New Slate Article and Edison Embracing Capitalism

Making Political Sense: Capitalism Gave You Benefits

By: James E. Miller

Published 02/08/2011

“If you love your benefits, thank your union.”

Never have I seen such a misguided and infuriating bumper sticker. The person who believes this is wholly unaware of the vast amount of economic growth this country has seen just in the past 100 years.

This growth, which was due to the increase of mass production, specialization of labor, and an overall reduction of costly and ineffective positions, was responsible for modern day business being able to grant things such as health care benefits and the weekend off every week.

By striving to earn as much money as possible through offering goods that the public demands, companies are better able to put those profits toward better working conditions for their employees. Better working conditions lead to increases in productivity.

While unions take credit for the kind of standard of living most of us take for granted today, their interference in the market process is precisely what inhibits businesses from increasing society’s overall wealth.

Take the weekend example for instance. Labor unions often claim that their push for the 40 hour work week was responsible for most businesses to grant workers two days off. The Fair Labor Standards Act, which was passed in 1937, made it illegal to not pay workers a time and half wage rate after they have worked 40 hours in a single week.

So how did the government determine that 40 hours is the perfect amount of time everyone in the country should work every week? I am not sure either.

Regardless, those who supported organized labor, such as President Franklin Roosevelt, pushed for such regulations in the name of “worker’s rights.” Sure, anyone can point to federal laws as providing the impetus for everyone to work shorter hours every week, but upon more critical analysis, the argument holds no water.

When the government decided to impose itself upon how many hours a business could have its employees work, the immediate effect is that of pushing up labor costs. With the pushing up of labor costs comes higher prices for all consumers.

Despite what many believe, companies are not in possession of large amounts of wealth in which the workers can organize and tap into.

The real reason that many businesses are able to grant their employees the weekend off is their increase in productivity standards, not federal law. If there is one thing business is good at besides making money, it’s skirting government regulation.

If the forced adoption of a 40 hour work week was uneconomical, meaning it resulted in a large losses in profits, then businesses would find loopholes to get around such laws. These loopholes include classifying personnel as “seasonal” employees to avoid paying time and a half for overtime.

Instead, increases in technology and production have required less labor from workers. The result has been companies being able to afford giving their employees more time off without losses in productivity.

By requiring less time needed for employees to work, workers are better able to concentrate on their occupation while they are afforded more time to deal with outside events that often interfere with their own performance.

Government interference, though normally good-natured initially, often creates many unintended consequences which end up costing society as whole more for goods and services it needs in the end.

The same concept applies to things such as child labor and universal schooling for the young. While the labor movement strived to eliminate child labor on moral grounds, the real reason they sought to get rid of it was due to competition.

Children used to serve as sources of labor that were in direct conflict with older individuals who were not as robust as their younger counterparts. They were removed from the kind of responsibilities that come along with raising and providing shelter for a family. Therefore, they could afford to work at a lower wage which resulted in cheaper prices for consumers.

By essentially outlawing cheap labor, the labor movement has successfully funded itself by forcing everyone to pay more for products that could easily be produced by those who require less pay.

Thus public education, which is mandatory, arose to deal with the significant part of the population who were now forbid to support were now forbid to support themselves and their family. This movement has snowballed into an entitlement society which expects schooling at little to no cost.

The subsequent result has been subsidized higher education which defies simple economics because the supply of bachelor’s and master’s degrees does not correspond to the natural market demand for such qualifications. China faces this problem now.

Millions of college graduates are taking jobs they could have gotten without a degree. Four or five years of potential income accumulation has been subsidized away.

There is something to be said for an educated society, but there is even more to be said for a society that is unable to provide for itself. Thanks to the labor movement’s efforts to eliminate competition, my generation will have that much more of a harder time making a decent living.

So the next time you wake up later than normal on a Saturday morning after working all week, the last group that needs to be thanked are unions. Who should be thanked are those who sought higher profit margins by improving technology to achieve more efficient production.

What’s the difference between a leech sucking the life-blood from an animal and a union forcing a company to pay higher wages?

The leech does not have a federal law supporting its existence. And it usually leaves the animal alive after having its fill; unlike the manufacturing plants that have been left empty thanks to labor regulations and collective bargaining.

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In one of today's Mises Daily's, Thomas Edison inadvertently reveals how important capitalism and profit-seeking is for invention.  From a 1901 interview with Orison Swett Marden, Edison explains how his invention of a vote recording machine was rejected by his state legislature and was considered a kind-of failure:

Edison- "Yes, it was an ingenious thing. Votes were clearly pointed and shown on a roll of paper, by a small machine attached to the desk of each member. I was made to learn that such an innovation was out of the question, but it taught me something."

          Marden-  "And that was?"

Edison- "To be sure of the practical need of, and demand for, a machine, before expending time and energy on it."

Marden-"Is that one of your maxims of success?"

Edison- "It is. It is a good rule to give people something they want, and they will pay money to get it."

In some more idiotic New York Times news, Thomas Friedman, in his column today, once again reveals his love for China's surppression of political rights.  When discussing the Egyptian uprising:

China deprives its people of political rights, but at least it gives them a rising standard of living. Egypt deprived its people of political rights and gave them a declining standard of living.

Dude is unbelievable sometimes.

On a more interesting note, Steve Malanga reveals today how clearly messed up Rhode Island's financial condition really is.  Though I doubt it beats Illinois, Rhode Island is just another case of state and local governments making more underfunded promises it can't back up.