Is free trade worth a child's life?

President4242

Wed Jun 20 18:09:58 -0700 2007

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I'm to the point where for me, Regulated Trade> No Trade > Free Trade. 

Mainly because I can't see free trade as being anything other than yet another scam, like fiat currency, debt, and the stock market.

Is free trade worth a child's life?

Uncle Entity

Thu Jun 21 00:15:25 -0700 2007

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Even if six families find an income where seven did before, their country is more able to provide education and the other necessities of life: in short, they get out of poverty faster

So we should cull the herd? I know that's not what you're really saying but the seventh worker will be the lowest productive worker, the one closest to the edge and you are suggesting we should let them fall over the cliff for the benefit of the other six.

How does an international minimum wage account for different currency systems? When specie currency gets in high demand, such as in cases of rapid development or investment, prices tend to lower as more goods and services are competing for a limited amount of money. People's purchasing power increases as more pressure is put on the supply of currency. Increasing wages under these conditions would lead to massive deflation. Workers would have higher purchasing power but property and capital investments would lose value.

Fiat currency works in the opposite fashion, raising wages would lead to inflation -- especially if the economy was inflationary to begin with. Any increases in wages would just lead to increases in prices and not really help the people that now make a higher wage. In addition to the loss of low productivity jobs which would result from a higher minimum wage.

Some food for thought...

Is free trade worth a child's life?

Morosoph

Thu Jun 21 05:41:02 -0700 2007

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So we should cull the herd? I know that's not what you're really saying but the seventh worker will be the lowest productive worker, the one closest to the edge and you are suggesting we should let them fall over the cliff for the benefit of the other six.

I agree that there is a problem, but the problem is that any effort to invest in any way has costs now. In this case, a higher aggregate wage which will bring less poverty in a generation (and more investment immediately, since training is a smaller fraction of wage) helping many more than might suffer immediately. The higher wage is itself an investment, since children will be more likely to be educated.

Also, poorer countries tend to have larger families, so the vast bulk will be better off. Some will draw multiple short straws, but that will be rare.

A hidden assumption in the argument that you're putting is that the deal that free trade gives you is the correct one, and that it is immoral to act with any shadow of the future acting on the present. The few that might suffer now have their importance exaggerated, since they're suffering "unnaturally".

Further, the oversupply of workers means that their wage is not determined by conventional supply and demand; rather, their wage is determined by what provides subsistence. Read Adam Smith for more on this, for he was writing in a time when there wasn't enough industrialised work yet, and competition for workers hadn't yet kicked in. There is already a minimum that is subsistence, you already have the problem that you describe. Raising the level will have the effect that some families that were in trouble can now make ends meet, and others that previously could make ends meet no longer can. Which ones are winners and losers is somewhat random, so it isn't the case that one has deliberately sacrificed particular individuals.

How does an international minimum wage account for different currency systems? When specie currency gets in high demand, such as in cases of rapid development or investment, prices tend to lower as more goods and services are competing for a limited amount of money. People's purchasing power increases as more pressure is put on the supply of currency. Increasing wages under these conditions would lead to massive deflation. Workers would have higher purchasing power but property and capital investments would lose value.

I did mention purchasing power parity (PPP) in my original article. Also, you're not accounting for the actions of a central bank. Even if the central bankers aren't especially bright, the amount of currency floating around is not fixed in any national economy in the modern world. The quantity of money is determined by the interest rate, as set by the central bank. Money is printed or retired according to what is needed to preserve the rate of interest. Accordingly, the economy is far less brittle than you paint it to be.

Fiat currency works in the opposite fashion, raising wages would lead to inflation -- especially if the economy was inflationary to begin with. Any increases in wages would just lead to increases in prices and not really help the people that now make a higher wage. In addition to the loss of low productivity jobs which would result from a higher minimum wage.

The immeadiate effect of a minimum wage is a single step inflationary change. This much is true. However, over a slightly longer period of time, the effect is to bring about an equilibrium where wage differentials are reduced.

