Tuesday, September 3, 2013

UK Takes First Feeble, Steps to Eliminate Unemployment and Poverty in the Manner We Have Long Proposed

On various occasions we have pointed out the imbecility of welfare schemes that make idleness pay while offering no assistance to the working poor.

The solution to the problem of poverty among those able and willing to work is a free labor market and a publicly funded income supplement, thus ensuring that those unable to earn a living wage in the market economy do not starve.

As I have discussed previously, the idea has a number of variants, for example, a negative income tax, tradable wage subsidies, etc., and it remains to be seen which offers the most efficient means of achieving the intended objective.

Such ideas are, naturally, derided by the dupes and shills of the billionaire libertarians, but they offer the only practical solution to the problem of poverty due to mass unemployment in non-competitive regions of the West such Greece and Spain, Detroit and Glasgow, etc. — other than waiting for the billionaire libertarians to solve the problem through their own generous (not) charitable activities.

Western capitalists find it much cheaper to manufacture clothing for the home
market in collapsible factories such as this one in Bangladesh, than pay Western
workers real wages to work in factories at home that are subject to workplace
health and safety regulations and where minimum wage laws apply.. (Image source)
In addition, unemployment due to the lack of adjustment mechanisms, for example, between Greece and Germany in the EU or between Michigan and the Dakotas in the US, can be alleviated by across-the-board adjustments in wage rates based on national or regional unemployment rates.

Despite the venoumous ridicule of such ideas from the Libertarians intent on destroying the welfare state while intending to do nothing, other than bleat about morals and charity, to deal with the resultant social catastrophe, the British Government, at least, is taking steps precisely in accord with the policies we have advocated.

Thus, for example, the UK Government is now contemplating government subsidies to wages for low paid workers administered through the tax system. At the same time, the UK Government has instituted variable pay scales for public servants such that those in poorer regions, i.e., those regions with generally high unemployment, will get lower pay.

Although these are only feeble, baby steps in the direction we have advocated, they may lead ultimately to a general solution to the problems of mass unemployment and poverty that have been created as a consequence of forcing Western worker, through the process of globalization, into direct competition with billions of Third-Worlders working for pennies an hour.

The cost of assembling an i-Phone at a Chinese sweatshop is said to be about
US$4.00. Nobody even thinks of trying to compete with that at European or
American minimum wage rates. (Image source)
For now, the measures adopted or proposed are no doubt seen as stopgap measures to be withdrawn when the economy improves. But when it becomes clear beyond doubt that when you off-shore the economy the only way you'll get it back is by lowering the cost of labor to match that of the Third World then serious thought will be given to how to achieve that without inducing mass starvation among the working poor who have to face a far higher  cost of living than those Bangladeshi garment factory workers or those Chinese assembly line workers who assemble i-phones and just about any other consumer good available in the West.

Naturally, we expect no credit for identifying the solution to the central economic problem of the times. But surely within a few years some Ivy League University economics professor will win a Nobel Prize for encapsulating these obvious ideas into a couple of mathematical equations that no one but a PhD economist can understand.

See also: How Globalization shrinks the economy

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