What Happens to Jobless Individuals in a Free Market During Economic Downturns?

[drankin]

Yes.

Well that's just great, kasse. I solute you and your homeland. Do you have a point?

 

[skeptic2]

Why do you even make this statement? Does being a woman or a minority make you an inherently worse pick for a job? This is borderline racism. If you force businesses to employ people because of quotas and not ability you do tie the hands of the companies. If racism is a problem with some companies than others will come along and swoop up the best qualified people that were ignored. Lots have companies have prospered on resources that others have ignored and in the process they have changed how business is done, personnel are a resource like all others.

Why do I make that statement? Because I go to Mexico occasionally and I read the want ads including by U.S. companies. Many of them have statements such as: Female, 18 to 24, attractive, unmarried. Or male, 18 to 35. It's not at all that others not fitting the description are less qualified. It's that the law permits that type of discrimination so they do it. As far as it being borderline racism, it's not borderline, it's blatant racism. The Native Americans in Mexico find it almost impossible to find a job. The funny thing is there don't seem to be any companies that want to swoop up the unemployed Native Americans.

Why the monopoly comment? If a company is free to hire/fire employees as the wish and to give raises as they wish then the best people will get the best pay at the best companies. Now there may still be companies that treat their employees badly, but they won't stand a chance in the long run against happy productive employees. Even in monopolies there is always a threat of having your workers taken by other industries. If you don't pay them enough they will leave and you will be left with the worst workers available for what you pay.

This simply is not true. Go to countries that don't have the government regulation we have and you will find there is less competition, not more. You will find workers with fewer rights and a greater difference between the salaries of the executives and the wages of the workers.

If you work in a coal mining town and want a better job then you move. If enough people move then the mine either can't operate or they raise the pay and the price of coal. Having only one job available is never a good excuse for not moving up.

If your only skill is mining coal, where are you going to go - another coal mining town? The problem is in areas where there is only one employer, wages tend to be lower because of the lack of competition. If one's wages are low enough, there is a point where the worker can't afford to quit and look for another job. This was taken advantage of in the 19th century by some employers forcing employees to buy supplies from them at prices that drove the employees into debt. Those employees were no longer free to quit.

So when companies lobby to have the government create artificial monopolies this is better than having a huge company that can do things better than smaller companies? Yes I admit that having a bad monopoly is possible in a truly free market, but it is inherently short lived. If you corner the market on sprockets and then raise the price enough, sooner or later someone is going to take the risk and start producing his own sprockets. Without artificial monopolies there is no way to permanently prevent competition. The government is the only power that can prevent you from making something, because they have the monopoly on force.

Actually, without government intervention and regulation, monopolies are remarkably stable. Look at Chiquita and Dole in Honduras. How much competition do they have? How long have they been in business? Speaking of Honduras, there is some evidence now that the real cause of the coup wasn't that President Zelaya wanted another term, it was that he had raised the minimum wage and Chiquita and Dole were mad.

Some government regulation is a good thing such as child labor laws, but for the most part it solves problems that would have solved themselves. Minimum wage establishes itself without government mandate. If you raise the minimum wage then the money has to come from somewhere. The owners either cut profits (less profits in an industry means less growth and fewer jobs), they cut employees (again fewer jobs), or they raise prices which means that everyone who buys from them effectively takes a pay cut. On the other hand, there is truly a minimum you can pay employees before you can't get anyone to work for you, and in many places it is ABOVE the minimum wage.

Well of course they raise prices. And when they raise prices, they raise them enough for everyone to get a raise. If they didn’t, the workers would eventually make more than management. In the end it all comes out the same. I suppose there could be minimum wage below which a company won’t find workers. For a monopoly, that would probably be at the subsistence level and somewhat higher for skilled workers in a competitive environment.

I'm really tired of the idea that there is some magic evil rich person somewhere and when we raise taxes or minimum wage or increase regulations they just pull some extra money out of their pocket. There is no magical person. Most of us own businesses in the form of IRAs or other retirement investments. All of us pay the tax burden of the rich each time we buy something. The only person who gets stuck with the bill is the working person. Trying to stop free market because of inequities will eventually make everyone equal, but we will all be equal and poor.

Is this what you think we believe?

 

[kasse]

Well, it's not only the oil exporter Norway that have had success with the welfare system, but also countries like Sweden, Denmark and Germany.

 

[chayced]

I've heard this idea before that the free market supposedly takes care of monopolies on its own but I have never seen a rationale for this. You say that some brave entrepreneur will come along and start a competing business. What happens when the monopoly tries to buy them out of chase them out of business? Monopolies are really quite good at mantaining themselves through various forms of legal coercion.

Company stores- Mines and other monopolies that controlled the entire town used to set up company stores where the prices were set to recoup the wages that the mine spent. Things like the Sears Catalog and others made mail order items available to people who used to have only one place to shop.

