Wednesday, November 21, 2007

Had Adam Smith lived to see the 1800s... (on TAP)

Had Adam Smith lived to see the industrial revolution he surely would have provided a seminal contribution to our understanding of the build-into-industrialization race to the wage and benefit bottom.

The race to the bottom hit American labor only sporadically (late 1800s, interwar and starting early 70s) and never as harshly or as it hit European workers steadily from the early 1800s on. By the last half of the twentieth century Europeans got a grip on the problem of out of control wage tailspin: sector-wide labor agreements (or equivalents like the French/Quebec practice of requiring all firms to work under conditions negotiated by union firms) -- a solution that makes life easier for ownership as well as labor according to its users.

The worst of the race to the bottom works like this: The maximum business can possibly pay labor in any market is just short of the labor expense that push it into the red. The lowest wage labor can possibly accept is enough to barely keep body and soul together. In between is room for fair free market play. Upon the advent of industrialization the maximum ownership could pay sometimes became the least labor could accept -- both meeting at the (not quite dead) wage bottom.

Individual weavers who once made a fair living were succeeded by 100 (?) times more productive, but replaceable, steam loom operators who were reduced not merely to subsistence but to the lowest level of same, living on oat cakes three times a day, unable even to afford wheat bread. In like manner California supermarket workers today cannot hang on to their previously settled pay scales because poor paying Wal-Mart is entering the retail food market.

American workers (and their progressive professional helpers) mostly seem not to have sensed the nature of the unnecessary lid that has been placed on their economic prosperity for over a third of a century now.

If we could somehow have predicted to Americans of the 50s and 60s that, by early 2007, a quarter of our workforce would be earning less than the minimum wage of the late 60s (approaching 10$/hr in today's money), the only explanation they might have been able to think of for such an astoundingly bleak economic future might have been a small atomic war, multiple depressions or even a mini-ice age.

It is long overdue for progressive professionals to alert mostly economically unaware Americans to what is happening. Begin by creating an alternative, "Team B" poverty standard (the 2002 book Raise the Floor contains a professionally worked out example) for the media to talk about to -- which should double the currently mis-reported poverty rate to about 25%. No more news organizations limited to reporting only on a grossly misleading poverty rate -- based on three (3) times the price of a barely survivable diet (dried beans only, no canned beans allowed -- no oat cakes: mid-twentieth century standard)!

It is also overdue for unfettered market theory to take its place along side (yes) communism as an equal no-brainer -- for exactly the same reason -- both all promising panaceas completely neglect the one factor it takes to produce fair and balanced human interaction: adequate checks and balances.

BTW, supercharging labor's economic power will simultaneously supercharge labor's political power. Who could ask for a better American prospect?

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