Americanly Yours

You might wonder exactly why it is that janitors earn much less money than CEO’s. After all, in most circumstances, janitors engage in much more physical labor than do CEO’s, executives and managers, and even the average “white collar” worker.

Are the working class laborers being systematically exploited by managers and white collar workers? Is it the case that white collar workers are making money at the expense of blue collar workers, or is there a better explanation?

Value Does Not Come From Labor

If labor created value, then society (and all of its members) could get rich by having everyone use their bare hands to dig large holes in the desert and then fill them back up. After all, this would be extremely hard work of a very physical nature. However, this would create no wealth for society—in fact, it would represent a destruction of wealth (imagine what the laborers could have actually produced if they were not hired to complete this task).  Generally, this destruction of wealth takes place in the form of an absence of economic activity which would have otherwise occurred.

The value of a product does not come solely from the labor of the workers. The value of a product is measured subjectively; a product is essentially worth what people are willing to pay for it.

A laborer in turn receives payment for his services based on the value that his work adds to the product or service. A janitor in a shoe factory adds relatively little value to the shoes that are being created. There is likely more value being added by the designer who designs the shoes, by the worker who sews the shoes together, and by the person who manages the distribution network which allows for the shoes to be sold in thousands of stores around the world. These workers add more value to the product, despite the fact that the janitor undoubtedly exerts more physical effort to do his job.

Scarcity

While value added by workers is an important reason for the existence of disparities in income, scarcity tells much more of the story.

As Thomas Sowell put it, economics is the allocation of scarce resources which have alternative uses. With the exception of air, just about all resources are scarce. Similarly, nearly all resources have alternative uses (should this rubber be used to make tires or shoes?, should this glass be used to make a window or a beer bottle?, should my time be spent watching a movie or cleaning the house?).

Scarcity doesnt just mean that there isnt a lot of a certain good. Scarcity means that the good is limited. Even in America, bread is a scarce resource.

Diamonds and Water

Think of diamonds and water. Which of the two resources is absolutely essential to life, and which could we live without? Water is infinitely important: without water we will all die very quickly. Diamonds are nice and sparkly and women love them, but they are hardly essential to our lives. However, water is very cheap and diamonds are very expensive. This phenomenon is known as the “diamond/water” paradox. The reason for the differences in the costs of these goods is scarcity; water is abundant, while diamonds are scarce.

For example, I live in unincorporated DeKalb County [in Georgia] where my water is provided by a government monopoly (and hence is likely more expensive than would be the case under a free market system). Yet, the monthly bill for my 3 bedroom house has averaged $61.17 per month since April of 2007. In other words, over the past 4 years, it has cost about two dollars per day to provide the 2-3 people living in my house at various times with the most important resource that we need for survival. In fact, water is so cheap that I can do more than just use it for survival needs—I use it for showering, cooking, watering my plants, and even brewing beer.

What does this have to do with janitors and CEO’s?

Well, the same principles which lead to the diamond/water paradox also apply to compensation for labor. Please keep in mind that my intent is not to belittle the work that janitors do. I know that this type of work is physically demanding and dirty work. However, there is little skill involved and little intelligence required. The fact of the matter is that nearly every able-bodied person above the age of 13 or so is probably qualified to be a janitor. In contrast, there are only a very limited number of people who have the intelligence, experience, and ability necessary to be a successful CEO of Coca-Cola. Janitors are replaceable and easily trained. High-level executives are not. In other words, the pool of available janitors is relatively unscarce when compared to the pool of available CEO’s of Fortune 100 companies.

Bringing it all together

Disparities in income are hardly the result of exploitation by the white collar class against blue collar workers or the working poor. Compensation results from several factors including the value added by the worker, as well as the relative scarcity of the pool of workers available to fill that position.

There is no Federally mandated wage scale requiring certain salaries for certain types of workers. Decisions on how to pay employees—be they janitors, CEO’s, or something in between—are generally made on a company by company basis. Those in the position to hire janitors will pay them according to the value that they believe will be added to the firm. They will likely tend to pay the janitor at levels similar to that of other janitors in related fields. This is because a janitor is likely to add similar levels of value at which ever company he works. The range of compensation for CEO’s is very large, with CEO’s of smaller companies earning drastically less than do CEO’s at large multi-national firms. This is because of the differences in the amount of value that can be added by different CEO’s in different fields at different companies. The CEO of Wal-Mart is responsible for running a worldwide distribution network, ensuring that over a million employees get paid, and in a broader sense—ensuring that society is fed and clothed. In contrast, the CEO of a small but delicious pizza chain has responsibilities which are much greater than his employees, but which do not compare to that of the CEO of Wal-Mart.

