food, etc.

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By MidView, June 2, 2010 at 4:57 pm Link to this comment

If you don’t like the way employees are compensated, put your money where your
mouth is. Start your own business and pay employees according to your
conscience.

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By Lilith, June 2, 2010 at 3:16 pm Link to this comment

To Inherit The Wind:

“A two-word answer to your question: Titanic mentality.”

LOL, you got it!  Perfect analogy!!

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By Lilith, June 2, 2010 at 3:06 pm Link to this comment

Smoove”

“Markets are NOT zero sum games. So, I’d say the simple answer is they both have an “advantage.”

This is true, for the most part, like when people CAN find jobs, food, and shelter from other sources. But when an economy collapses, for what ever reason, things become more desperate, and that is what is happening to one degree or another here and around the world.

What most people fail to realize is that we are in the same or worse situation economically as we were in during the 1930s and the great depression. The main reason we are not feeling the impact of this depression as we did back then is because of the Social Entitlement Programs that the New Deal ushered in to deal with just those specific impacts. Think about it, with out programs like Welfare, Social Security, Disability, and Un-employment, poverty, starvation, and death would be rampant. So too would be violent crimes, robberies, and so forth, just like it was during the great depression.

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By Inherit The Wind, June 2, 2010 at 3:02 pm Link to this comment

Lilith:

A two-word answer to your question:

“Titanic” mentality.

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By Lilith, June 2, 2010 at 2:38 pm Link to this comment

To Inherit The Wind;

Yap, you prove my point grin

Unfortunately, stories like yours when companies are taken over and driven into the ground out weigh stories of my Son-In-law’s and your original experience, by many fold. The drive them into the ground scenario took real hold back during the 1980’s and people still have not learned. Now those same people, or kinds of people have taken this “grab all you can at any cost” tactic world wide, and we are now reaping those actions big time.

I have often heard that much of the fundamental problem with businesses in this country lies in what is taught in the business schools. I can not say one way or another about that, but anyone with business school experience and/or a MBA degree, I would love to hear your input on the subject of what is taught in Business Schools today and in the past.

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By Smoove, June 2, 2010 at 1:53 pm Link to this comment

“I’ve 12 apples to sell and there are 24 people wanting to buy 1 apple each. Who has the advantage? There are no other apple sellers. Their options are buy the apples or not. Who has the advantage, the seller or the buyer?”

Markets are NOT zero sum games. So, I’d say the simple answer is they both have an “advantage.”

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By nemesis2010, June 2, 2010 at 11:26 am Link to this comment

By Fat Freddy, June 1 at 9:00 pm

”I own a business. Where there was once nothing, there is now a profitable business which supplies me with the means to earn a living and provide for myself and my family”

.

Great for you! Glad to hear it!

I’ve a few questions and perhaps, being the great capitalist libertarian free-marketer that you are you can enlighten me.

1. I’ve 12 apples to sell and there are 24 people wanting to buy 1 apple each. Who has the advantage? There are no other apple sellers. Their options are buy the apples or not. Who has the advantage, the seller or the buyer?

The world population is currently at 6.8 billion. The U.S. land mass has a maximum carrying capacity of 300 million and we currently have a population of about 325 million. Supposedly, we have reached peak oil and are beginning to move toward the downhill side of the curve. Unemployment in this nation is about 15%—give or take a few points—depending whose methodology one uses. Our manufacturing base has been devastated and what little production of goods that remain is mainly geared to warfare; weapons of destruction. Those middle class families lucky enough to have employment find it increasingly difficult to put food on the table, keep a roof over their heads and provide a half-decent education for their children without at least two incomes. Real wages for the working class in the past 40 years have declined while income for the super-wealthy 1% has increased 20-25 hundred percent.

Given the above:

2. What do you propose we do with the millions of individuals, heads of households, etc. who simply cannot find work?

3. How are the many millions of humans around the world who cannot find employment supposed to obtain safe drinking water, adequate food, shelter, clothing, and an education?

4. Where will the energy to produce in the very near future come from?

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By Anarcissie, June 2, 2010 at 10:38 am Link to this comment

Fat Freddy, June 2 at 9:28 am:
’...  Sure, I know, progressives like to believe that it was deregulation that caused the problems. In actuality, the repeal of Glass-Steagall only facilitated, and accelerated the flow of cheap, easy money into all of those risky investments. It was the unprecedented expansion of credit, by the Federal Reserve, that ultimately caused our demise….’

