The Futility of low interest rates to save the already Marginalized
One who makes comments on Angry Bear, William Ryan, said…
“Besides I thought we have been in a slump since 2008 haven’t we?( I guess it depends on what sector of the economy we are talking about)”
What sector has been in a slump? Middle and low incomes. Wages have been barely rising. Under-employment is rampant with high levels of part-time workers and long-term unemployment.
How low interest rates are a Futile Attempt to save the Already Marginalized from High Inequality
Labor share has really been dropping since 2003. Inequality is rising. Corporations are making record profits while labor becomes marginalized. What does it mean to be marginalized?
If you go to any Latin American country, you will see large sectors of the populations marginalized. They just do not participate in the economy to any great extent. I have lived in Mexico, Guatemala and Chile and passed through other countries.
Why are large sectors marginalized? … It is simple, Inequality. Money gets concentrated at the top and flows very slowly among the bottom of society. The rivers are full at the top, but the rivers run dry and slow at the bottom. It is a liquidity thing. It is the reason that Reagan and others were so wrong about “Trickle-down economics”. When you create an economy for the top incomes, hoping that it will trickle-down to the rest, you are in the realm of being evil. It is one of the greatest lies.
I never liked Reagan, even before 1980. I was not happy when he became president. I knew things would not turn out well over time. He started the political process to create inequality.
Ok, enough on Reagan… back to low interest rates trying to cover-up the evils of inequality.
When you look at a society, you will see sectors of labor marginalized, cut off from the economy. You may see millions upon millions in the country-side of China, or millions in India. You may see millions becoming marginalized in the United States.
In Chile, the marginalized are called, “Marginados o marginalizados”. It is a common term. Marginalized communities are extremely easy to spot and describe. They really have no place or hope to become part of the real economy and improve their condition. If the central bank of Chile wanted to incorporate these Marginados into the real economy, they would have to drop their interest rate down to zero for a long time and push businesses into less profitable ventures that could employ these people.
If you leave the marginalized labor outside the economy, you only have to set interest rates for a smaller tighter economy. Interest rates will go up because there will be less slack capacity of labor and capital. But the moment that you look to the marginalized sectors and say, “We have to get them into the economy”, then you all of sudden see unused capacity and start to drop interest rates in order to expand production and drive down societal unemployment rates.
You may want to bring the marginalized workers in because it is the right thing to do, or because you see large reserves of cheap labor to take advantage of. Either way, you bring down interest rates to motivate business to employ more people who are more likely to be unskilled and unproductive.
China has kept interest rates low as part of their financial repression policies. But those policies are slowly being reversed. The key though is if inequality can come down in China. That is a lot to ask, especially for China where people ferociously protect their wealth.
But by lowering interest rates, you bring in workers that are not part of the “real” economy which has been downsized from inequality. These extra workers will take more part-time jobs and lower pay. These jobs are less productive. As the marginalized sectors get incorporated, inflation is weakened due to lower pay and overextended business development, which in the long-run can only be profitable if there is a strong consumer base. So eventually inequality has to be reversed.
Context and the Future
Business development has been the fever for a few decades. Large amounts of marginalized labor, land and capital had to be developed. Interest rates have been falling steadily for decades. Business has overextended in China and as we see now in Europe too where banks have growing amounts of non-performing loans. The context of low interest rates started out as a plan to help businesses develop marginalized sectors worldwide. Now low interest rates are trying to salvage the businesses with non-performing loans.
What is the future? There will have to be a general pullback from low interest rates. Keeping the interest rates low will create deeper and deeper levels of non-performing loans that will have to be dealt with in the future.
Realize this… High inequality has already marginalized many workers. These workers are being employed but they have no hope of improving their condition. These employed workers are destined to be what they really are… marginalized.
It is delusional to think that we are helping them with low interest rates. It is like a patient that has no hope of living, and as doctors, we are telling them that they will live a normal life. It is a lie that will create massive bitterness in the future.
The rich feed upon low interest rates and get stronger. Inequality is not reversed with low interest rates.