Not as many "low productivity jobs" will be lost as you seem to imply. The reason is that our instincts are honed to what a single firm sees, for in our everyday experience, we don't get to change the system dynamics, but only to act within the system. If wages rise together, the competition has to face the same costs as your own firm, and so there is less pressure to sack people so as to match the competition's prices.

More conventially (and as an additional factor) a "low productivity job" is one where there is an oversupply of workers, so that one more is taken on when there is little difference whether he is hired or not. However, not all of these jobs will go to the wall. If you have five cleaners on a shop floor, every single one of them might have a marginal productivity near their wage. However, if there are four, each one would have a higher marginal productivity. It is simply false that there is a natural rate for a given job.

One last point. It might be enough to restrict the minimum to internationally traded goods. Clearly this would take some enforcement, since suppliers to a factory producing such goods would have to meet the same terms. I expect that the enforcement effort could reasonably be outsourced to workers themselves to a great extent, since there would be plenty with an interest in sounding out wrong-doers, such as competing suppliers that have been undercut.

Is free trade worth a child's life?

Uncle Entity

Thu Jun 21 13:56:32 -0700 2007

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In this case, a higher aggregate wage which will bring less poverty in a generation

How does this explain the experience of African Americans? A traditionally repressed minority who's unemployment levels are higher than the general population yet we import millions of workers to perform lower productivity jobs.

The quantity of money is determined by the interest rate, as set by the central bank.

Only under a fiat currency. If a currency is set at 1000 pesos per oz of gold how does a central banker produce new money without increasing the gold supply. Two ways, either take the currency off the gold standard or practice fractional reserve banking. Both of these lead to inflation in the long run with the latter leading to boom-bust cycles and bank runs as was common in the US before taking the dollar off the gold standard.

More conventially (and as an additional factor) a "low productivity job" is one where there is an oversupply of workers,

You misunderstand the concept. The productivity of a job has no relationship to the supply of workers but how much work is produced by that laboror. Let's say you have a high school kid come in and sweep the shop floor , if you raise minimum wage you will price their labor higher than the market will bear and they will simply fire the kid. In the future it will be harder for low productivity workers to get jobs to learn valuable job skills and so you will end up with 'welfare generations' such as we see in the inner cities.

It is simply false that there is a natural rate for a given job

Yes but there is a market rate for a given job. Raise the price of a job above the market rate and it no longer becomes economical viable to have that job any more. The underprivilidged are the true victims of this 'helping hand' so the next generation grows up in poverty while we import workers because its illegal to hire a citizen to do a job for less than minimum wage.

When I get a little time I plan on seeing how much total welfare benefits (food stamps, housing and all else) are worth if calculated as an dollar per 40 hour work week...there's your *true* minimum wage.

Is free trade worth a child's life?

Morosoph

Fri Jun 22 05:10:31 -0700 2007

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How does this explain the experience of African Americans? A traditionally repressed minority who's unemployment levels are higher than the general population yet we import millions of workers to perform lower productivity jobs.

There is one important difference: manufacturers have nowhere else to go. Are the world's poor to face wage competition from Mars?

Only under a fiat currency. If a currency is set at 1000 pesos per oz of gold how does a central banker produce new money without increasing the gold supply. Two ways, either take the currency off the gold standard or practice fractional reserve banking. Both of these lead to inflation in the long run with the latter leading to boom-bust cycles and bank runs as was common in the US before taking the dollar off the gold standard.

A fixed money supply does not cope well with changes in economic patterns, such as a change in the velocity of money (one thing that a minimum wage would increase, BTW). I wouldn't argue that more money should be printed indefinately, but rather that one restraint (fixed money supply) should be replaced by another (interest rate, ideally set with a view to hitting an inflation target over the medium term). A fixed money supply leads to cycles just as bad or untrusted policy does, for it cannot relax in the face of tension, not can it tighten in the face of surplus.

It is certainly true that interest rate policy has been open to political influence in the past, which is the real cause of boom and bust, but more and more countries have been giving the central bank independance, subject to inflation targets.