But we can’t stop there.  We have to ask why that expansion of easy credit was thought desirable, even necessary, given its obvious risks.

The Federal Reserve bank and its activities were not dropped on us by the Martians.

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By Fat Freddy, June 2, 2010 at 5:28 am Link to this comment

mrfreeze

I do not disagree with you that businesses seek to maximize profits. Any less would be a violation of the shareholder agreement. You seem to imply that only the wealthy own stock in corporations. Nothing could be further from the truth, and you know it. If you have a 401(k), a pension, or even an S&P 500 indexed, no load mutual fund from Vanguard, you own stock in some corporation. Therefore, you benefit from corporations maximizing profits. You are the evil, greedy shareholder. Unless, of course, you invest your retirement in pure, physical gold, or some other precious metal or in T-Bills or a Treasury backed money market account.

You also seem to imply that the current economic climate was caused by Capitalism. I can assure you,it was not Capitalism that is to blame. It is the Keynesian, Socialist-style central planning of the economy. Sure, I know, progressives like to believe that it was deregulation that caused the problems. In actuality, the repeal of Glass-Steagall only facilitated, and accelerated the flow of cheap, easy money into all of those risky investments. It was the unprecedented expansion of credit, by the Federal Reserve, that ultimately caused our demise. You see, when you break it all down, it all falls back on the fact that our entire financial system is based on the fraudulent practice fractional reserve banking and legal tender laws which force people to accept currency by government fiat.

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By Inherit The Wind, June 2, 2010 at 4:05 am Link to this comment

Lilith:

Again, 2-way loyalty IS good for business.  I work for a company with an owner operator for well over 15 years.  He’s got his flaws, many of them, but his loyalty to his staff was unprecedented.  In a desire to move on and retire, he and his partner sold the business.  They looked for a buyer who would continue that, and thought they found one.  Unfortunately for us, they were badly taken in.

The new owners brought in a party nobody knew about and he ran through the place like Genghis Khan, changing it from the congenial workplace where people would pitch in and stay late without complaint to an atmosphere of fear and threats, boasting what a great businessman he was and how he was going to whip us into shape.

About all he’s managed to do is reduce the staff by 60%, cut salaries, lose long-term clients, and take himself and his wife on an extended vacation.  I was let go in the first 6 months and the “severance” package I received was insulting—about 1/4 the MINIMUM standard for the industry—as if I hadn’t been there all those years.

Meanwhile, my former boss has given me the necessary references to get two jobs, one I needed and now one I enjoy.  Sure, I wish things had been better and that he had sold to a better buyer, but he’s done for me and others everything he can to help.  Were he to start another business, he wouldn’t have to ask me twice.

That’s just how it is.

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By Gary, June 2, 2010 at 2:07 am Link to this comment
(Unregistered commenter)

OK Enough!

What I see here is one big circle jerk.

What most of you are advocating for is a government powerful enough to make us all be good. Good Luck.

When government is finished taking over everything it will have one purpose, maintaining power at all cost. And you who think you can continue to dissent freely will be the first to go. What you idealize for and what will really happen are totally different and if you believe otherwise your head is up where the sun doesn’t shine.

Yes, it’s just my opinion.

So let’s get down to something concrete.

America is so bad - where should I move to? What country on earth is the closest to utopia and why?

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By Lilith, June 1, 2010 at 11:51 pm Link to this comment

“but so long as humanity continues to operate under the illusion that not having absolute power over others equals being subjugated.”

Meant to say:

“... but so long as humanity continues to operate under the illusion that not having absolute power over others equals being subjugated is what constitutes reality or the preferred circumstances of life, we will continue, as a species, to repeat historical demise and re-construction. When those with the so called power over others become all consuming and drastically out of proportion to those who supply them with their standard of living and wealth, that culture, government, and what not, collapses. “

That should make more sense now wink

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By Lilith, June 1, 2010 at 11:39 pm Link to this comment

mrfreeze,

Although I agree somewhat with your observations and some of your conclusions, the trouble has not just been around these bast 30 years. It has been around since the development of city states over 5,000 years ago. Yes, it has waxed and waned throughout history and around the world, but so long as humanity continues to operate under the illusion that not having absolute power over others equals being subjugated. When those with the so called power over others become all consuming and drastically out of proportion to those who supply them with their standard of living and wealth, that culture, government, and what not, collapses.