Inequality created marginalized workers and trying to make up for this fact with low interest rates is futile. As long as we have higher levels of inequality, we will have to accept higher levels of marginalized workers. Interest rates will go lower and lower trying to deny this reality.
But one day, interest rates will have to rise in order to optimize the economy at a smaller level that is functional with high levels of inequality.
We will set interest rates for a socially optimal level of workers that can work for the rich. Interest rates will have to abandon those who are marginalized. Interest rates will have to rise. In that moment, the reality and evil promise of inequality will be manifested. Large sectors of society will become as they were intended under higher levels of inequality… marginalized and infected with humiliation.
The United States and Europe will become as Latin American countries. You will have smaller neighborhoods of very rich. You will have larger neighborhoods of poor marginalized people. There can be no other outcome from high inequality. And low interest rates can try to hide or postpone this fact, but eventually the reality manifests, and most likely the hard way.
The only solution is to significantly raise labor’s share of income around the world. Inequality has to come down. The result will be that the rivers of liquidity at the bottom of society will start to flow better. Marginalized workers will stop being exploited and start being a real and viable part of the economy. They will create their own grassroots business development. Inflation will be supported throughout society. There will then be good reasons to raise interest rates to normalized levels, because the marginalized workers are no longer marginalized. A place has been prepared for them at the table.
High inequality creates large sectors of marginalized people. Interest rates come down in an eventually futile attempt to keep them in the economy. But they are already destined to be marginalized. So interest rates go lower and lower to hide this reality.
The only way to return to normal interest rate levels is to reverse inequality.
You put far too much importance on % rate levels and their consequence to marginalized people in society. If you want to tinker with this topic you have to do it with fiscal policy, not monetary policy.
Fed monetary policy does not take into consideration social issues. There is no connection.
China has kept interest rates low as
part of their financial repression policies.
That’s just not correct. Chinese base lending rate is 4.35% wile inflation is YoY 1.3% (real 3%). The US has 0.25% base rate at 1.3% inflation (negative real of 1%)
You go on to say:
those policies are slowly being
Also wrong. China has been rapidly lowering rates.
Let’s say there is fiscal stimulus. Where does the money go? It still circulates through the economy according to a low labor share. Inequality in not affected. The solution is not fiscal or monetary, it is cultural and political. The ideology for increasing long-run growth through lower effective taxes and lower wages is just wrong. The ideology ruling economics has to change. It is an ideology that produces inequality. Eventually the US will look like Latin American countries. Interest rates will have to normalize at some point, and then all the marginalized people will become apparent.
Are you saying that there’s no financial repression in China?
I say it was worse a few years back, but it still exists.
How do you think China ended up with a domestic consumption percentage of 35% of GDP? The 65% rest of GDP is net exports, investment and govt. The domestic consumption should be rising but I haven’t seen any updated numbers.
Thought experiment: suppose you took a country with a large marginalized population. Then, suppose those people were gently removed, (perhaps hired en masse by a roving extraterrestrial day labour company.)
Once they are removed, what happens to that country?
Econ theory would say the whole country would be better off, with fewer people sharing the national wealth. But I am inclined to think that marginalized masses do have a purpose, if only to bulk up the population and make invasion difficult.
I had a student who was studying a small town in the north of Argentina where the local government was trying to kick out an indigenous tribe so that the land could be developed. The indigenous tribe was adding nothing to the local economy they thought and were holding back progress. He told me that there was a fence around the tribe’s land, and that a woman who was fighting for the land was actually breastfeeding her baby through the fence.
But the point is that, the local government saw no value in the tribe itself, only the land. So if you remove the tribe, you only open up untapped resources.
Then we can look back at the United States when the Indian tribes were forced off the land and into reservations. The Indians were marginalized from the economy. Removing them did not reduce the economy, but opened up untapped land development.
In a sense, if you remove marginalized people, then there are less workers for the menial labor jobs. But crime is reduced too. There are trade offs, but interest rates mean nothing to the marginalized people. For example, In Chile in 2010, a low income person could borrow money for a consumer loan at 25% to 35% interest rate. A rich person who had wealth could borrow at less than 5%. I remember reading the rates in the Chilean financial times. They are published every week. I had friends who were poor and who were rich. I saw both sides of the coin.