Extremely low inflation, or indeed negative inflation (as a fixed currency in the face of growth would bring) is harmful, just as high inflation is. High inflation brings with it unpredictable price jumps, making it hard for buinesses to plan, but negative inflation would also bring random price cuts, which would bring the same kinds of uncertainty: how much should you factor these into your plan for the year ahead? Inflation below (say) one percent prevents necessary economic "lubrication", for prices do need to be able to change, or else supply and demand cannot work.

You misunderstand the concept. The productivity of a job has no relationship to the supply of workers but how much work is produced by that laboror. Let's say you have a high school kid come in and sweep the shop floor , if you raise minimum wage you will price their labor higher than the market will bear and they will simply fire the kid. In the future it will be harder for low productivity workers to get jobs to learn valuable job skills and so you will end up with 'welfare generations' such as we see in the inner cities.

I understand what you're saying, but there is another factor: the value attributed to the work in the first place. If the market rate for a cleaner has increased, this causes the businessman who is hiring them to alter the proportions in which they allocate money. They are seen as constituting a larger slice of the value of the product. Productivity in terms of amount cleaned might remain constant, but money productivity is not a concept that is independent of human arbitration.

I agree that there will be job losses, but the forced reassessment of value means that they will be fewer than you might anticipate. Additionally, families in poor countries tend to be large, and extended. This means that the law of large numbers can come into play: if the rate has been set by poorer countries, the rate chosen will be such that [income x low-paid-workers] is maximised, so that a typical family will be better off. Your focus upon marginal individuals makes more sense in the context of nuclear, rather than extended family arrangements.

With others in the same (extended) working, the family members won't be disconnected from the field of work, and have the opportunity to educate themselves or each other. I can't take your comment about skills very seriously, though: skilled jobs pay more than the minimum even at the apprentice level. Also, the higher value of a worker makes training more attractive to an employer, which also creates gaps when the now trained worker is promoted.

Your observation about families in inner cities is (ironically) tainted by political correctness. These families are out of the habit of working, and lean on the dole. There is no dole in poorer countries; those out of work will be motivated either in their own right, or by those who are paying their way.

Yes but there is a market rate for a given job. Raise the price of a job above the market rate and it no longer becomes economical viable to have that job any more. The underprivilidged are the true victims of this 'helping hand' so the next generation grows up in poverty while we import workers because its illegal to hire a citizen to do a job for less than minimum wage.

The market rate is far from god-given; see my example above. Also, you're bringing in irrelevancies about the effects of minimum wage in an open system; if the minimum wage is international, there's nowhere for the cheaper workers to come from.

Now, richer countries and regions might want to institute higher minimums, and three are costs and benefits to doing that, however, that is not what I am arguing about. Your points about the effects of the minimum in richer countries actually lean upon the fact that there is poorer competition from elsewhere.

When I get a little time I plan on seeing how much total welfare benefits (food stamps, housing and all else) are worth if calculated as an dollar per 40 hour work week...there's your *true* minimum wage.

Now you're getting it. This isn't rich-country minimum wage that I am talking of, but rather a wage for the very poor indeed. One that aims to increase their income from dirt poor to a little bit more. One that maybe allows them to have one child educated instead of none, or allows then to be able to save a little and maybe start up their own simple business.

Poor countries don't have the productivity to pay rich country minimums, this is why the level has to be set by the poorest countries.

Is free trade worth a child's life?

Uncle Entity

Fri Jun 22 11:53:00 -0700 2007

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...but rather that one restraint (fixed money supply) should be replaced by another (interest rate...

It turns out that the interest rate set by the Fed has very little to do with inflation yet it is seen as a major influence in the media for some reason. Most of it comes from them purchasing bonds on the open market leading to banks having a higher reserve which they can produce new money on top of. The pattern goes, govt sells new bonds on the market, fed buys old bonds from the market and new money is created.