I see those signs now in our culture. Historically nearly all governments, and such only last 200 years unchanged. We are due for that big change and I fear it is not going to be pretty. The only way to mitigate some of the fallout of that change is for individuals to make the necessary changes. Both employees and employers must do this, both locally and on a more grand scale. I do not believe it will stop what is coming, but we can possibly, hopefully mitigate the carnage that is threatening to come in the near future.

There are many different solutions to the crises of business and employer/employee relations, and I can not list them all here. But one that I see making good progress is the trend of employees banding together and buying out a company that is closing, and running it themselves. It will be interesting to see how these new types of ownership work out.

Here’s to not holding your breath, but still always working toward solutions. Always the optimistic pessimist LOL

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By ofersince72, June 1, 2010 at 11:25 pm Link to this comment

MrFreeze , you about summed it up,

I believe we need to go back to 40 acres and a mule
real quick.

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By ofersince72, June 1, 2010 at 11:16 pm Link to this comment

Nemesis and ITW all in the same breathe
what an improvment.

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By mrfreeze, June 1, 2010 at 11:15 pm Link to this comment

IHW and all others - Actually, I’ve enjoyed reading down this thread. Lot’s of strong (and opposite) opinions about the nature of businesses and “the dismal science.” Lot’s of interesting thoughts about wages and overpaid bosses and the good and evil of capitalism….good stuff.

I remain steadfast in my belief that a business has one purpose and one purpose only: to maximize shareholder/owner value. That’s it. All of you capitalists and free market apologists should love that. Businesses have been portrayed as much more than they really are: “good corporate citizens,” “giving back to the community,” “creating jobs…...” All of that is merely PR bullshit to hide the ugly truth:

The despots at the top will always move to the default setting: profit at any cost. We have seen quite a bit of that behaviour over the last 30 years. I’ve been around long enough to have seen and felt the transformation of employees in many industries from respected contributors in the success of enterprises to mere functionaries (today more like indentured servants). It’s not surprising that there is such a hatred for unions, labour or any suggestion that employees have “value” compared to the almighty lords that run or own companies (no matter what their legal composition…yes, I know what that is….).

Anyone paying attention in the current economic climate knows that the days of the middle-class are almost gone and that our domestic labour will continue to be devalued until we become a 2nd or 3rd rate country. But, by god, isn’t it great that the owners, who have literally risked everything and have actualized their EXCELLENCE can pay the big bucks to see Bon Jovi or sip tea with Tiger Woods or have a personal assistant attend to their every need? God Bless Capitalist, Gated Community America!!! Where freedom means never having to say we paid too much for labour costs, or taxes…...

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By Lilith, June 1, 2010 at 10:33 pm Link to this comment

nemesis2010 and Inherit The Wind,

Thank your for your kind responses. It is nice to see that we do share these insights.

BTW Inherit The Wind, you are correct about Loyalty for the employees by the employer. I did not state that directly, but through my examples and explanations.

I would like to give a great example of how well that works. My son-in-law worked for a small start up here. The start up was financed through a mega-cooperation for it’s initial research phase (medical device was the product). Working there was wonderful, and fulfilling for nearly all the 150 employees. When the company lost their funding several years ago, the owners and CEO’s pledged to the employees that they were going to do all they could to regain their financing. During the two years it took to re-establish the funding the owners kept in constant touch via e-mail to the employees as a group and individually. They also put together at least one summer Bar-Ba-Que for all the employees and management during that two years. When they did get the funding, of the first 43 employees that were hired to begin the new start up only one was a new employee, the rest were returning employees from the first run of the business.

Not only was this a wonderful humanitarian and employer/employee relationship, it was just plain good business. Because they took such good care of their relationship with their employees during employment and during down time, they have hit the pavement running. They do not have to re-train employees, nor start from scratch. The have been back in business for these past two years and is one of the biggest success stories in our county. It is just common sense: It pays better and is more profitable to do the right thing.

G.Anderson,

you are very correct, employees ARE customers. That has been lost on businesses in the past 30 to 35 years. It became horribly apparent when the Reagan administration started paying (via tax breaks? not sure on details) large manufacturing companies to move their plants outside of the US. Then CEOs, politicians and many economist wondered why Americans could no longer afford the goods of these transplanted companies.

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By Money is funny, June 1, 2010 at 7:59 pm Link to this comment

Children are not worth much unless they do apple sauce commercials.