Do marginalized people have value? Their value to society is low because of the crime and other social costs. From what I see, the central bank in Chile does not even count the marginalized people in their unemployment rate, which is usually around 6%. Huge portions of the population are unemployed. 6% seems unrealistic. Even in China, the actual unemployment rate is said to be much higher than what is reported by the govt. It is like they do not recognize certain populations as employable.
But in the US and Canada, we try to count everyone as employable. We cannot fathom marginalized people in our economies, but the reality of that is coming…
I agree. Someone has to cut the grass.
I just think that monetary policy has absolutely nothing to do with decreasing marginalization.
The column could be:
“The Futility of high interest rates to save the already Marginalized”
As Edward said, it is inequality that is the problem. Too low income at the bottom, too low taxes at the top. Those are societal decisions. Though we have reached the point where those decisions are not reached by society.
Maybe that is not quote right. Perhaps we have reached the highest level in our society where those decisions are not reached by society.
“”All animals are equal, but some animals are more equal than others”.
I’m also trying to figure out why interest rates would have anything to do with bad loan performance.
The worst loan performance I have seen was during the S&L crisis and during the latest housing crisis. Rates were totally different in the 80’s, and during the bubble the Fed rate started at 1 and went up to 5 with no effect on lending.
The key is what the investors know, not the rates.
Noni Mausa wrote: “Thought experiment: suppose you took a country with a large marginalized population. Then, suppose those people were gently removed, (perhaps hired en masse by a roving extraterrestrial day labour company.)
Once they are removed, what happens to that country?”
Let’s go back into history. The Black Death in England killed so many people that those remaining could demand higher wages for their services. The response was predictable.
From Page 120 of ‘A Distant Mirror’ by Barbara Tuchman
“In the effort to hold wages at pre-plague levels, the English issued an ordinance in 1349 requiring everyone to work for the same pay as in 1347. Penalties were established for refusal to work, for leaving a place of employment to seek higher pay, and for the offer of higher pay by an employer. Proclaimed when Parliament was not sitting, the ordinance was reissued in 1351 as the Statute of Laborers. It denounced not only laborers who demanded higher wages, but particularly those who chose “rather to beg in idleness than to earn their bread in labor” ”
Now fast forward to today. Modern corporations would merely get the US Congress to encourage more immigration into the country.
Nothing would really change.
I just can see corps getting that past the government.
Rates are more signaling then anything else.
EL – Debt/GDP in China has gone from 150% to 300% since 2008. It is simply not possible to say this outcome is the result of “financial repression”. Give it up!
Household spending has nearly tripled over the past seven years.
There are plenty of things wrong in China, but financial repression and stagnant PCE are not on the list.
An expert on China who lives in China is Michael Pettis. He writes a lot about the financial repression in China. Here is link…
Assume a country with a corrupt bureaucracy in the pockets of the big corporations. A large low-skilled rural population provides cheap labor for dirty , dangerous jobs like mining. Say , coal mining. For a long time , these people , though marginalized , have considerable utility to the ruling elites.
Then , the coal market tanks – global warming and such. Jobs are lost , and ailments related to the years of dirty work , leaking coal-ash ponds , etc , start showing up. The unemployed workers contact lawyers , hoping to get something from the companies that have poisoned them and their environment. Clearly , the utility of these people to the ruling elites is fading fast.
What to do ? Well , they might flood those neighborhoods with cheap drugs , while allowing unscrupulous docs to provide unlimited scrips for powerful narcotics without sanction. Now the company lawyers can argue that their ex-workers are sick because of their addictions , not because of toxic coal ash or dust. Many of the workers will die before they ever make it to court anyway.
That’s just one example , purely hypothetical , of how a marginalized population could go from being relatively useful , to being completely expendable.