So what you're saying is that before they invented this Ponzi scheme called fractional reserve banking and prices were basically stable over *generations* that businesses couldn't plan for the future better than when their capital loses value inless it is put into active use. Gone are the days where you can just let your money sit around and do nothing, now you *must* put it in a bank for it to retain its value in the face of inflation and this only leads to more inflation since the cash reserves in the bank has now grown higher. These bankers know exactly what they are doing with the whole inflation scheme and it isn't designed to help out anyone but the banking industry.

Businesses were able to function for thousands of years not only without a central bank's inflationary fiat currency but even without paper money. Governments used to debase coin every once in a while but they did it with extreme caution, this was the cause of quite a few revolts in the past.

Your focus upon marginal individuals makes more sense in the context of nuclear, rather than extended family arrangements

Isn't that one of the arguments in favor of a welfare system, the disintegration of the extended family? So what you're suggesting is we take workers out of the workforce and have them rely on the generosity of the community for support because the people that keep their jobs will be able to support more people on their new, higher wage even in the face of inflation. Seems to be something I'm missing here.

I can't take your comment about skills very seriously, though: skilled jobs pay more than the minimum even at the apprentice level.

Its hard to get a minimum wage job without any previous work experience let alone a skiled job. Employers want to see basic things like the ability to keep a job and all the things that entails before they'll take a risk on someone and everyone I know did that with low productivity jobs in their youth. Except for the few that can manage to not work a day before graduating from college and have Daddy make a call to get them a skilled job *everyone* has to work their way up from the bottom.

Your observation about families in inner cities is (ironically) tainted by political correctness. These families are out of the habit of working, and lean on the dole.

Without a minimum wage, instead of moving a factory to India they could move it to Compton to take advantage of cheap, low skilled labor. Then they can learn the skills necessary for them to get higher wage jobs and can get out of poverty without the 'helping hand' of Big Government. 'Exploiting' the poor is what that's called I believe.

Before minimum wage and welfare there wasn't a problem of people out of the habit of working, it is a problem created *by* the system itself. If you can sit on your ass and watch soaps all day and collect the equivalant of $10 an hour of welfare benefits why should you go out and get a $6/hr job. But if you are forced by the threat of starvation to sell your labor you might be a little more motivated to take a job at maybe less than minimum wage. As it is illegal to hire someone at less than the minimum wage and there is the dole businesses don't need to feel guilty about sending jobs overseas because of a worker shortage in their home country, the US even pays companies to do this.

These factory exports do more for the poor people of the countries than a minimum wage ever will. Look a the last victims of 'western exploitation,' Japan, Korea and Taiwan...they seem to be doing just fine.

Is free trade worth a child's life?

Morosoph

Sat Jun 23 05:31:37 -0700 2007

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It turns out that the interest rate set by the Fed has very little to do with inflation yet it is seen as a major influence in the media for some reason. Most of it comes from them purchasing bonds on the open market leading to banks having a higher reserve which they can produce new money on top of. The pattern goes, govt sells new bonds on the market, fed buys old bonds from the market and new money is created.

Well, okay; the point is that inflation can be managed over the long term.

I have to say that I smell essentialism in your approach: there has to be "real money" somewhere; the economy is a dynamical system, the elements of which are ignorant of exactly how much gold (say) a particular note represents. Even in the face of knowledge, the dynamics of supply and demand overwhelm the social construct that accompanies the real (but irrelevant) fact of there being a store of treasure somewhere.

What is relevant is confidence, and the need for a store of treasure backing a currency reflects distrust in the reserve. For the reserve to follow a tight and trusted policy is an alternative, but it relies upon studied independance from politicians.

So what you're saying is that before they invented this Ponzi scheme called fractional reserve banking and prices were basically stable over *generations* that businesses couldn't plan for the future better than when their capital loses value inless it is put into active use. Gone are the days where you can just let your money sit around and do nothing, now you *must* put it in a bank for it to retain its value in the face of inflation and this only leads to more inflation since the cash reserves in the bank has now grown higher. These bankers know exactly what they are doing with the whole inflation scheme and it isn't designed to help out anyone but the banking industry.