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By Inherit The Wind, June 1, 2010 at 7:44 pm Link to this comment

Lilith,

Despite the low opinions that some here have of me, I am not the inflexible lout I am made out to be.  I found your post to be a far better expression of the ideas I was trying to convey, and a perfect expansion on them.  I don’t think anything I wrote would contradict you.  While I did omit a discussion of loyalty to employees (which fosters INTENSE loyalty to an employer), I fully agree with its import. In fact there was not one idea in your post I would take issue with.

Fat Freddy: You raise a valid issue but it was not one I was discussing.  Share holders are not usually the day-to-day boss the way a CEO or a COO is, but also the way an owner-operator is. I was contrasting the two.

Mrfreeze: 
Just because you own car doesn’t make you a mechanic. 
Just because you own a house doesn’t make you a carpenter, plumber or electrician.
Just because you own your body doesn’t make you a physician.

Likewise, just because you own a business doesn’t make you an economist.

I have seen or worked for many a business owner who floundered and didn’t know why they were floundering, or sometimes, even that they were floundering.  Yet every smaller business I’ve worked for (one for over 15 years) it was obvious who the owner was and who the biggest risk-taker with the most to lose was.  When I worked for one mega-corp, none of that was obvious.

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By G.Anderson, June 1, 2010 at 7:28 pm Link to this comment

So we have, a crisis in capitalism. Where the old structures of capitalism are no longer effective, no longer working.

As Marx predicted the need to automate, and increase profit would eventually, doom the capitalist to failure, by failing to consider the consumer as a necessary part of the economic structure of capitalism.

It’s not just the buisness owner, or the worker, it’s the consumer and that’s where the model breaks down.

Because the worker, in his other role as a consumer, can no longer afford to consume the goods he produces.

This is what is happening now. Yes our business models are very efficient, they are so good, that they don’t really need many employees.

So go ahead make eveyone an independent contractor, or ship all the jobs to India, China, or even train robots to do them, because your just speeding up the demise of the capitalist system.

And when, your goods and services, have no value because not enough people can afford to buy them, then you will see either the mother of inflation or deflation take your pick.

Wasn’t it Marx who said, the mode of production determines social consciousness?

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By nemesis2010, June 1, 2010 at 6:28 pm Link to this comment

By Lilith, June 1 at 6:01 pm

”I have been both an employee and employer, but most of the time I have been self-employed as a private contractor.”

Fantastic commentary!

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By ardee, June 1, 2010 at 5:07 pm Link to this comment

mrfreeze, June 1 at 1:03 pm

I must commend you on continuing to stand up for what you, and I, believe is the correct view of our current economy. I would warn you, though, that, should you continue to refute that posters opinions, you will be treated with less and less courtesy. Just so you are forewarned.

There was a time when a CEO would earn one hundred times that of his lowest paid worker, then five hundred times. Now the CEO of Wallmart makes more in an eight hour period than any of his workers make in a year! One wonders how anyone might be worth such compensation?

Our nation descends into third world status, slowly but seemingly inevitably.The middle class, once a bastion of strength and the glue that held our democracy together, shrinks yearly. It would seem that , should this trend continue, we will have only two classes, the very, very wealthy and everyone else. I believe that this will signal the death knell for our freedom.

“This is the way I think the world will end- with general giggling by all the witty heads, who think it is a joke.”  Kierkegaard

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By Fat Freddy, June 1, 2010 at 5:00 pm Link to this comment

I own a business. Where there was once nothing, there is now a profitable business which supplies me with the means to earn a living and provide for myself and my family. I bought the property and tools necessary for that business to function. I used my knowledge of the industry to put together a “plan”, and implemented that plan with the intentions to provide a product or service that was lacking in the market, for a profit. When I need employees to help fulfill the needs of clients and customers, I hire them. They come to work to perform their task and get paid at the end of the week. When they are hired, there is a negotiation for their salary and benefits. If we can not reach an agreement they are free to go elsewhere to look for employment. If we do agree, that is a private contract between myself and the employee. If the employee performs his tasks well, I will be inclined to offer him a raise, and possibly a promotion. If I feel he is not performing his tasks properly, I can relieve him of his duties, and dismiss him. If at some point, the employee finds a better job for a better wage, he can quit. If an employee feels that he can offer a better product or service for the same price, he can start his own business, and possibly put me out of business. If I feel that the business no longer suits my needs, I can dissolve the business. That’s called freedom. Freedom to own property and freedom to enter into private contract.

