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Families vs. the 1% January 5, 2019

Posted by geoff in News.
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Instapundit linked to a very good editorial by Tucker Carlson concerning the link between the economy and families. He notes that social conservatives tend to look at the family independently of the economy, while Wall Street types and many pundits look at the economy independently of its impact on families. Sez he:

Both sides miss the obvious point: Culture and economics are inseparably intertwined. Certain economic systems allow families to thrive. Thriving families make market economies possible. You can’t separate the two. It used to be possible to deny this. Not anymore. The evidence is now overwhelming.

While I take issue with a couple of his statements, overall he makes a great point. So I’m going to take a next step and try to guess why this is.

I blame the perception of fungibility, rent seeking, and government intervention.

Fungibility. Something is fungible if its value is the same as any other member of its group. Like $1 bills – any $1 bill is worth as much as any other. Unlike art, where one painting might be worth 100X the value of another.

The rise of MBAs since the 1970s brought hard-nosed business practices into play, where increasing productivity and profitability became paramount. There were large benefits from this approach, but along with the dominance of MBAs in business management came the perception that the actual workers were fungible. Any worker could be replaced easily with no impact on the company. E.g., “Get another Michael out of the warehouse.” [about 10s into the video below]

This perception erased the notion of companies’ loyalty to their employees, and, in turn, employee’s loyalty to their companies. Gone were the days of 40-year employees retiring on company pensions. Now senior employees were readily ditched in favor of younger, cheaper folk, company pensions plans were eliminated, and raises were suppressed despite large increases in productivity.

At the same time, customers were thought of as fungible. Basically everybody was fungible, except the guys at the top, which led to the enormous pay differentials between the lowest and topmost workers.

Having eliminated humanity from the equation, the liberal notion of the faceless, soulless corporation became true, even for very liberal corporations such as Facebook or Google.

So in the old days, employees and customers were often regarded as family, and their families were included in that regard. Today they are regarded as faceless cogs, and their financial security is always at risk. This puts enormous pressure on families, which, as Carlson notes, need strong economic conditions to survive.

Rent Seeking. The second issue is rent-seeking, wherein companies influence government to create favorable business conditions, directly compromising the capitalist system. In modern times this has extended into “Too big to fail” bailouts, meaning the risk borne by banks, investment companies, and large corporations is minimized. Of course those bailouts are paid for by those fungible little guys, or by debt increases which will be paid by their descendants.

Thus, the mistakes made by the top 5% are spread out across the country’s population, burdening the innocent, corrupting the free market, and creating widescale disillusionment with government, corporations, and the economic system.

The answer here, of course, is to restrict the power of government. Businesses can’t seek favors which the government doesn’t have the power to give.

Well-Meaning Government Intervention. Government is constantly faced with a clamor to “Do Something,” and so often attempts to rebalance the scales between corporations and individuals (something unions used to do before corruption crippled their charter). But government intervention is usually clumsy and ineffective. Legislation is intrinsically one-size-fits-all, which usually creates as many problems as it fixes. Corporations can afford to pay legal minds to easily circumvent legislative restrictions (as the wealthy can with taxes), so the usual consequence is that the the more legislation there is, the better corporations do.

Thus, government intervention adds to the burden of small family businesses, often adds to the problems of families themselves through concessions to corporations written into the legislation, and has no effect on corporations. Anybody who has started a business knows how difficult it is to grasp and follow the required regulations administered at all levels of government.

Conclusion. I have always believed, in contrast to many other libertarian folk, that the “invisible hand” fails when companies and consortiums get too big. When the company gets large enough to influence the market, rather than being driven by it, employees and customers lose their voice. The one government intervention I would like to see exercised more frequently, is intelligent application of anti-trust laws to shrink the size of the hugest corporations.

This has a disruptive impact in the near-term, but in the long run it can be very beneficial. The emergence of cell phone technology, for example, would probably have been much slower if the AT&T breakup hadn’t happened.

But more importantly, increasing competition among smaller corporations gives employees and customers a chance to be less fungible.

And that can only help restore a sense of humanity to business and stability to families.

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