Ceteris Peribus

This article does not deal with things like corporate welfare or other special privileges which are often received by corporations from the State. While special privileges will likely skew the distribution of income away from the bottom of the and towards the top, the principles at hand do not change. In a truly free society with no governmental grants of limited liability, no business licensing requirements, corporate welfare, and private control of the currency, income is likely to be somewhat more evenly distributed among the productive members of society. However, as long as there is any level of freedom of choice, there will always be disparities in income.  Income disparities are not always bad–in fact, they are very important.  Differences in income give us something to strive for.  If we all earned the same wages, no matter how hard we worked, no matter how much value we added to society, and no matter what type of work we did, no matter our ages, or no matter how much experience we had, there would be little reason for people to put much effort into their jobs.  There would be little incentive for anyone to be productive beyond the subsistence level–after all, any additional effort that they did would have to be shared equally with all of society.  If we were all the exact same, there would be no reason for trade, or even for society to exist.  It is our differences which encourage people to interact and trade with each other.  No society larger than a small tribe could survive for long if wages were distributed equally.

As long as there are people with different skills, levels of intelligence, backgrounds, lifestyles, and so on, there will be differences in income. People are different from each other, and as such, will seek out different goods and services. They will also find themselves qualified for different types of employment than their friends and neighbors. Typically, those who are employed in positions that create a lot of value and are relatively scarce will earn higher incomes than those who are employed in positions that create little value and are relatively common.

Americanly Yours,

Phred Barnet

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Well theyve gone and done it.  Congress has passed a bill that has been consistently opposed by the majority of Americans. This bill is horrendously costly and will cause the country’s deficits and total debt to rapidly expand–something that we can hardly afford when we are already in grave danger of losing our AAA credit rating. After watching debate over this bill on C-SPAN, it is clear that the Congressional supporters of this bill seemed to be intentionally ignoring both the financial problems with this bill, as well as the potential that this bill will lower the quality of health care available for all Americans.

For confirmation of this, check out the C-SPAN coverage of this issue, especially the speeches starting from around 70 minutes until they begin voting on the rule.

President Obama promised that American people that he would pursue a bipartisan approach to health care reform.  Unfortunately for the American people, President Obama did no such thing.  Representative Paul Ryan (R-WI) and several other Republicans have been begging President Obama and the Democratic leadership to listen to other ideas and to move to attack some of the problems with health care that the vast majority of Americans agree on.  This bill is not bipartisan in any remote sense of the word.  In a clear sign of both idiocy and doublespeak, Nancy Pelosi disagreed and declared that a “bill can be bipartisan without bipartisan votes.” The argument here was that because Democrats have included a few small ideas that Republicans and independents support in the bill that it can be called bipartisan.

In fact, the only thing that can even be said to be bipartisan about this bill is the opposition to it.  There are no Republicans supporting this bill; it is opposed by every single Congressional Republican and a number of Congressional Democrats.

But, even if this bill had been a perfect example of bipartisan compromise, it is still wrong.  On top of being immoral and undemocratic, this bill is blatantly unconstitutional.

Alas, they have passed it and the battle is over.  What do we do now, you ask?:

Well, we have three choices here.  We can:

1)  Admit the fight is over, accept this new national health care system, its immense costs and potential to result in a level of care much lower than the current level.  Accepting this option is akin to tacitly accepting that our federal government no longer has any limits and thus, is no longer bound to the contractual restraints placed upon it by the Constitution.

2)  Accept that the battle is over, but focus our efforts on repealing this bill.  Republicans have little chance of retaking the Congress in November, and given their history of supporting big government programs, there is little if any reason to believe that they will seek to implement a health care system based on the principles of freedom.

3)  Take the passage of this bill as a setback and as the loss of a major battle, but regroup and get ready for a major guerrilla offensive.  The centralized approach to fighting this bill should be abandoned for now.  This battle simply cannot be fought on the national level right now.  The answer is for a number of different methods of attacking this plan.