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By Fat Freddy, June 1, 2010 at 4:36 pm Link to this comment

mrfreeze

If you are a business owner, I think you have some very strange ideas, and I think your creditors would like to know about these. I also do not think you understand what limited liability is, or have very much knowledge about the different types of business entities and corporate structures. 

Inherit The Wind,

You are very close. But let me ask you a question. Don’t shareholders and bondholders of a large corporation also take risks? A corporation is just a form of a limited partnership. Their initial investment is their risk. Their profit is proportional to their risk, no?

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By Tobysgirl, June 1, 2010 at 2:05 pm Link to this comment

ofersince72, could you spell Chris Hedges’s name correctly?

mrfreeze, thank you for pointing out that many times bosses are hardly the brains of the operation. When I was a typesetter in NYC and my last bosses set up a typeshop, they were horrified to find out how much typesetters made (I made $26 an hour in 1990). They had absolutely no idea how to produce anything—at least my previous bosses had some notion of production—and found it outrageous that people who did should make so much money. They, of course, would have been taking home six figures.

I believe there should be a limit on what the highest-paid person, including the owner, should make in relation to the lowest-paid person, and I think this is in our societal interest. Big government is here to stay; whose interests shall it serve?

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By Lilith, June 1, 2010 at 2:01 pm Link to this comment

Only mrfreeze (I think) has declared that s/he is a business owner. This whole discussion seems partisan, so here is my 2 cents worth ...

I have been both an employee and employer, but most of the time I have been self-employed as a private contractor. I have seen it all. Clients are the worst in this country. They want everything for virtually nothing. What does that say about our economic culture?

With that in mind this is what I have learned and observed:

1) Yes a person creating and starting/running a business takes the highest risk. They should take a higher portion for both the risk and their creation. Without that person’s creation, employees would not have a job.

2) Without employees, the owner would not have a profitable business. The owner owes them that both financially and in the way they treat their employees. Owners NEED to recognize and respond to the truth of this partnership.

3) Employees are the face and first contact of your business to the public. How they feel about the company, their ability (or perceived ability) to make a difference in both the company and their own lives, and how they are appreciated and treated by their employers, influence how they present your company to the public, how much care they put into manufacturing and quality, and so forth. The owner needs them and their goodwill as much as the employee needs the job.

I have long struggled over the issue of paying livable wages, the reality of the cost of doing business and making it sustainable, the need for growth to promote and secure that sustainability, and fair compensation to both employees and the owner/manager.

What I have come to is that:

1) an employer needs to treat employees as part of a team, a group with the same goal. Not as peers, because of the nature of risk taking and investment, as well as creation rights, but as valued members of the same team: The business.

2) Employees are human beings, not gears or cogs in a machine. People need to know that what they do means something, makes a difference in the world, for their families and in their life. They need to see a direct relationship between effort and results, not just for the company, but for all those mentioned above.

3) The most successful companies in Europe and here are ones that have employee reps on decision making boards and/or councils for the business. Not just concerning rights and benefits for employees, but on issues of marketing and running the business as well. They also practice real profit sharing. A real response to the direct effort employees make working for and with the company. On a purely analytical basis: direct positive feedback and compensation for effort and work done.

Nothing better than experiencing the satisfaction and knowledge that what you do does have a direct relationship to the circumstances and quality of your life.

Cultural anthropologist agree that the first true signs of a culture in decline (death throws) is when the individual feels that they can no longer make an effective difference in their own lives. Sound familiar?

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By diman, June 1, 2010 at 1:15 pm Link to this comment

By Inherit The Wind,

diman, June 1 at 9:50 am #

Useless article and worthless comments.

**********************************************

Be sure to include your own comment in that criticism.

O.K. I retract useless and worthless, until the moment MrFreeze confronted you with beautifully argumented comments. And here is my comment -the majority, I repeat, the majority of businessmen are assholes, here it is, it is a fact, there is no sophisticated intellectual debate over it and it doesn’t require a degree in economics to understand.

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By mrfreeze, June 1, 2010 at 12:06 pm Link to this comment

ITW- I own my own business and know full-well about “risk” and the BS concept of “excellence” and all the other mythology connected with modern American capitalism (or “microeconomic theory”).

The reason you find it pointless to argue with me is because I disagree with you on some very fundamental concepts, and, like all those who have a fetish about private enterprise and the free market, you don’t like to be contradicted…..