I prefer not to get stuck in the weeds of misleading economic data and analysis. To me the solutions to saving the marginalized in this country is rather simple. Not through interest rates or hiring another Hitler, I can be done through the commons sense of applying sound economic principles. Lowing corporate taxes to repatriate all those billions of off shore profits, yes. Shrink the size and out of control spending of big gov. through the do more with less lean principles and concepts applied to big gov everywhere,Yes. Build the Trump Wall to cut off the flow of all cheap, illegal labor supply that will also increase our national security, Yes. Last and most important is to establish and maintain fairly the balanced Trade Agenda with the variable rate tariff to keep trade balances with China, japan, South Korea and Mexico. Fair Trade and no gaming the system with currency manipulations and product dumping merchantilism… We will then become able to afford to pay for better military, education, roads, bridges, ect. when more people are working again at higher pay and paying fair share of taxes again…What you say? Who is the next president who will do this?
” Lowing corporate taxes to repatriate all those billions of off shore profits, yes. ”
Figuring the typo means “lowering”, do you have an example of how this works?
Cause I got one that shows it clearly does not work for anyone but the people who are already spending every penny that can possibly spend.
William Ryan wrote: “Lowing corporate taxes to repatriate all those billions of off shore profits, yes.”
I see this comment quite often but I don’t believe that it would make any difference.
Investment in this economy is not starved of funding. There are plenty of dollars sloshing around in this economy. There is the accumulated wealth of richest of us, all the defined contribution retirement account money, and very very low interest rates. There is so much money and so little economic activity that a large slice of the combined wealth is used for speculation or sitting in cash.
If we were building new manufacturing facilities or replacing worn out or outdated infrastructure then repatriating those off shore profits might be beneficial.
Those profits could be repatriated now but the corporations are waiting for a tax break. They should wait until hell freezes over.
We should give those corporations a tax break at the same time that we give a tariff or tax break to the Chinese.
We must bring the capital investment back home to make things in our country once again. This is what creates new wealth-good paying mfg.jobs. Not to have and make everything along with the capital investment overseas. Yes we need a complete redo of the tax code and any too big to fail banks or corrupted government agencies revolving doors in Washington. The corporate inversions of predatory capitalism must be reversed. Lower all corporate taxes to do this and let’s make made in America mean something again. The greedy oligarchs will have to start putting American people and products first and the balanced Trade Agenda does this with the variable rate tariff. I think some people still do not get the message or smell the coffee that the average citizen is sick and tired of all the crony corruption going on in corporations and government. IMHO.
William, this is not the GOP debate where you can just give a stump speech and everyone claps.
“do you have an example of how this works?
Cause I got one that shows it clearly does not work for anyone but the people who are already spending every penny that can possibly spend.”
To Mr.EMichael, I do not have an American example of us doing this economic trade balancing with the variable rate tariff because I don’t think that we have done this before in our American history.. . But I would suggest that all you take a look at what China and Japan have done with their import tariffs(VATs) and currency manipulations against us to see that it has worked greatly for them. Why is it that you cannot see this and choose rather not to see the issue that we are now running a $700/year trade deficit is what is killing our economy?
Sorry Mr. EMichael I did mean $700B/year as in billion. Try to put that number in human terms as in lost jobs, productivity, GDP and innovation if you can.
I keep seeing this word MARGINALIZED, which is simply a verb in the passive voice masquerading as an adjective. So WHO, exactly, marginalized these people? Could it be that they are simply marginal workers with marginal skills?
What might actually help these marginal workers is allowing employers to hire them.
Warren, you may as well ask this question:
“To whom must a person offer proof of worth in order to justify their continued life and freedom?”
That question removes all the passiveness and abstraction of the whole “marginalized” term.
Most ordinary people have the unenviable task of not only convincing someone or something of their skills and strengths, but they also need to persuade that person or thing to choose them from among dozens or hundreds of equally capable persons.
It was interesting to read your comment, which began by questioning the word marginalized, and then proceeded to withdraw it like a harpoon, take essentially the same word, and drive it in again at an even more painful angle.
A marginalized person is a victim of circumstances. A marginal person is one whose essence is disposability.
What we need to ask is, who decides?
William, here was my question.
November 11, 2015 10:11 am
” Lowing corporate taxes to repatriate all those billions of off shore profits, yes. ”
Figuring the typo means “lowering”, do you have an example of how this works?
Cause I got one that shows it clearly does not work for anyone but the people who are already spending every penny that can possibly spend.”