Record Labels - This may not seem like a monopoly, because it is in fact an Oligopoly. A hand full of producers were in charge of all aspects of the recording industry (including radio). Remember when CDs cost $20? The reason they are cheaper now is Walmart. Walmart dictated that either the Labels would reduce the price of CDs or they would stop selling them. Also have you noticed the rise of indie artists? When you have a handful of companies making CDs for 25c each and selling them for $20 each with the artist making pennies then somethings got to give!

Cable TV- Back in the day if you wanted non broadcast channels it was either cable or satellite. Now there is Dish network, Direct TV, and high speed Internet based TV. Again you can't charge insane prices forever.

Railways- Used to be the only way to move cargo. This was a geographic monopoly, and although it is certainly cheaper for a single company to operate a single set of rails in a area vice having two competing railways, if you charge too much for too long someone will find a different way. Now trucking freight is another alternative and the railways are put in their place.

Postal Service- Although this is a government enforced monopoly, and not part of my direct example, other services like FedEx and UPS have sprung up to give the public what they needed in spite of a monopoly.

Newspapers- One of the most hated monopolies whenever they exist, however back before modern technology if a paper was to charge to much or slant their opinions too much then someone would start an independent paper.

We tend to forget about all the businesses that pop up destroying the competition by offering goods at lower prices because we never get overcharged enough to think that the predecessor was a monopoly. Small towns have prime examples of monopolies when there is only one store in town that sells certain items, but we don't think of them as such. When we have a cheaper alternative we don't think 'yay the evil monopoly is gone' we simply go on with life as usual.

To answer your question, yes companies with monopolies do fight hard to keep them, and will drive out the little guy if they can. If the monopoly gets greedy enough though then someone else will come along and fight them to carve out some profits themselves while at the same time helping the public. You don't go into business expecting everyone to be happy that your here! The worst case scenario is a monopoly that uses the government to stop its competition. If I produced a car that ran on cow manure and lasted forever, but the big auto makers passed legislation deeming my technology unsafe or otherwise illegal I would never even get the chance to compete in the free market.

 

[TheStatutoryApe]

To answer your question...

Most of your examples have involved improvements in technology. They have also almost all been examples of competition arising in the US during the era since regulations have been put in place to prevent monopolies.

Can you explain the dynamic which would prevent monopolies absent regulation? And examples that do not require innovation?

Innovation is the only thing I can think of that really is the bane of a monopoly unless it is lucky enough or smart enough to move forward with the times. This has nothing to do with a free market though.

 

[kasse]

Maybe a meaningless question, but:

Libertarians keep saying that interference in the economy creates an unhealthy economy that involves bubbles that will sooner or later burst. But isn't it then possible that bubbles can be created as a result of interference in the market when human rights are being violated?

 

[imiyakawa]

Social security is not a human right, and it ought not to be.

Would you be saying that if you broke your legs?

From an economic perspective, I agree. Social security promotes inefficiency and undermines one of the foundations of America's capitalist economic system: incentive. (Although it could be argued taking money from the rich and giving to the poor actually leads to an increase in Aggregate Demand because those on the dole spend almost all their money, leading to increased economic growth and more money for the rich (simple multiplier effect)..

Although I agree that there are too many people who can't be stuffed working and get social security (my plan for the future).

 

[mal4mac]

What happens to the unemployed who have not taken out unemployment insurance?

"Even if there are no general grounds for considering the unemployed deficient in
employment commitment, do the variations between countries suggest that the
relative generosity of the welfare system may have an important impact on work
motivation? There is no indication that relatively generous welfare systems give rise
to low motivation among the unemployed. Employment commitment was highest
among the unemployed in Denmark (85%) and Sweden (82%), while the Netherlands
shared joint third position with Britain (81%)."

http://www.nuff.ox.ac.uk/projects/uwwclus/Papers/restrict/lisbon.pdf

 

[kasse]

In a free market society, will it cost money to enter the city park for a walk?

 

[kasse]

Would you be saying that if you broke your legs?

Isn't that just an appeal to emotion, and not a valid argument?

 

[kasse]

How about heritage buildings in a free market society? Should everyone have the right to buy anything they want, and treat it as they see fit?

 

[arildno]

There is no reason why a wholly unregulated economy would be a good thing.

If you are poor, at the physical starvation level, even the merest twinkle of hope to get bread for the next day makes you willing to agree to any sort of degradation.

We have pathetic letters from 6th century Gaul, where a man sells himself into slavery to the local land-owner in order to gain some sort of security in his life.

People sold their own children (if you were a carpenter, scraping by, and then had an accident making you unable to work for a long time; what would you choose: let all your children starve to death, or sell one to a guy who says he will be treated well, giving you the money to care for the others while you are ill?)