Before industrialisation, the economy didn't change (or grow) a whole lot. A fixed money supply would make sense, then. There are good reasons to increase the money supply in a steady way, and allow it flexability in the face of (for example) seasonal variations in investment.

Having to keep your money in a bank is unfortunate, but the alternative is to have an economy that doesn't cope well with industral growth.

Businesses were able to function for thousands of years not only without a central bank's inflationary fiat currency but even without paper money. Governments used to debase coin every once in a while but they did it with extreme caution, this was the cause of quite a few revolts in the past.

Debasing the coin in a single step would, most likely, cause chaos, and not give a way to restore the loss, such as by having your money in a bank account.

Your focus upon marginal individuals makes more sense in the context of nuclear, rather than extended family arrangements

Isn't that one of the arguments in favor of a welfare system, the disintegration of the extended family? So what you're suggesting is we take workers out of the workforce and have them rely on the generosity of the community for support because the people that keep their jobs will be able to support more people on their new, higher wage even in the face of inflation. Seems to be something I'm missing here.

I'm not talking about rich countries, and although we are likely to disagree there too, I want to focus upon my suggestion, rather than argue in general about the minimum wage.

My suggestion is that poor countires form a cartel so as to push the wage for their nationals' labour up so as to maximise [employment x income] for the very poor. Someone else's argument as to how welfare is justified in rich countries is simply not relevant.

BTW, you're absolutely right despite your sarcasm. Inflation is a one-off as the economy restructures, and the wage is calculated at a monopoly rate, ie. so that there is indeed more money around to help those in one's own family (community bonds would not be strong enough) who remain out of work.

I can't take your comment about skills very seriously, though: skilled jobs pay more than the minimum even at the apprentice level.

Its hard to get a minimum wage job without any previous work experience let alone a skiled job. Employers want to see basic things like the ability to keep a job and all the things that entails before they'll take a risk on someone and everyone I know did that with low productivity jobs in their youth. Except for the few that can manage to not work a day before graduating from college and have Daddy make a call to get them a skilled job *everyone* has to work their way up from the bottom.

Employers still need employees, and they need to hire new employees. More money coming in from rich countries (remember that the rate is calculated so a to maximise this amount) means that employees will be promoted more rapidly, and vacancies created. Employees still need to work their way up from the bottom, but they no longer prevent each other from getting ahead. It's also more worthwhile training them, and again vacancies are created as the newly trained takes on new work.

I get the impression that you're appeaing to some sense of natural order with the assumption that that order is the best order achievable, and if it isn't, it's immoral to try anything else. Certainly, most intervention is too fine-grained and incompetently instituted to improve matters, but the minimum wage is not fine-grained, and allows businesses several degrees of freedom so as to adapt. Also, the effect of the minimum wage is that of a normal type of business cost, such as when they have to deal with a monopoly, or else (albiet less exactly) goods that are in finite supply (such as land).

Without a minimum wage, instead of moving a factory to India they could move it to Compton to take advantage of cheap, low skilled labor. Then they can learn the skills necessary for them to get higher wage jobs and can get out of poverty without the 'helping hand' of Big Government. 'Exploiting' the poor is what that's called I believe.

Again, you're introducing rich-country irrelevancies. It is wages in India, not Compton that I'm talking about. I know that for you the minimum wage in the States is a big issue, but that is not the policy that I am putting forward.

Also, I'm not using Marxist language, so talk of 'exploitation' is irrelevant. Indeed, if you look a few posts up, I stated clearly that free trade is preferable to no trade. I am trying to argue a policy. I don't care for politics.

It's pretty obvious to me, and is conventional economics, that if the world poor (ie. not the low paid in Compton) could form a cartel, they would get a better deal out of it. Unlike most cartels, this one would actually be beneficial. Furthermore, it is something that, if only they could co-ordinate their effects, they would, in general, most definitely want to do.

