Sunday, January 21, 2007
The State Against Economic Law: the Case of
Minimum Wage Legislation
When it comes to matters such as the theory of
evolution and stem-cell research, so-called
liberals—i.e., socialists who have stolen the name
that once meant an advocate of individual
freedom—ridicule religious conservatives for their
desire to replace science with the dictates of an
alleged divine power. Yet when it comes to matters
of economic theory and economic policy—for example,
minimum-wage legislation—these same liberals
themselves invoke the dictates of an alleged divine
power. Their divine power, of course, is not the God
of traditional religion, but rather a historically
much more recent deity: namely, the great god State.
Traditional religionists believe that an omnipotent
God came before all natural law and was not bound or
limited by any such law, but rather created such
natural laws as suited him, as he went along. Just
so, today’s liberals believe, at least in the realm
of economics, that the State is not bound or limited
by any pre-existing natural laws. In the case in
hand, the State, today’s liberals believe, is free
to decree wage rates above the level that would
exist without its interference and no ill-effects,
such as unemployment, will arise.
In this matter, the liberals have been as quick to
cast aside whatever modest knowledge of economics
they may once have had, as the traditionally
faithful are quick to cast aside whatever relevant
knowledge of physical cause and effect they may once
have had. The traditionally faithful revel in the
sight of a seeming miracle or even the mere report
of a seeming miracle, such as a faith healer
commanding the lame to walk, and on that basis
abandon their knowledge of cause and effect in the
realm of human anatomy and physiology. In the same
way, today’s liberals have been reveling in the
report of increases in the minimum wage
unaccompanied by increases in unemployment, and on
that basis have abandoned their knowledge that
increases in wage rates reduce the quantity of labor
demanded and thus do indeed cause unemployment.
The liberals’ faith healers in this instance are
David Card and Alan Krueger, who are the authors of
a book called
Myth and Measurement: The New Economics of the
Minimum Wage (Princeton, N.J.: Princeton
University Press, 1995, 422 pp.). Their book is
described by its publisher as presenting “a powerful
new challenge to the conventional view that higher
minimum wages reduce jobs for low-wage workers.… [U]sing
data from a series of recent episodes, including the
1992 increase in New Jersey's minimum wage, the 1988
rise in California's minimum wage, and the 1990-91
increases in the federal minimum wage…they present a
battery of evidence showing that increases in the
minimum wage lead to increases in pay, but no loss
in jobs.”
Denial of the Law of Demand
Card and Krueger and the “liberal” faithful who are
eager to embrace their message may not realize it,
but when they claim that increases in the minimum
wage do not cause unemployment, what they are
denying is one of the best established propositions
in all of economics, namely, the Law of Demand.
This law states that, other things being equal, the
higher is the price of any good or service, the
smaller is the quantity of it demanded, i.e., the
quantity that buyers purchase, and that, by the same
token, the lower is the price of any good or
service, the larger is the quantity of it demanded,
i.e., the quantity that buyers purchase. Since wages
are merely the price of labor services, the Law of
Demand implies that all government and labor-union
interference that forcibly raises wage rates above
the height at which they would otherwise have been
reduces the quantity of labor employers seek to
employ in comparison with what it would otherwise
have been. It thus implies that the government’s or
labor unions’ interference causes unemployment.
One major reason for the existence of the Law of
Demand is that while people would like to buy more
goods and services, their ability to spend is always
limited by the funds at their disposal. Lower prices
enable the same funds to buy more, while higher
prices prevent any given amount of funds from buying
as much. In order to overthrow the Law of Demand,
one of the things Card and Krueger would need to be
able to do would be to show how the division of a
given-sized numerator (i.e., the funds people have
available to spend) by a larger-sized denominator
(i.e., the prices and wages they must pay) does not
result in a reduced quotient (i.e., ability to buy
goods and labor services). It should be obvious that
this is simply impossible and that insofar as the
Law of Demand rests on the laws of arithmetic, no
statistical data can ever overthrow it. Rather, the
statistical data must be interpreted in a way that
is logically consistent with the laws of arithmetic
and their derivative, the Law of Demand.
It is very easy to provide such an interpretation.
This is because, contrary to what Card and Krueger
appear to believe, the Law of Demand does not claim
that every rise in a price or wage must reduce the
quantity of the good or labor service demanded below
what it was
before the price or wage was increased.
That would be true only if all other things remained
equal. When all other things do not remain equal,
the Law of Demand claims merely that higher prices
or wages cause the quantity of a good or labor
service demanded to be less
than it otherwise
would have been.
