Worshipping the power of the market, part 2

What follows is a paper entitled "Poverty: A Question of Liberty and Equality." I wrote it during my first semester at college for a class--Poverty, Welfare, and Politics--taught by Ann Quinley, Pomona's Dean of Students. I recently rediscovered this paper while looking for a writing sample to include with a job application and realized that it does a pretty decent job of addressing some of the ideas I had initially planned to cover in an earlier post about the shortcomings of the power of the free market. Anyway, here it is, unabridged aside from fixing a couple citations (I may do another post later on what I think of this paper four years after I wrote it):

The “poverty issue” is not — or rather, should not be — mainly a question whether there is sufficient opportunity for upward social mobility. If a person at the low end of the economic spectrum manages to move himself up to a higher level of affluence, it does not change the fact that our economy still needs a certain supply of unskilled labor, so somebody else will just take his place. The real issue should be trying to raise the living conditions of all people at the bottom of the economic spectrum to an acceptable level. Poverty is not simply having a comparatively low income; it is lacking access to the resources necessary to maintain a reasonable standard of living. This is not to say that once the standard of living for the poor is raised to an acceptable level we can ignore whether they have opportunities to move up in society, but rather that improving the standard of living is a more pressing issue.

There are many factors affecting the ability of each individual to extricate himself from the clutches of poverty, from lack education to the difficulty of securing a deposit for a house to getting caught up in a drug-based culture and economy. However, there is one aspect of life in the United States that sets the stage for all these other factors: capitalism. We live in a capitalist society in which some people rise to the top at the expense of others. Therefore, it makes sense that in a country with cases of tremendous — some would say excessive — individual wealth, there would also be cases of people at the other extreme end of the spectrum. Still, it is hardly a stretch to say that the majority of people living in the United States would like to eliminate poverty and would be willing to contribute a percentage of their income to such a cause; in fact, they do it every year when a portion of the taxes they pay are used for welfare. If the consensus within our modern, affluent country is that poverty should be eliminated or at least drastically reduced, then why are there still so many people living hand-to-mouth, unsure if they will be able to eat next week, let alone make a deposit on a house or pay for a visit to the doctor? Why does poverty persist in a country with as much wealth as the United States?

Living in a capitalist society is not an excuse to accept poverty as inevitable. In his essay, “A Defense of Free Enterprise,” William Graham Sumner argues the merits of the free enterprise system that forms the theoretical basis of the capitalist society in which we live. Sumner describes free enterprise as a system of nature, over which attempts to exert influence would have dire consequences.

If we do not like [free enterprise], and if we try to amend it, there is only one way in which we can do it. We can take from the better and give to the worse… We shall thus lessen the inequalities. We shall favor the survival of the unfittest, and we shall accomplish this by destroying liberty. Let it be understood that we cannot go outside of this alternative: liberty, inequality, survival of the fittest; not-liberty, equality, survival of the unfittest. The former carries society forward and favors all its best members; the latter carries society downwards and favors all its worst members.

However, our capitalist society does not embody the pure form of free enterprise envisioned by Sumner. Not everybody begins life on a level playing field, and thus those who survive and thrive are often simply the ones who abuse their advantaged position to break the “laws” of free enterprise. In her book, Nickel and Dimed; On (Not) Getting By in America, Barbara Ehrenreich, a journalist who temporarily immersed herself in the low-income workforce, observes that even in favorable job markets, employers still manage to take advantage of their workers by paying them well below a living wage. Apparently, the business practices of many employers of low-income workers and the psyche of the workers themselves allows these businesses to flout a basic premise of free enterprise, namely that when the supply (workers) is outstripped by demand (employers), the price (salary) should increase. When the reality of the situation clearly differs from the pure theoretical model championed by Sumner, it is unreasonable to simply assume that the market will eventually take care of itself.

One area of Sumner’s argument that holds true is his observation that liberty and equality have a direct negative correlation. In the case presented in the previous paragraph, the wealthier members of society are using their liberty to, in effect, reduce the liberty of the poorer members of society and heighten the inequality between the groups. Consequently, the government must step in and reduce the liberty of the wealthy, either through regulating business practices or levying taxes which can be used to benefit the poor, until a relative state of equality is regained. Much of the debate over welfare and other programs designed to benefit the poor is in essence a debate over the how much equality is actually desirable, and how much liberty should be taken from the wealthy to achieve this. While having a society with an imbalance of wealth is an unavoidable part of capitalism, it is unreasonable to expect those on the lower end of the economic spectrum to frequently go without basic healthcare, housing, or even food, as is the current case for an intolerably large percentage of the United States’ population. In addition, it is in the interest of those who have managed to reach a successful position in society to help improve the living condition of people in lesser situations, because by doing so they will in turn create a society better for each of its members.