Before minimum wage and welfare there wasn't a problem of people out of the habit of working, it is a problem created *by* the system itself. If you can sit on your ass and watch soaps all day and collect the equivalant of $10 an hour of welfare benefits why should you go out and get a $6/hr job. But if you are forced by the threat of starvation to sell your labor you might be a little more motivated to take a job at maybe less than minimum wage. As it is illegal to hire someone at less than the minimum wage and there is the dole businesses don't need to feel guilty about sending jobs overseas because of a worker shortage in their home country, the US even pays companies to do this.

Again irrelevancies about jobs America when this is not what I'm talking about.

These factory exports do more for the poor people of the countries than a minimum wage ever will. Look a the last victims of 'western exploitation,' Japan, Korea and Taiwan...they seem to be doing just fine.

Again a general broadside against Marxists, and a projection that I am really talking about policy in the States.

Maybe the workers in poorer countries could get a better deal, and sooner.

Is free trade worth a child's life?

Uncle Entity

Sat Jun 23 08:24:35 -0700 2007

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As I live in the states and have seen the effects of a welfare state my whole life and that's the only system I have any knowledge of that is the reason I use it in my examples, not to start a debate about the US system as compaired to say the UK one. The problems created seem to be relativly universal in that introducing a minimum wage also means a welfare system is also needed to support the people who lose out because, barring outright socialist countries, the only states with a welfare system also have a minimum wage.

It also wasn't my intention to start a discussion on the relative merits of a fiat currency over a specie backed one but to point out that the two systems would react differently to an artifical increase in wages which you obviously understand by calling for everyone to go to a fiat currency. While I don't agree with this at all, it seems to be very popular with governments and big business so I'm sure it will be exported to the few holdouts that still exist. It also looks like a minimum wage would be nearly impossible under the gold standard without some major pain for everyone except people who don't own anything that could lose value like land. It makes me wonder why the wealth redistribution folks haven't tried this to reduce the income gap by depreciating assets while increasing purchasing power.

A closing thought...the industrial revolution got along just fine without the rampant inflation of the last 70 years, the only real problems came when banks overextended themselves and refused to honor their legal obligation to return the deposits of their customers when demanded in hard currency.

Is free trade worth a child's life?

Morosoph

Mon Jun 25 05:21:23 -0700 2007

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The problems created seem to be relativly universal in that introducing a minimum wage also means a welfare system is also needed to support the people who lose out because, barring outright socialist countries, the only states with a welfare system also have a minimum wage.

The minimum wage has historically occurred after the basic welfare system, since alleviation of poverty (rightly, IMO) was prioritised above "a fair deal for workers" (not my language).

It cannot occur that way in poorer countries, since they simply do not have the GDP to pay for a benefits system. Maybe, the minimum would be a slippery slope to a sub-optimal future state of the economy once these countries become developed, but if you can have less poverty and a more educated workforce sooner, it's likely that the benefits of that will outweigh the costs.

Given that large extended families can smooth the effect of any reduced employment; maximising the family income through voluntary employment, in that every job is still of benefit to both parties, is not best achieved by being undercut by workers in other poor countries when such workers could be included in a cartel. The income boost that cartelisation brings is likely to slow ghettoisation, and having an international cartel should deal with the cause of the mass elimination of ghettoised employment, for a closed system has different properties than an open system. The jobs simply cannot move elsewhere. At least not on the basis of wage differentials.

A further benefit of an international minimum is that it actually weakens (but does not eliminate) competion from abroad. Jobs will still go abroad, but the downpull on wages will be less. This could be an improvement for the ghettos in richer countries. I haven't mentioned this yet because I wanted to make clear that my interest in in the world's poor, which is also why I am opposed to trade restrictions in western interests. However, I mention this a a counter to the point that you make about the effect of a minimum wage on the ghettos. This proposed minumum, being international, should actually improve them.

One trouble is that familiarity is misleading you, for again and again you mention competition from abroad. A simple model of cause and effect is substituting for systems analysis. Analogy between systems with similar dynamics is much stronger than a generalisation from a subsystem to the entire system. Everywhere local is not the same as global. If you consider any economic phenomenon with externalities, you should be able to see what I mean. This specific example of mis-generalisation is a small part of a larger critique of conservativism.