“A marginalized person is a victim of circumstances.”
Do those “circumstances” include one’s own laziness? Take a typical public school system. Some kids work their @$$3$ off, get good grades, get into a good college (maybe even with scholarships), and get a good job or start a business. Others, with the same intellect, choose to slack off, do drugs, disrupt class, and be a general pain in the toochis. They don’t get good grades, and don’t show up to work on time, and don’t work hard when they are there.
Do those “circumstances” include choosing to have children out of wedlock? Do those “circumstances” include choosing a loser for a husband?
In short, how do we distinguish someone who is a “victim of circumstances” from someone who is a victim of his own bad choices?
You will see. When the marginalized become apparent, good people will not have a small chance to improve their condition. Go look at the marginalized communities in Latin America. They are filled with good men willing to work… seriously. But there are no good jobs or business opportunities for themm. it is the result of high inequality. The communities do not have financial resources to develop their local businesses nor healthy consumer demand for local goods and services.
College is free in Brazil, and there is universal healthcare and progressive taxation. Their corporate income taxes are almost the highest in the world.
So shouldn’t they have less inequality than we do?
But really, we are not talking about South American, but the United States of America. We are talking about how to change the policies here to have the desired effect, whatever that might be.
So what is that desired effect? Less inequality of opportunity? Less inequality of outcomes?
A dear friend of mine was quite poor, despite his being very intelligent and having a Ph.D. However, there was not much call for his Ph.D. in Medieval Scottish History, and so he was never paid well. Meanwhile, some of us with perhaps less intelligence but more wisdom chose to become engineers, and we made more money. Others I know dropped out of engineering because they could not handle the math, and became doctors. They made even more money.
Was the Doctor of History a victim of circumstances, or of his own bad choices? How is it fair to take more from the Doctor of Medicine so that you can give it to the Doctor of History?
You will be able to identify people who are marginalized because there simply won’t be any opportunities for them. The net benefits of higher education over cost will decrease. Jobs will become low paying. Have you ever lived in a country with high inequality? I realize that the US has high inequality now, but its effects have not developed yet. Go to a country where inequality has been the norm for a couple of generations. You will see the difference.
At this point in Chile’s history, about 80% of the university students are the first ones from their family history to go to college. There is a huge rise in college and university attendance. I worked in a few universities down there. There were jobs when copper prices were high and trade agreements with Asia were bumping, but I hear now that the tide is turning and many of the graduates are unable to find jobs.
Things like this will happen more frequently in the US.
By “a country with high inequality”, what measure of inequality are you using? Inequality of income? Inequality of opportunity?
Please don’t answer “both”, because the latter is one cause (but not the only cause) of the former.
We need to know whether we are trying to correct the cause or the effect.
Now, it may be that we disagree even on which is cause and which is effect. Certainly it can be argued that inequality of income creates inequality of opportunity — for instance, to start a business or to better educate one’s children.
I contend that it is the inequality of opportunity that drives inequality of income. If we give lazy, unemployed fools more money, there is no reason to think that they will decide to read to their toddlers more and spend money sending their kids to science camps. The kids brought up in such homes just do not have the same opportunities as kids brought up in the home of people who value reading and education. My Doctor of Medieval Scottish History friend was quite poor, never even managing to buy his own house or buy a new car, but he read to his kids and taught them to love learning. The opportunity to have such a father is lacking for many poor kids, and their future education and income suffer for it.
Warren, you are assuming there is such a thing as a lazy person, and that you can tell whether someone has chosen to be idle. You can see idle, anxious, unhealthy people with your own eyes, but you cannot see what led to their choices, just as I can see your stubborn insistence on dehumanizing the poor and unfortunate, but cannot tell what social influences, anxieties, or resentments underlie them.
Cast your mind back to the decades following WWII. By all modern measures, Americans were poor (coming out of the depression,) uneducated (very few college grads, and even high school diplomas were markers of more than ordinary accomplishment,) many came from broken families, if only because of the premature death or flight from impossible responsibility of a parent. In my own family, my mother’s father died of cancer when my mother was 7, her mother died when she was 25, and my father’s father, an abusive drinker, left the family when my father was 8 at the height of the Depression.