Here’s the bottom line with regard to this essay:

Business owners will always purchase labour at a discount or overwork their current workforce in order to maximize profitability. We all know this. We also know that, in the 21st Century, workers have virtually no bargaining power. So, all the arguing about this theory or that theory regarding the economics of owners caring what their employees make (unless it’s close to nothing) don’t amount to a hill of beans.

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By Shift, June 1, 2010 at 11:35 am Link to this comment

The last thing we need is an economics lesson.  If people are too dumb to know their own best interests then no amount of legislation is going to save them.  Workers today seem to lack the intelligence they were born with.  They buy into the economic propaganda they are fed by their masters.  Too many are undereducated, unfocused, and do not seem to care.  It’s hard to help people who choose to hurt themselves.

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By ofersince72, June 1, 2010 at 11:27 am Link to this comment

Americans don’t even get the benifit from the
Tillions upon trillions that our government steals
in Natural Resouses from third world adventures,
with the exception of almost free gasoline.,, this just
to keep the masses entertained.

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By ofersince72, June 1, 2010 at 11:25 am Link to this comment

Cris Hedges’ weekly rants more and more seem nothing
more than diversion.

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By Inherit The Wind, June 1, 2010 at 11:20 am Link to this comment

MrFreeze:
Your lack of familiarity with basic microeconomic theory renders any discussion with you pointless.  I don’t have any idea who those people you referred to were.  Nor do I care.

Business decisions and employment decisions are all unique to the individuals involved.

While I wouldn’t pay $18 for Bon Jovi front row seat, I’m not as arrogant and judgmental as you as to say it’s not worth $18 to someone, or $180, or $1800.  Why is YOUR judgment of what is worthwhile for SOMEBODY ELSE meaningful?  That’s how the Taliban and extreme fundamentalist “Christian” groups act They tell someone what to like and how much to like it.

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By ofersince72, June 1, 2010 at 11:19 am Link to this comment

Anyone who still believes America can vote ourselves
out of the gripe of the MIC and Wall Street are part of
the problem.

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By ofersince72, June 1, 2010 at 11:17 am Link to this comment

Anyone that can’t translate the last ten years,
doesn’t wany too.

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By ofersince72, June 1, 2010 at 11:16 am Link to this comment

The type of discussions that we have here on
Truth Dig are going to become laughable.

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By ofersince72, June 1, 2010 at 11:13 am Link to this comment

Job growth of jobs paying a living wage will drop even
more.
We will soon learn how valuable food, air and water are.

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By ofersince72, June 1, 2010 at 11:09 am Link to this comment

The wage disparity is not going to get better, only worse

Will will see Sinclair’s Jungle long before we see
Camelot

We sat on our thumbs in the eighties and ninties,
the last two decades that we had a chance to take
our government out of the hands of the the MIC and
Wall Street.

We all will be children of Gaza.. It’s over…

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By kerryrose, June 1, 2010 at 10:53 am Link to this comment

Just a correction on the former.  A substitute teacher is out of work for 2-3 months a year, so unless they can line up summer work (increasingly difficult) they are making tops (in a high paying district) and minus holidays $18,000.

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By kerryrose, June 1, 2010 at 10:48 am Link to this comment

I think the important thing to debate is not whether the business owner should or should not make more than an employee, but whether or not the employee is even making a livable wage. 
A bus driver making 23,000 a year is not making enough to live.  A substitute teacher making 24,000 a year gross, if they are lucky to work every day which is not a guarantee, is not making a livable wage.  That in and of itself is shameful.
My father owned his own business, and most likely made more than his employees, but on bad months he would always say, ‘I’ve got to pay my employees before myself.’

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By felicity, June 1, 2010 at 10:42 am Link to this comment

Forget ‘fairness.’  Old Henry Ford, not the most magnanimous guy on the block, paid his workers a, unheard of in his day, wage of $5.00/day.  When asked why, the pragmatic Henry replied, “So they can buy my cars.”

Using 1963 as a benchmark, today’s minimum wage should be about $21.00/hour.  And where would that money end up other than in increased government revenue?  Purchasing goods and services.  Afterall, our economy is consumer driven so it’s not rocket science that the more consumers we have consuming more, the healthier our economy.

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By mrfreeze, June 1, 2010 at 10:13 am Link to this comment

ITW - You’ve been listening to too many Brian Tracey audio tapes and Zig Zigler fantasy garbage. “Because of his/her EXCELLENCE” such and such happend….Utter and total mythology.