Regardless of the analysis that I, or anyone else puts forward, the international minimum wage is not likely to happen. A combination of ideology and American manufacturers' interest in cheap labour is likely to lead to a sustained effort on the parts of the States to break up such a cartel, and deals brokered by companies directly with third-world governments to the same effect.

The American effort to bring about a maximalist stance thoughout the world on "intellectual property" shows exactly how much they care about poverty.

It also looks like a minimum wage would be nearly impossible under the gold standard without some major pain for everyone except people who don't own anything that could lose value like land. It makes me wonder why the wealth redistribution folks haven't tried this to reduce the income gap by depreciating assets while increasing purchasing power.

We had a system called "rates" in the UK where there was a tax on property proportional to its value. It was replaced with a per-head tax (the infamous "poll tax", or Community Charge) which was so unpopular that we ended up with a bastard child of both. Restoring the rates system would be nigh-impossible: quite simply, the marginal voter will not vote for a reduction in the value of their property, despite the fact that any property they'd want to buy would also be deprecated. This is partly because of common irrationality, and partly because mortgage lenders get decidedly nastier when a property goes into "negative equity". The entire financial system in full of idiots who look into the past rather than the future.

There is a way around your problem regarding the Gold Standard, and it is this: the minimum is not economy-wide, but only applies to internationally traded goods (both factories and their suppliers). Since the goods are traded internationally, the surplus can be paid for in foreign currency. Alternatively, this currency can be used to buy gold to back the local currency. While it is true that lefties will object to the "two tier economy" that emerges, it should help achieve the end of getting more wealth in the hands of those who would wish to improve themselves and their families (in particular their children), and into the economy as a whole. It might also deal with many of your other objections, in that local jobs will still be around. As the economy develops, the distiction between the tiers should become less and less pronounced.

A closing thought...the industrial revolution got along just fine without the rampant inflation of the last 70 years, the only real problems came when banks overextended themselves and refused to honor their legal obligation to return the deposits of their customers when demanded in hard currency.

A few criminal convicitons would do a lot to make banks more cautious.

Is free trade worth a child's life?

Uncle Entity

Mon Jun 25 21:59:55 -0700 2007

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The minimum wage has historically occurred after the basic welfare system

Well yeah, you can't put thousands of people out of work without having a 'safety net' to catch them. These kinds of things lead to revolts.

...the effect of a minimum wage on the ghettos. This proposed minumum, being international, should actually improve them

That's the opposite of my point that getting rid of minimum wage would help the ghettos. The only difference between the two is government interference in the market, you can have a labor board to enforce wages (with an increase in taxes to support it) or no government price fixing and more money retained by the worker because of reduced taxes. I prefer one system and you prefer the other.

We had a system called "rates" in the UK where there was a tax on property proportional to its value.

We have this too. The problem comes in when the tax increases with the property value but the higher 'value' is only realized when it is sold. Case in point; my grandmother has a house in San Jose that my Dad grew up in. Houses in the neighborhood are going for two to three million but back in the 40s they probably paid 10-20k. Without the voters passing a law which capped the property taxes to 1973(?) levels there's no way she could afford to pay the taxes on that house. Actually all my relatives in the SF Bay Area are in the same boat, massivly inflated housing prices but tax based on actual purchase price. You would have a revolution if they tried to repeal that law in California.

Alternatively, this currency can be used to buy gold to back the local currency.

Uh huh, buy a new presidential limo or buy gold on the open market...this currency would be in the hands of the workers who would be getting a higher minimum wage so the government would have to increase taxes to buy gold to prevent deflation. This plan would prevent the new influx of capital to be used to help the poor, the very reason for its existance, because the government would be using it to inflate the currency. The money would go from the rich countries straight into the hands of gold speculators in the rich countries.

A few criminal convicitons would do a lot to make banks more cautious.

The whole reason of going with a fiat currency is to encourage this sort of behavior. With hard currency a bank that knows its competitor is overextended can buy some of its debts and demand payment, if it can't pay it's forced out of business. Kind of a natural system of checks and balances, plenty of cases of this happening I'm just too lazy to find links. 100% reserve as the rule and no artificial inflation.