By your measures, our whole family should have been discards. And in today’s economy both families would have little on no hope of succeeding, much less prospering.
But what actually happened? All my uncles and several of my aunts got work, government work, before the war, in the war and on the home front. Some of the state park buildings my father built as part of the CCC are still serving Americans now, a century later. After the war, the US was growing, and there was work for everyone. My high school educated father went to university and took his engineering degree (GI Bill, thanks Uncle Sam) and his degree led to a career in electrical design, earning enough to keep a wife, five kids and later, his widowed mother, and later yet his widow, comfortable and well educated. His brothers and sisters also studied and moved into various fields. Meanwhile on my mother’s side, her brother went to school (GI Bill, natch) and worked as a mining engineer, and her sister had a lifelong career in the Air Force.
At this distance, Warren, what you probably see is a generation of hard workers. But you’re wrong. Oh, they worked hard, but they had supports and protections and opportunities. Do you think for a minute that my father’s mother and her eleven children could have managed to get any of them through college? That my mother’s widowed mother could have put her son through his geology degree?
People work hard when they have reasonable expectation of success. When their society demonstrates the opposite, that hard work leads to scrambling after a handful of entry level jobs in your fifties, what do you expect?
It has only been a couple of generations since my fathers time. Humans haven’t mutated into sluggish yahoos, they are the same people. But when four times the effort earns one quarter the payback, when a job search amounts to months or years of dropping resumes down a bottomless pit, then the industry you, Warren, seem to demand would only be an indication of a delusional optimism verging on madness.
Just wish the post wasn’t directed towards deaf ears.
Capital investment is down because we don’t make money anymore via capital investment. We make money from money. Current monetary policy has assured such an economic system. Change that, and money will be repatriated.
Thank you for the inspiration…
You mention the GI bill… I know a man who is 93-years old. He came to the United States after the war. He told me that he was given a chance to go to college and get a degree. He did not have money. They told him that his education would be paid for …
if he got a GPA of A after 15 credits
or if he got a GPA of B after 30 credits
or if he got a GPA of C after 60 credits.
That is how simple it was to get an education.
Noni, yes there are lazy people. Certainly you must have met some in your life.
There has been some evidence that children abandoned by their fathers (whether before or after birth) are worse off than those whose fathers died.
Even with the GI Bill, far fewer people went to college then than now. Now, more than 50% of people aged 18-19 matriculate. That’s right — we have below-average kids going to college. We have a higher percentage of college graduates than the Denmark that Sen. Sanders likes to tout.
So what changed? Are we spending less on social programs? No. Do we have a lower percentage of people going to college? No. Do we spend less on public schools? No.
So what went wrong?
You ask what happened. Excellent question. What happened is, priming the pump isn’t working any more.
For younger readers here who have never had to prime a hand pump, what you do is pour a jug of water down the pipe before you start pumping. This up-front water touches the well water far below, and fills the pipe up high enough so the pumping mechanism can get a grip on the water and draw up both the original water but also new water from the well. You refill your jug for future priming, and then pump up the water you need for all your other needs.
But what happens if there is no water below, or if there is a one-way valve down there where you can’t see it? You pour your jug of water in, start pumping, and nothing comes back. You remember what your parents and grandparents told you about priming wells, and go borrow several jugs of water, thinking you just didn’t have a big enough jug. And still, nothing comes back.
How long do you go on borrowing water? How long till your neighbours refuse your requests, or run out of water themselves?
Eventually, you’re reduced to buying water at inflated prices, or gathering rainfall and melting snow, leaving your pump to rust, even though below the one-way valve there’s an untouched underground lake of water. Only an obsessive fool — or someone afraid of being called “lazy” — would keep on pumping, much less priming.
I have begun wondering if there is such a thing as a lazy person. I haven’t met many, if any, people who are really, truly lazy. I am not sure how you would even test for that.