The list goes on and on, and there is not the slightest reason why any wholly unregulated economy might not develop degenerate features like these.

It doesn't matter if formal laws are passed against these particular practices, they WILL happen, in the darkness of the night, unless all people has some minimal resources to fall back upon.

Insofar as some (small) level of social aid IS furnished by the state, then the free market will regulate ITSELF thereafter, because any company trying to cut costs by offering wages distinctly worse than the minimal level will get no applicants.

There is no reason why the state as such should stipulate minimum wages at all, indeed, that can be counter-productive.


As for those on the receiving side of social aid, I think it ordinarily should be coupled to a willingness to do work, whenever the opportunity arises.

 

[Vanadium 50]

It doesn't matter if formal laws are passed against these particular practices, they WILL happen, in the darkness of the night, unless all people has some minimal resources to fall back upon.

I don't see many people selling themselves or their children into slavery in 21st century America. 21st century America is not 6th century Gaul.

 

[arildno]

I don't see many people selling themselves or their children into slavery in 21st century America. 21st century America is not 6th century Gaul.

That might change.

They were EXACTLY like you and me in their human natures.

Consider the implications of that.

 

[xxChrisxx]

I don't see many people selling themselves or their children into slavery in 21st century America. 21st century America is not 6th century Gaul.

How many of those people are facing starvation? I can tell you something for nothing, given the choice of certain death or selling themselves to slavery, I would say 99% of people would choose the slavery option. (There is always the stupid stubborn bastard)

It's very easy to say "oh that'll never happen". But until someone is truly put in that situation not even they can say what they would do. It's very easy to imagine, another to experience.

EDIT: And just exactly what makes it different to 6th century Gaul?

 

[rootX]

There is no reason why a wholly unregulated economy would be a good thing.

It is even unrealistic to believe in a completely unregulated or a completely regulated economy.

 

[fleem]

Yesterday I posted a graph from an extremely reputable source showing a profound and irrefutable correlation between a nation's economic freedom and its per-capita wealth. The only comment I received on that graph was, "Correlation does not imply causation". What does this tell us about the intellectual prowess of the socialists in this thread?

 

[rootX]

Yesterday I posted a graph from an extremely reputable source showing a profound and irrefutable correlation between a nation's economic freedom and its per-capita wealth.

Per-capita wealth is not equal to the personal welfare.

 

[xxChrisxx]

Yesterday I posted a graph from an extremely reputable source showing a profound and irrefutable correlation between a nation's economic freedom and its per-capita wealth. The only comment I received on that graph was, "Correlation does not imply causation". What does this tell us about the intellectual prowess of the socialists in this thread?

The below is not to imply that you or the graph is wrong, just bakcing up the statement of Correlation does not imply causation.

There may be a correlation but that does not mean that single variable is responsible. You also need to be careful about the conclusions you can draw from a graph like that. You have to ask, do the results indeed imply causation or as a consequence.

Eg. Do rich people have more TV's in their home because they are rich. Or are they rich becuase they have more TV's. (In this case the answer is obvious becuase of common sonse, but strictly from the correlation alone you cannot draw the conclusion that they have more TV's becuase they are rich)

Point is: your graph lovely as it is, by itsself is inconclusinve.

 

[fleem]

Per-capita wealth is not equal to the personal welfare.

So do you believe it is inversely proportional, then?

 

[fleem]

The below is not to imply that you or the graph is wrong, just bakcing up the statement of Correlation does not imply causation.

There may be a correlation but that does not mean that single variable is responsible. You also need to be careful about the conclusions you can draw from a graph like that. You have to ask, do the results indeed imply causation or as a consequence.

Eg. Do rich people have more TV's in their home because they are rich. Or are they rich becuase they have more TV's. (In this case the answer is obvious becuase of common sonse, but strictly from the correlation alone you cannot draw the conclusion that they have more TV's becuase they are rich)

Point is: your graph lovely as it is, by itsself is inconclusinve.

This makes no sense. It sounds like you are trying to defend your (or whoever's it was) statement, "correlation does not imply causation" by now saying "consequences aren't necessarily caused by anything".

I assure you, correlation always implies causation, unless, of course, you reject the scientific process.

Please take a look at my first response to that "correlation does not imply causation" post. I address the issue of direction of causation, but I'm being difficult, here, because it really looks like someone is trying to obfuscate simple matters in order to pretend they didn't make a bad (and, IMO, spun) statement.

 

[DavidSnider]

fleem:

What does GDP say about the quality or sustainability of what is being produced?

 

[xxChrisxx]

This makes no sense. It sounds like you are trying to defend your (or whoever's it was) statement, "correlation does not imply causation" by now saying "consequences aren't necessarily caused by anything".