As for your distinction between small business owners and corporations…based on your belief that “businessmen” are the uber-menches of the world: so what if they sign a personal guarantee? So what if they loose everything. No one holds a gun up to someone’s head and tells them to risk it all.

Finally, any owner stupid enough to spend $1800 for a Bon Jovi ticket isn’t as smart as you’d portray him/her.

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By Inherit The Wind, June 1, 2010 at 9:43 am Link to this comment

MrFreeze:

Perhaps you’d better re-read my post.  LLCs and small corps only protect a single owner so far. That is why MANY small business owners MUST sign a “personal guaranteed” for loans—which means the corp or LLC no longer protects them.

Think about the flip side of your argument: If someone starts and builds a business,  and now has aides who allow him/her to take time off because, due to his/her excellent foresight and forethought, the biz is self-sustaining, you would say it no longer belongs to him but rather to the workers under him.

Understand: I’m not at all opposed to unions and labor organizing.  Why shouldn’t workers band together to form their own labor-supplying corporation to try to get themselves the best prices for their labor?

Also you need to understand that I differentiate between owner-operators and non-owner CEOs and BODs who freely spend and WASTE the owners’ (shareholders) money.

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By ofersince72, June 1, 2010 at 9:38 am Link to this comment

Who would want to see Bon Jovi ????

The answer to this question , could answer
a lot of problems in this country.

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By knobcreekfarmer, June 1, 2010 at 9:32 am Link to this comment

You can present good bosses as well as bad ones. Equitable organizations and some very top heavy ones. The bigger point I endlessly try and make is without cheap energy jobs, businesses, the whole economic premiss of capitalism is, as diman said, “useless” and most likely be over.

We are wasting time and precious resources to change our path all the while we are arguing over right and left ideology.

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By mrfreeze, June 1, 2010 at 9:03 am Link to this comment

ITW - Your criticisms of Adler are based on some fairly “shaky” assumptions. Your one-size-fits-all owner definition is, IMO, flawed. Allow me to suggest this:

1) The owner isn’t necessarily the “brains” of the operation. I’ve worked for plenty of owners who spend a lot of time on the golf course or vacationing who aren’t all that bright and who know less about the business than their administrative assistants.
2) Once again, the notion that an owner takes all the risk is baloney. This is what LLC’s and corporations are for: to mitigate the personal risk of owners. You make it sound as if a business owner will go to debtor’s prison if a business fails. FALSE. He/she can file bankruptcy and be back in business in a short period of time.
3) Employees take risk as well. If the company fails, they are out-of-luck and probably have as many debts and obligations as the owner (in their own lives). Your class prejudices are showing ITW!

On the flip side, if the workers are more “highly productive” why have wages been stagnant for the last 30 years? Shouldn’t “smart/risk-taking/highly productive workers prosper in proportion to the owners?

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By Bolton, June 1, 2010 at 6:59 am Link to this comment

Moshe, you are on the right track. Becuase of the position of power, and a higher supply of available workers, employers more than ever can put downward pressure on wages. Wages have very little to do with job performance or capability, but with labor supply. The more employees available in any skill set, the more wage leverage an employer has, and the more expendable an employee is due to the “employment at will doctrine”. So the rich and/or powerful get richer, and everyone else gets the shaft, but the GDP will keep growing (to some extent). The rich will have more and everyone else will have less and less until they snap and destablize the system. That’s why this illegal immigration is such a problem. The flood of additional people to the work force puts more downward pressure on wages by increasing the supply of labor (also destroys the unions). The rich know this, and they like it, that is why nothing reasonable is being done about it. Profit/revenue sharing laws could help to offset the undeniable unfairness in wage evaluation. The wages should be set against the profitabilty and revenue stream of a company (by law), with each member making a wage based on his/her % of the team, and its impact on the profits. People at the top would make more, and people at the bottom would make less. But everyone would benefit in the success of the business, and therefore the business would run more effectively and efficiently, and the system would be reasonable. The way it is now, employers are kings, and employees are surfs. The economy will grow and run better with more wage equality. Without it, America will fall because the middle and lower classes will lose all buying power. How many cars can a rich person buy? How many homes can a rich person live in? The rich just hoard their money and everyone else doesn’t have any money to spend (except on credit). No wonder the economy is slipping. I guess companies will shift to sell to consumers in China when the American society is tapped out.