Since the United States is not only a capitalist society but a democratic one too, all its members have a say in how the scales of equality are balance. However, since money tends to translate into power and political influence, the wealthy members of society end up having a disproportionate amount of influence on this issue. Clearly, people who already are among the “haves” are unlikely to choose to give a large portion of their wealthy, power, and liberty to the “have-nots.” It is this fact, that those responsible for protecting the liberty of all are the ones who already have more than their share, that prevents the necessary effort from being made to alleviate the problems of the poor.

When the Welfare Reform Act was passed in 1996, it included no provision for measurement of its efficacy, and thus has been easily labeled as successful and removed from the national radar. The reality of the situation is that recent welfare reforms have done little to help welfare recipients, and quite possibly has caused considerable damage to many of them. While significant amounts of money are still being devoted to those at the lower end of the economic spectrum, the results of this money have been far from successful in eliminating poverty. Despite the many government programs and agencies providing services for the poor, Ehrenreich’s account depicts a very small percentage of low-income workers who actually take advantage of government services. Obviously, the government money currently ear-marked for the poor is either insufficient, poorly allotted, or both. Given the many channels Ehrenreich reports going through in her attempts to obtain food for even a single meal, it appears that one of the top priorities should be in restructuring the current food-distribution system so that those in need of food are able to get it without having to go through endless layers of bureaucracy and being passed from organization to organization.

As Ehrenreich successfully illustrated, obtaining affordable housing can be one of the biggest challenges for low income workers to overcome. It is also one of the most important steps a person or family can take towards bettering their quality of life due to the assistance it lends to both financial and emotional stability. Often, being able to put down a deposit on a place to live is not an option for those who live week to week on their paycheck. As a result, many people are forced to pay the higher rates for less comfort in shoddy motels, further inhibiting any chance of saving a portion of their paychecks. In addition, many places demand a proof of employment to secure a place to live, while many employers demand proof of residence to secure a job, catching low-income workers in a vicious catch-22. Setting up a stable residence at an affordable rent would also help low-income workers avoid the wild seasonal fluctuations of hotel and motel prices, as well as making it easier for them to get a job. Of comparable importance to the economic benefits of a stable residence are the emotional benefits. As anybody who has ever moved to a new home can tell you, relocation is stressful even under the best conditions. The ability to know with a reasonable certainty that one will be able to pay rent on one’s residence into the foreseeable future grants a significant peace-of-mind for those whose lives are often regular only in frequency of which new obstacles seem to arise.

The obstacles to ending poverty in the United States are great, but we as a nation need to rededicate ourselves to doing what is necessary to ensure an acceptable standard of living for all. We cannot guarantee anybody the ability to be happy; it is up to each individual to take responsibility for pursuing whatever items, experiences, or emotions he believes will lead to happiness. What we can do however, is take steps towards ensuring that everybody is able to obtain the basic minimum living conditions necessary for allowing such a pursuit to occur. Despite everyone’s best efforts, there will always be some who fall short in their pursuit. When this happens, it is important for the rest of us to be able to say that while some may have failed to achieve happiness, it was not because they lacked the basic living conditions and opportunities necessary for success.

Putting the party first

I wasn't a huge fan of Howard Dean as a presidential candidate, but I absolutely love him as the DNC chair. His focus on building the party for the future by strengthening the Democratic presence in EVERY state was a great first step towards building a long-term Democratic majority. Now, under Dean's guidance, the DNC has decided to shake up the presidential nominating calendar. The Nevada caucuses will be squeezed between Iowa and New Hampshire, with South Carolina coming shortly after those three. Apparently New Hampshire is threatening to ignore this decision and move up their primary.

Is it really so hard to accept a slight decrease in the influence of your state on selecting the party's nominee, even if it means a better chance for the nominee to win the election? I think the fact that politicians in New Hampshire and Iowa are getting so upset about these changes says a lot about the disproportionate amount of power given to states that get to hold their caucuses and primaries first. The way I see it, if the Democrats (or Republicans) want to get an edge for the REAL election, they should put aside the infighting and adopt a more sensible nomination process. Here are a couple ideas I would love to see implemented:

1. The order of the caucuses/primaries for each presidential election are determined by which states were closest in the previous presidential election. According to Wikipedia, we actually aren't doing too poorly by this measure. Maybe this could also be weighted by the number of electoral votes held by each state.
2. Hold all caucuses/primaries ON THE SAME DAY!