What I have met is people who are depressed, suicidal, isolated, convinced of the futility of effort, or convinced that the workfare pumping they are forced to do is actually moving water from one underground chamber to another without retuning any to the surface. I have met people whose education is minimal or distorted. I have met people who have been convinced of their worthlessness, but don’t have the energy to kill themselves outright. I have met people who bend their energies towards charitable aid of family, friends or strangers, having given up on ever finding paid work. I have met people with disabilities who are so effected that they are only functional two days out of ten — but spend those two days making crafts for sale, essentially at cost, in order to have something in which they can take pride. I have met people putting their energies into the slow suicide of drugs or drink. I have met people who are doing nothing, having spent the past five years nursing a wife with ALS, and now that she is gone are left exhausted, aimless and destitute. I have met skilled professionals attending yet another job hunting course, just to fulfil unemployment requirements. I have met an experienced business manager age 63 in college taking a management degree (and pulling down consistent As) because of his stubborn pride, and because that’s the only way he could access his GI Bill stipend because no company would hire him after his second heart attack. He only dropped out after he lost 40 lbs to cancer, three months before he would have finished his course cum laude, and 13 months before he died in a VA hospital.
What I have not met is someone who was happy to live their entire life on $800 a month, doing absolutely nothing but watch Wheel of Fortune and eat Pizza Pops. Plenty of such people can be found if you rely on a snapshot taken at one point in time. Even Homer nods. But when he wakes up, he writes the Odyssey.
If I had endless cash, I think I would hire some private eyes and send them out like a team of Diogenes’s, to seek for a truly lazy man. But I think it would take a while to find candidates, and longer to confirm their status as professional confirmed layabouts.
I guess I just have a more jaundiced eye, Nomi. Perhaps you are right.
I have seen people who play video games instead of studying. I have seen those who can’t be bothered to get to work on time or get to class on time or do their homework.
Is that lazy (internal) or unmotivated (external)?
I have met people living on pizza pops and watching Wheel of Fortune in their mom’s basement at age 52. They are not particularly happy about it, but they don’t do anything to change it, either. Lazy, or unmotivated?
I love your analogy of “priming the pump.” It seemed that you were referring to our government’s borrowing to boost the economy, but then it turned to personal economics — individuals taking out student loans for a “Women’s Studies” degree or something equally worthless. And it occurs to me that perhaps too many people have been trying to draw from the same underground reservoir. Do we really need below-average students going to college? Their wells are not drilled deep enough. Perhaps they would be better off drilling into another reservoir. The water may not be as sweet, but they will get some. Others (such as the Women’s Studies major) are drilling in a very shallow part of the reservoir, and most will come up dry.
Nomi, I would be interested to hear your opinion of the third of Chairwoman Yellen’s examples, living in public housing while refusing full-time work because she would have to pay her debt to Best Buy:
I am going to end this discussion with an intentional Godwin: I dare say that in the death camps there must have been several undiscovered murderers. You cannot then use their perfidy to justify the maltreatment of the millions. However, if you would rather “let God sort them out,” there’s not much more I can say to you.
That is a great way to put perspective on the issue.
While that is an amusing response, and no doubt felt good, it does not address the questions, “What policies got us into this situation?” and, “What policies can reverse it?”
I see these:
1. So-called “Free Trade” with countries that are not free, and which do not abide by the trade agreements.
2. Ignoring immigration laws, allowing millions of unskilled workers to come in and compete with citizens and legal residents.
3. The Minimum Wage, which prices the bottom rung of the economic ladder out of reach of many unskilled workers, and which is thus particularly damaging to the Black community.
4. Our criminal (in)justice system, which allows prosecutors to lie to get false confessions with false promises of leniency and false claims of evidence, which allows prosecutors to offer plea deals based on those lies, which does not provide equal resources for public defenders as for prosecutors, and which allows neither truly blind justice (the jury neither sees the defendant nor knows his name, or even that he is a he) nor a jury of one’s true peers.
5. A public education system that allows the inmates to run the asylums, resulting in horrible inner-city schools.
6. A welfare system that punishes women for marrying the father of their children.
7. A regulatory system that overburdens small businesses and which erects needless barriers to entry. (Do you really need a 1000-hour course to be a hairdresser? Should you really have to buy an $800,000 medallion to drive a taxi?)