Everywhere local is not the same as global. If you consider any economic phenomenon with externalities, you should be able to see what I mean.

How is a global theory of economic phenomenon going to help the person in Peru that just lost his job because of some idealistic plan to help the world's poor? If you fail to take into account the effects on the individual but concentrate on the group or the whole then you are bound to make mistakes on grand scales. The Great Depression lasted years longer than it would have because of thinking of this sort, if they would have just left things alone it would have just another valley in the business cycle. They wanted to *fix* the system and the only thing that saved us from our saviors is WWII jump starting the US economy. Yet again I'm being UScentric but that's where I pay taxes so I don't really concern myself with other government's interventionism.

So yeah, I could care a rat's arse about fiddling around with the global economy to lift a certain percentage of the world's poor out of poverty as long as I'm not the one who is required to apply the violence to enforce the laws.

Probably be better for everyone involved to impose universal sufferage instead of universal minimum wage then they could decide their own fate instead of a world body who only looks at 'the big picture'.

Is free trade worth a child's life?

Morosoph

Tue Jun 26 05:53:42 -0700 2007

manage

Well yeah, you can't put thousands of people out of work without having a 'safety net' to catch them. These kinds of things lead to revolts.

If the family is getting more in aggregate, there is a safety net.

That's the opposite of my point that getting rid of minimum wage would help the ghettos.

Quite. That's the effect of the wage being international. If other countries have a minimum, then there's less pressure on unemployment in your own country. It's a kind of prisoners' dilemma, if you like.

The only difference between the two is government interference in the market, you can have a labor board to enforce wages (with an increase in taxes to support it)...

Not necessary: employees and competitors can sue. The system is hugely self-policing.

Without the voters passing a law which capped the property taxes to 1973(?) levels there's no way she could afford to pay the taxes on that house. Actually all my relatives in the SF Bay Area are in the same boat, massivly inflated housing prices but tax based on actual purchase price. You would have a revolution if they tried to repeal that law in California.

You're missing something: if house prices have tripled (say) since, the value of rates would simply be lower. Having a lower peg simply changes the multiplier. Any house-price based system needs reassessments and calibration, but an income-based system is more intrusive, and a poll tax would really start riots.

Alternatively, this currency can be used to buy gold to back the local currency.

Uh huh, buy a new presidential limo or buy gold on the open market...this currency would be in the hands of the workers who would be getting a higher minimum wage so the government would have to increase taxes to buy gold to prevent deflation.

Where's the slack? Manufacturers receive foreign currency, they change it at the bank, and pay their workers. The bank in turn sells foreign currency with the central bank, which uses it to buy gold to back their currency with.

If the central bank cannot be trusted to hang onto the gold, your plan for a gold standard fails independently.

This plan would prevent the new influx of capital to be used to help the poor, the very reason for its existance, because the government would be using it to inflate the currency. The money would go from the rich countries straight into the hands of gold speculators in the rich countries.

Why is the tax required? The foreign currency is offered voluntarily in exchange for local currency. I do not doubt that gold speculators will gain from this, but that is of the order of the usual cost of currency exchange, which is a given.

So yeah, I could care a rat's arse about fiddling around with the global economy to lift a certain percentage of the world's poor out of poverty as long as I'm not the one who is required to apply the violence to enforce the laws.

The mechanism that I have in mind is suing, ie. private law. Wage boards aren't needed. Rather, it is treated as part of the terms of contract. Between employees and competiors, you should find pretty effective enforcement.

Probably be better for everyone involved to impose universal sufferage instead of universal minimum wage then they could decide their own fate instead of a world body who only looks at 'the big picture'.

It doesn't even need to be a world body. OPEC is pretty effective without central enforcement.

Not only that, but if you follow my suggestion of limiting the minimum to international trade, the job losses will be more than made up in the local economy. I agree that universal sufferage would be a great way forward, but I suspect that my suggestion would be even more appealing to poor countries who's inhabitants have the vote.