I assure you, correlation always implies causation, unless, of course, you reject the scientific process.

Mathematically you are wrong. Technically its always correct to say "Correlation does not imply causation"

Correlation is not equal to causation; it is only a requirement for it.I wasnt making comment about anything you or anyone else said, becuase I really couldn't care less. Just defending the (correct) point that you have to be careful when using a graph you have found to instantly conclude you are correct.

EDIT: I also said that I wasnt saying you were wrong (as I agree with the conclusion that the more free the economy, the grater the wealth) I'm simply backing up the statemnt from a statistically honest perspective.

 

[fleem]

fleem:

What does GDP say about the quality or sustainability of what is being produced?

A high per-capita GDP says that the products and services in that nation are being purchased by the consumers in that nation (over foreign goods) because those domestic goods are all extremely low quality and the consumers are all masochists and want their economy to plummet to oblivion. (just kidding).

 

[fleem]

Mathematically you are wrong. Technically its always correct to say "Correlation does not imply causation"

Correlation is not equal to causation; it is only a requirement for it.I wasnt making comment about anything you or anyone else said, becuase I really couldn't care less. Just defending the (correct) point that you have to be careful when using a graph you have found to instantly conclude you are correct.

EDIT: I also said that I wasnt saying you were wrong (as I agree with the conclusion that the more free the economy, the grater the wealth) I'm simply backing up the statemnt from a statistically honest perspective.

Ah of course. I thought you were implying the strong correlation among the many data points in that graph impied a notable liklihood of no causation. As with all science, we refer to a strong enough correlation as a "proof" of causation. But your technical point is taken.

EDIT: I do, though, think the original statement was simply made to imply the graph was notably suspect on purely statistical grounds (assuming no foul play in its creation), because the person that made that post didn't make clear, like you, that he was simply setting the technical record straight.

 

[DavidSnider]

A high per-capita GDP says that the products and services in that nation are being purchased by the consumers in that nation (over foreign goods) because those domestic goods are all extremely low quality and the consumers are all masochists and want their economy to plummet to oblivion. (just kidding).

or perhaps they buy them because the products are cheap and buy them again because they fall apart and prefer what they can buy now over what they have to save for to get later.

 

[Evo]

If welfare and big government is bad, how come the scandinavian countries suffer less than other countries during the financial crisis?

Swedish economy hits 30-year low

Sweden’s government has released data showing the nation’s economic growth has slowed to its weakest levels in more than 30 years. Anders Borg, Sweden’s Finance Minister, announced the bad news along with a forecast that the Swedish economy will shrink by 0.8 percent in 2009.

Sweden’s labour market will also be affected by the economic slump, with unemployment expected to rise to 7.7 percent in 2009 and 8.5 percent in 2010. Again, the government foresees 2011 as being the turning point when figures begin returning to healthier levels.

http://www.icenews.is/index.php/2009/01/19/swedish-economy-hits-30-year-low/

Population: 9,059,651 (July 2009 est.)
(Source: CIA Factbook)

New York City has almost the same population at 8.36 million. You're comparing apples and oranges.

 

[fleem]

or perhaps they buy them because the products are cheap and buy them again because they fall apart and prefer what they can buy now over what they have to save for to get later.

Quick, somebody give their blow hard politicians the power to save them from that hell on Earth!

Seriously, I could say the same thing about foreign goods. You're making things up to avoid talking about that graph.

 

[mheslep]

That might change.

They were EXACTLY like you and me in their human natures.

Consider the implications of that.

The concept of a free people, the worth and rights of the individual have radically changed over the last couple millennia, more so over the last two or three centuries. In the middle ages, generation after generation expected that the world would not change at all for them, even for their descendants, other than the possibility their social group might be obliterated. They were correct in that thinking. Before the settlement of North America, culminating with the American revolution, large societies had an expectation around the world that they would answer to a King/Emperor/Pope somewhere. There was zero expectation on the part of the average person that they could ever be King. That thinking has radically changed in the developed world.

 

[xxChrisxx]

The concept of a free people, the worth and rights of the individual have radically changed over the last couple millennia, more so over the last two or three centuries. In the middle ages, generation after generation expected that the world would not change at all even for their descendants, other than their social group might be obliterated, and they were right. Before the settlement of North America, and culminating with the American revolution, large societies had an expectation around the world that they would answer to a King/Emperor/Pope somewhere. There was zero expectation on the part of the average person that they could ever be King. That has thinking has radically changed in the developed world.

Maybe so, but the comment was along the lines of selling yourself into slavery to ensure you are kept (ie don't die of starvation).

This is a point about preservation which is the most fundamental need, it trumps expectations and aspirations. So within the context of the question, were are precisely the same as the people from 6th centruy Gaul.