I’m kinda going on a rant there. But these are some of the policies I see keeping the poor poor.
You are on a rant… That is fine.
But you are wrong about the minimum wage. It is actually too low when you look at the social costs of paying such low wages. If the minimum wage was increased, net social benefits would increase. Yes, some people would be priced out of the market, but still, on the whole, net social benefits would increase. Most people do not understand that.
A business that can’t pay the minimum wage does not need to be in business.
You are so right… Let me suggest a change to your statement.
“A business that cannot pay the socially optimal minimum wage does not need to be in business.”
In which case, Jerry, that business is not employing anyone.
Thank you for reinforcing my point.
“If the minimum wage [were] increased, net social benefits would increase. Yes, some people would be priced out of the market, but still, on the whole, net social benefits would increase. Most people do not understand that.”
Even if that were so, who are you to decide that someone should not be allowed to work because he cannot produce enough to be hired at your arbitrary price?
Business should pay the full cost of their labor. That means paying a high enough salary that people do not qualify for welfare assistance. The taxpayer should not have to supplement the cost of business labor.
Thanks… you say it good.
The idea is to have a minimum wage high enough to pay the social costs of labor.
“Business should pay the full cost of their labor. That means paying a high enough salary that people do not qualify for welfare assistance.”
That’s a nice platitude, but what it really means is that those who cannot produce to some arbitrary level are not allowed to work.
If someone cannot find a job at $7.25 per hour, but someone is willing to hire him at $5 per hour, why should the government deny him the opportunity to work?
Qualification for welfare assistance depends on one’s situation. A 17-year-old living with his parents will not qualify no matter how little he makes. A 21-year-old living on his own will qualify at a higher income level if he has dependents. Are you going to have different Minimum Wage levels depending on whether the employee lives with his parents and whether he has dependents?
What should be the Minimum Wage for a teenager living with his parents?
What should be the Minimum Wage for a single person renting his own apartment with two young children?
And if that person is married, can his Minimum Wage go down if his spouse is working?
You need to understand the “social costs” of labor. These costs need to be paid by someone. If they are not paid for by the minimum wage, then someone else has to pay, like the government, a church, a charity, other family members…
So a business can pay a worker $5/hour, but then absolutely someone else has to pick up other social costs for that person working. The business does not pull its fair share socially. It is trying to push real costs of a factor input onto other people.
Warren, you are simply making up unnecessary complications. The question is not, should we have a minimum wage. That question has already been answered. Get over it. The question is what should the minimum wage be? And I am simply stating that the taxpayer should not supplement the cost of labor for business. Do you think we should?
A business that cannot pay the full cost of labor is an unsubstainable business.
If that person is not working at all, the costs to everyone else are even higher. So, if we allow that person to work for what his labor can earn, our costs will be lower.
You create an economy that races to the bottom. If you allow businesses to pay low wages, then other companies will have to pay lower and lower wages, and pretty soon, society has a big burden to take care of people that are working.
Then look at your statement, “our costs will be lower”. No, that is not correct. Ultimately the social costs are greater as more and more people are unable to meet their social costs through their own wages.
The key is to establish a minimum wage that maximizes net social benefits. Thus, the minimum wage can be too high, and it can be too low.
We already have such an economy, Edward. If the companies cannot get the labor here, the get it in China or India, and the “marginalized” can never reach that lowest rung of the economic ladder.
I think you understand now… Does the term “Catch 22” ring a bell?
Indeed, Edward. See my comment at November 12, 2015 5:25 pm. Item #1 is “Free Trade” with countries that are not free.
I am with you on the Free Trade thing… I realize it is good to have free trade, but there are limits when the other countries do not play fairly or evade social costs. For example, China has built up huge social costs of pollution and worker exploitation over the years. And encouraged that labor policy there with our free trade. And we lost jobs too.
Just as we are supposed to defend human rights in other countries and place sanctions, we should also place trade sanctions to some extent when labor rights and social costs are ignored in the other country. We would at least have a negotiating position so that China improves labor conditions and pollution. The extra costs in China for those socially proper things would have saved jobs here in the US.