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By Inherit The Wind, June 1, 2010 at 6:57 am Link to this comment

diman, June 1 at 9:50 am #

Useless article and worthless comments.

**********************************************

Be sure to include your own comment in that criticism.

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By diman, June 1, 2010 at 5:50 am Link to this comment

Useless article and worthless comments.

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By Inherit The Wind, June 1, 2010 at 4:16 am Link to this comment

As usual, Moshe Adler doesn’t know WTF he is talking about.

Let’s start with the propane company owner: Why is HE justified in taking the lion’s share of profits?

Two reasons.

1) He is the brains of the operation who organized and categorizes EVERYTHING.  Each person in the operation is a cog in the gear, but he has to ensure that ALL the cogs mesh in ALL the gears. HE created each and every single job that everyone who works for him has.

2) He takes the greatest risk.  He may have invested his retirement, borrowed against his house, and, as is usual with smaller businesses, made personal guarantees.  That means in a bankruptcy, EVERYTHING he owns goes to his creditors.  He has gambled to make jobs for all his employees.  He gets the lion’s share of the profits.

Now this is VASTLY different from a corporation, where the CEO is paid to ensure the bottom line each quarter grows.  The Board of Directors may well compensate him far beyond his value—after all, a CEO IS an employee, not the principle owner in a mega-corporation.  CEO compensation has grown logarithmically versus other employees over the last 3 decades.

Adler’s bus analogy is just plain silly. The bus is a capital investment that costs many, many times the driver’s annual salary.  The purchaser of that bus IS entitled to more of the take than the driver.

Value-added is a fine concept, but in ANY business the greatest value added is by the risk-taker who makes it all happen.

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By knobcreekfarmer, June 1, 2010 at 4:12 am Link to this comment

Yea, yea, I heard this line before. And not that I disagree but I’ve been more troubled
lately by our biggest un-appreciated “team” player?

Energy! More to my point is liquid energy in the form of oil.

“A tank of gasoline in a car holds enough energy to equal approximately five
years of one person’s rigorous manual labor.”

How much would you want to be paid if your job was to push your car the distance
one gallon of gas would propel it? Even if you took a small car on level ground
imagine pushing that car for 20-30 miles! It would take months, as the above quote
implies. Would $3 cover your time/effort?

This is but one small example of the disparity the industrialized world has been
programmed to be blind to. Energy is not going to always work so cheap. The Deep
Water Horizon disaster is just another example in the ongoing folly of the last
desperate years of oil and the lengths we go to get it in our gas tanks.

When there is no easy and affordable way to commercially produce market and sell
propane will Jim Leaman still pay $1875 for a ticket to a show? Or will he be as
evenly concerned as his forklift driver where the next meal is coming from?

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By C.Curtis.Dillon, June 1, 2010 at 3:23 am Link to this comment

I have commented often on the disparity between what labor makes and what the owner takes from the business.  There is this belief, fostered by the owners, that capital is somehow more important that workers and therefore, he who controls capital has favorable access to the benefits.  Owners will often crow about how much they worked to develop their business and there is some validity to this argument.  However, as the author points out, there are few businesses where the owner contributes much to the ongoing operations of the business once it is established and, yet, he still feels entitled to a disproportionate distribution of the profits simply because his name is on the ownership records.  Employees, although they don’t usually have an ownership position and are therefore not libel for any losses the company may sustain, do contribute to the current earnings of the business and should, by virtue of their contribution, be allowed to participate more readily in the benefits.  It galls me to see a CEO who had nothing to do with the company’s founding or growth taking home massive paychecks and bonuses because he got the board to agree.  He is raping the workers and that is absolutely wrong.  Labor needs to be given a strong hand to deal with owners who have a natural advantage due to their wealth.  If that doesn’t happen, there will be no fairness in our country or the world.

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By kerryrose, June 1, 2010 at 2:24 am Link to this comment

This is very interesting.

Teachers who have not as yet acquired full time teaching positions often substitute teach.  Yet at $85-$110 a day in my area,(I hear in Southern Florida they pay $20 a day), it is an unaffordable wage to live.  Studio rentals in the area are never less than $1,000 a month.  The schools do not offer health care, even for permanent subs, or unemployment through the summer months. Subs do not belong to the union.

Yet, there are enough teachers, still living at home, or retired on pension that can afford to work as a sub. If you don’t like it, too bad, there are plenty in line.  Isn’t this governmental slave labor?

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