The economic history of the last 60 years
illustrates this. Over this period, prices and wages
rose from one year to the next and yet the quantity
of practically all goods and labor services demanded
also increased from year to year. For example, in
the late 1940s, the price of a new house was
$10,000; that of a good-quality new automobile,
$1,000; that of a meal at a first-class restaurant,
less than $5; a high-level executive job paid
$15,000 a year; and the federal minimum wage was 75¢
an hour. Since that time, all of these prices and
wages have increased many times over. And yet, from
year to year, the quantities of practically
everything demanded increased rather than decreased.
The explanation, which is perfectly consistent with
the Law of Demand, is the continuing increase in the
quantity of money in the economic system. In the
late 1940s the quantity of money in the United
States was well below $100 billion. The total annual
spending that such a money supply could support was
in the low hundred billions. Since then the money
supply has increased to almost $3 trillion, which is
capable of supporting total annual spending that is
vastly larger.
Minimum-Wage Laws Cause Unemployment Even When More
People Work
With such an enormous increase in the funds at their
disposal, people are capable of buying larger
quantities of goods and labor services even at
today’s sharply higher prices and wages. What is
still true, however, is that if wages and prices had
not risen as much as they have, the quantities of
goods and labor services demanded would have
increased by even more than they actually have, and
thus that more workers would be employed than is in
fact the case, with the result that unemployment
would be less than it is. To the extent that the
minimum-wage law has contributed to wage rates and
prices being higher than they otherwise would be, it
is responsible for unemployment, despite the fact
that more people work today than at any time in the
past.
Expenditure Shifting
A supporter of the minimum wage might argue that
even though the total of people’s ability to spend
is limited at any given time, their ability to spend
on any one particular thing or category of things is
still capable of being increased—by the simple means
of their reducing their spending for other things.
This is certainly true. The total wages paid to
unskilled workers might increase to some extent at
the expense of the wages paid to skilled workers.
The total of the wages paid to all workers might
increase to some extent at the expense of
expenditures for capital goods, such as the
materials and machinery bought by business firms.
Nevertheless, an increase in any given price or wage
operates to discourage the shifting of funds to
purchase the good or service in question. This is
because its higher price or wage requires a greater
sacrifice in terms of alternative goods or services
that must be forgone in order to purchase it. For
example, if a worker must be paid $200 per week, all
that his employment entails is forgoing the purchase
of other goods or services worth $200. But if he
must be paid $300 per week, his employment requires
the correspondingly greater sacrifice of alternative
goods or services worth $300. The growing magnitude
of sacrifice of alternative goods and services is a
major reason that a rising price or wage results in
a falling quantity of the good or service demanded,
i.e., it is a further major reason for the existence
of the Law of Demand.
Furthermore, what is required to bring about an
increase in expenditure on any one good or service
or category of goods or services at the expense of
expenditure on other goods and services is either a
decrease in their supply or a decrease in their
price, neither of which is compatible with support
for a minimum wage. For example, if the supply of
crude oil, or the services of physicians, decreased
by 10 percent, the price might easily double,
because of the high value that people would attach
to each unit of the remaining supply. In this case
1.8 times as much would be spent in buying the good
or service—i.e., the doubled price times the
remaining 90 percent of the initial quantity.
Unfortunately for the supporters of the minimum
wage, a case of this kind still implies a
significant reduction in quantity demanded and in
employment. (And I will soon show that the reduction
in employment will turn out to be far greater than
thus far indicated.)
As stated, what is also capable of bringing about an
increase in the expenditure on a given good or
service at the expense of other goods and services
is a fall in its price. A fall in the price of a
given good or service can often so dramatically
improve its ability to compete against other goods
and services for the limited supply of funds in the
possession of buyers that more ends up being spent
on it at a lower price than at a higher price. The
automobile and computer industries provide
illustrations of this phenomenon.
At the beginning of the 20th Century, automobiles
were as expensive relative to the average person’s
income as yachts are today. So long as that remained
true, the automobile industry had to remain a minor
industry. But as the cost of production and price of
automobiles came down, a mass market developed in
which the increase in quantity demanded far
outweighed the decrease in price. The same story was
repeated in the last decades of the 20th Century, as
the price of personal computers radically declined
and their quality greatly increased, with the result
that another major new industry came into being.
It should be obvious that cases of this kind are of
no help to the supporters of the minimum wage. For,
when applied to labor, they rest on wage rates
falling,
as the means of expanding the quantity of labor
demanded. The imposition of a minimum wage or of an
increase in an existing minimum wage, works in the
diametrically opposite direction. It reduces the
ability of low-skilled workers to compete and thus
forces them into unemployment.
