Why Are We Worse Off?
One AB reader who thinks I am an Angry Marxist brought our attention to something Llewellyn Rockwell wrote:
wages have declined in real terms by 2 percent in the last three years. The first concern is political. The Democrats, despite their moderating image, carry with them the intellectual baggage of a Marxist morality play in which business skims the excess productivity of labor’s value. This new data is framed in a way that plays right into this model. Productivity is up, the rich are richer, but the workers are losing out. Meanwhile, the Republicans have a very strange response, as typified by the comments of pollster Frank Luntz. The bad economic news would not do serious damage to Republicans, he said, because voters will blame corporate America and not government for their problems … I have my doubts that he is right. Republicans have controlled the White House – Carter and Clinton excepted – for the better part of forty years, and yet somehow they are always able to get away with blaming government for their problems. I can easily imagine that the Republicans will again trot out their anti-government rhetoric this time around. But we shall see.
It seems the folks at the Mises Institute are not happy with the Bush Administration either. And it’s not just the politics of this piece that makes it interesting – although some of the economic claims here could have stood a rewrite:
The reason for the fall in income has nothing to do with corporate profits. The culprit is our old friend inflation. But more than ever, inflation data does not reflect the underlying reality we experience every day. As we all know, there is no such thing as a price level as such. There are only prices, some of which rise and some of which fall. There is no way that the government can collect enough information to make sense of it all. Take a trip to Wal-Mart, for example. You don’t see price increases here. You can buy shirts, jackets, and shoes for a fraction of what you would have paid ten years ago. This is even true for electronics and most other goods you find in so-called department stores.
Prices for certain goods have been falling, but that does not change the fact that the average price for a consumer’s basket of goods has increased. One would hope that nominal wages would have increased by more than the increase in the consumer price index. Rockwell also documents the increase in the prices of gasoline and electricity. Rockwell rightfully praises the market place and international trade for allowing the prices of apparel to decline, but then he loses me when he blames the rise in the price of energy on the government:
Now, here we have the exact opposite pattern, and from a sector of the economy that is heavily regulated, taxed, and beaten to death by interventionist regulations. There is far less supply flexibility in oil and gas because of trade restrictions, stupid wars, and insane and counterproductive environmental controls. When shocks hit, the only market response is to increase rationing via price increases.
Taxes on gasoline have actually declined in real terms. Now if he is blaming the oil shortage on that stupid decision made on March 19, 2003 to invade Iraq, I can’t argue with that at all!