Both of these suggestions have the advantage of getting the candidates to focus on the most important states from the very beginning of the cycle. They still don't take into account the need to appeal to unaffiliated or swing voters, but I think either one would would be a hell of a lot better than the way we do it now.

While we're on the subject of selfish people ignoring the good of the party... for a former vice-presidential nominee, Lieberman sure doesn't show very much loyalty. None at all. On the other hand, John Edwards continues to make me even more excited about his all-but-confirmed candidacy in '08.

Starbucks addicts rejoice!

First chocolate, then red wine, now coffee? Whoever is getting these results really needs to do a study on Ben & Jerry's Chubby Hubby...please? Then again, I guess the name alone should probably be enough to dash my hopes.

Worshipping the power of the market

A couple nights ago, I had an argument with my father and brother at the dinner table. They were both very critical of me applying to work for unions and my father started getting into problems caused by raising the minimum wage. My father, like most conservatives, has what I believe is an unreasonable faith in the power of the free market.

Unfortunately, markets never function perfectly as they are supposed to in economic models, because pesky things like environmental variables and irrationality effect the decision-making process of the participants. Even when such factor are minimal, we are faced with a system in which is considered most functional when each person or entitity is acting with maximizing its own self-interest as the only goal. One of the problems that can result from this is described by ecologist Garrett Hardin in The Tragedy of the Commons (1968). However, I think the larger problem with this type of thinking is that it condones a system where millions of people in this country work full-time and are still unable to provide their families with a decent standard of living while others purchase fourth and fifth homes at The Palm Jumeirah. A world like this can only exist when one accepts the premise that it is morally permissible to have these desparities so long as people are compensated according to the value of their labor. While I reject this very premise, most conservative economics rest upon it. Yet, even if you can accept the concept in the abstract, I take issue with anybody who argues that people in this country are in fact compensated according to the value of their labor.

To illustrate my argument, let's take a look at professional sports leagues, where owners claim they need to institute salary caps because otherwise they will lose money and force the teams and league out of business. Nobody is forcing the owners to pay ever more ridiculous wages to their superstar players. If paying Shaq $20 million per season is going to cause you to be operating in the red (at least according to whatever twisted accounting practices the team is using), PAY HIM LESS! Fundamental rule of business, people: don't spend more to make your product than you can earn by selling it. Assuming pro sports teams use reasonable accounting practices (yeah, right), there are two explanations aside from competetive balance that can explain why the owners would need salary caps. One is that they don't understand the fundamental rule of business, but since all of them managed to make enough money in whatever other ventures they undertook which earned them the money to buy a professional sports team, I think we can rule that one out. The other explanation is that they are irrationally bidding superstar salaries beyond the true value those players add to their teams, much in the same way that we continue to see skyrocketing salaries for CEOs. Paul Solman did an excellent job of explaining why this happens during one of his appearances on News Hour with Jim Lehrer:

When Graef Crystal himself started as a compensation consultant in 1959, firms often paid CEO's by formula: A multiple of the average worker -- the old 40:1. But then they started relying on consultants to survey other firms yearly to set their own CEO's pay. Crystal once polled 100 firms: Where do you like to position your CEO, the average, below the average, above the average. Well, one-third of the companies said, "We want to position our CEO in the top 25 percent, that way we can get better talent." Two-thirds of the companies said, "We want to be at the average." Not one company said we want to be below the average. So you actually have the Lake Wobegon effect: If one-third of the companies are chasing the top 25 percent and two thirds are chasing the average, you can't even catch the average. Every year, what do you know? We're behind again.

Obviously, bringing executive pay under control is only part of the equation in ensuring that workers at the bottom of the economic pyramid earn a wage which can provide their families with a decent standard of living. Although I do not advocate outright socialism, I think there needs to be a fundamental shift in the way people see the economy. A healthy economy should not be judged by the total output produced, but rather by the marginal wellbeing of all its participants.

Whew. That didn't end up where I intended when I started writing this post. Maybe I'll try again later.

Photo

Here's a photo for the profile...

The Beginning, again

Today I relaunched my job search by reaching out to a guy in DC who grew up next door to one of my parents' friends. He turned out to be really cool and VERY helpful. He not only provided me with excellent advice on where to look for jobs, what to expect, and how to present myself, but also put me in touch with a recruiter for Change to Win (a new labor federation that split off the AFL-CIO last year) and helped me tweak my resume for organized labor. As much as I appreciate the help he provided me, I feel somewhat disheartened to realize that networking really is as important as everyone told me. I wanted to believe that having a strong resume and good interview skills would be enough to find myself a job, but it looks like knowing the right people is at least as important as having everything else lined up.