Clearly, I favor option 3.  Under this option, we must urge our State legislators to nullify this and all future health care bills coming from D.C.  We must urge our State to follow the lead of Idaho and sue the federal government (however, we should also realize that it is unreasonable to expect federal courts to curb federal power).  Individuals and groups must follow a similar strategy and file lawsuits against the implementation of this bill.  One good thing about this bill is that many of its provisions do not take effect until 2013 and 2014, giving us plenty of time to try out various strategies

The important thing here is to not rely on only one strategy.  We must favor a decentralized strategy for fighting this bill for the same reason that we must facor a decentralized system of government.  The consequences of failure in a “one size fits all” system are too great.  By fighting a number of separate battles against the bill, we can be sure that the failure of one strategy will not lead to our total failure.  Additionally, the beauty of this strategy is that the success of any one of the single strategies that we are using to fight this bill could result in the death of this bill.

The Constitution was a contract between the States to create a federal government.  In creating the federal government, the Constitution also served as a contract between the States and the federal government.  The Constitution delegated certain powers to the federal government and reserved the remaining powers to the States (and to the individual people).

Article 1, Section 8 of the Constitution delegated certain powers to the federal government.  The 9th and 10th amendments to that Constitution placed every power not given to the federal government in the hands of the States and the people.

[The 9th Amendment reads: “The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.”]

[The 10th Amendment reads: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”]

This is the plain and simple truth.  Anyone who argues that the Constitution must adapt to changing times is ignoring the fact that the Constitution contains the mechanisms for this adaption in the amendment process. Any expanse of federal power that is not covered by the Constitution or by subsequent amendments is a direct violation of the Constitutional contract.  Thus, if the federal government wanted to lawfully implement a national health care system, Congress and the States would need to ratify a Constitutional Amendment granting this power to the federal government.

A contract obviously cannot be expected to enforce itself–Party A must be vigilant to ensure that Party B does not ignore the provisions of the contract and take advantage of Party A.  But, suppose that Party B does take advantage of Party A–what now?

The States as sovereign actors must do their parts to reject the improper violations of the Constitutional contract by the federal government.  This means that State governments must refuse to implement–or to allow the implementation of–this violation of the Constitutional contract by one party.

An illegal law is no law at all.  A law that expressly violates the Constitutional contract is invalid and can be ignored by the States.

37 of the 50 States are considering bills to nullify this health care bill.  That is, these States are refusing to allow the federal usurpation of local power to continue (at least in the area of health care).  Several days ago, Idaho became the first State to sign a bill into law requiring the State’s Attorney General to sue to federal government over this bill.  States like Virginia, Arizona, and Utah have also passed nullification bills and are only awaiting the signature of their governor.  Many of these States are considering laws that would lead to the imprisonment of any federal official attempting to enforce any law which is not explicitly authorized under Article 1, Section 8 of the Constitution.

There has been a long history of nullification to prevent the federal government from implementing unconstitutional or unjust violations of the Constitutional contract.  This history has included but is not limited to the following:  attempts by Northern States to nullify the propsed military draft in the War of 1812 and actions by Maryland and Wisconsin to nullify the Fugitive Slave Act (and to charge anyone who took an escaped slave back into captivity with the crime of kidnapping).

More recent examples of nullification include (but are certainly not limited to) the nullification of the REAL ID Act by 25 States (effectively blocking the federal government from implementing a national identification card) and the nullification of federal marijuana laws by thirteen States.

We can and must apply these same principles to this unwanted health care bill.  Many people have taken time in the last year plus to contact their Congressmen and Senators to tell them to vote against national health care.  This approach has failed, but the fight is far from over.  We can win this fight!

We need to put the pressure on our State officials to consider nullifying this and all other unconstitutional violations of our rights.  Please take some time this week to contact your State representatives to tell them to support nullifying this and any other federal health care bills.

Just as in any contract, one side could not grant himself the right to edit the terms of the contract and do as he pleased, the federal government cannot ignore the terms of the Constitutional contract and do as it pleases.  The States must do all that they can to prevent any further violations of the Constitutional contract by the federal government.

Nullifying unconstitutional laws will show the federal government that the States are serious upholding the Constitutional contract and its balance of power.  The federal government will be less likely to pass unlawful laws if they know that these laws will not be enforced on the State level.

Enough violations of a contract–any contract–by one party eventually render that contract null and void.  If the federal government continues to violate the Constitutional contract and encroach on the domain of the States, the States must reserve the right to peacefully withdraw from the contract and fully control their own affairs.

Americanly Yours,

Phred Barnet

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