Low-Skilled Workers Compete by Means of Low Wages
The relationship between the wage rates of the
low-skilled and their ability to compete with
more-highly-skilled workers needs elaboration. Lower
wage rates are the means by which less-skilled
workers compensate for their lack of skill and are
enabled to compete with more-skilled workers.
Imagine, for example, the case of two bricklayers,
one of whom is able to lay twice as many bricks per
hour as the other. Is there any way in which the
less capable bricklayer can successfully compete
against the more capable bricklayer? Yes there is.
All he needs to do is be free to work at
less than half the
wage rate of the more capable bricklayer.
In that case, the cost per brick laid is actually
less using him than the more capable bricklayer.
But what is the effect of a minimum wage that sets
the wage of the less capable bricklayer at more than
half that of the more capable bricklayer? The effect
is to prevent him from competing. It is to render
his services more costly than those of his
more-capable competitor and thus to force him into
unemployment.
The essentials of this case are present in all
instances in which some workers have less to offer
employers in the way of skills and ability than
other workers. For example, workers who cannot speak
the native language are necessarily at a
disadvantage compared with those who can. In a free
market, they can overcome that disadvantage by means
of being able to offer to work at sufficiently lower
wage rates. Similarly, workers who do not know how
to read, or cannot read very well, are necessarily
at a disadvantage compared with those who can read
or can read better. If they are to be employed, they
need to be able to overcome these disadvantages
through the offer of working for sufficiently lower
wage rates.
Minimum-wage laws prevent all such workers, workers
with disadvantages in skills and abilities, from
competing. They condemn such workers to unemployment
and thus deprive them of the opportunity to improve
their skills and abilities by gaining work
experience. In this way, despite all protestations
of their supporters to the contrary, minimum-wage
laws are the enemy of the disadvantaged.
Minimum-Wage Laws Also Cause Unemployment Indirectly
The extent of the harm minimum-wage laws cause is
considerably greater than has thus far been
explained. Its measure includes even those instances
in which an increase in the minimum wage is
accompanied for the most part by an increase in the
funds expended in paying it and very little by any
immediate unemployment on the part of those
receiving it. Indeed, even if, contrary to economic
law, it were somehow the case that a rise in the
minimum wage were accompanied by such a shifting of
funds from elsewhere, that exactly the same number
of workers were employed at the now higher wage as
were previously employed at the lower wage, it would
still end up causing substantial additional
unemployment among the low-skilled in comparison
with what their unemployment would have been
otherwise.
This becomes clear when it is realized that to the
extent that funds are withdrawn from spending
elsewhere in the economic system, namely, from
spending on capital goods and the wages of
more-skilled labor, corresponding unemployment is
created in those areas. That unemployment could be
overcome if wage rates in the rest of the economic
system were free to fall. But under a regime of
minimum-wage legislation combined with pro-union
legislation, in which labor unions impose minimum
wages of their own for the various grades of
more-skilled labor, that fall in wage rates will be
prevented. The result is simply that unemployment is
created elsewhere in the economic system. (It should
be realized that the influence of labor unions on
wage rates extends far beyond the ranks of unionized
labor. It extends to all non-union firms that want
to remain non-union. Because in order to remain
non-union, they must match the unions’ wage scales.)
The more-skilled workers who become unemployed as
the result of funds being shifted from the demand
for their services to the payment of a higher
minimum wage, will be able to become reemployed in
other lines of work. Thus, for example, computer
programmers, say, who become unemployed will be able
to find other employment where their superior skills
and abilities enable them to outcompete workers who
have up to now been performing these jobs. These
jobs, perhaps, may be those of mid-level managers,
technical writers, salesmen for high-tech products,
and the like.
The workers displaced from these lines must in turn
now find alternative employment. To the extent that
their skills and abilities are greater than those of
the workers with whom they compete, they will
succeed in finding employment. Thus they may end up
working as bookkeepers, clerks, and the like. But
now the less-skilled workers whom they outcompete
will be unemployed and in need of finding other
work.
What is present is a process of labor being shifted
down into occupations of progressively lower levels
of skill and ability. The process ends in the
increase in the supply of labor in the occupations
at the bottom of the various levels of skill and
ability.
The larger number of workers now competing for jobs
at the bottom could potentially all be employed in
those jobs. But that would require a fall in wage
rates to increase the quantity of their labor
demanded. That fall in wage rates, of course, is
precisely what the existence of the minimum-wage law
prevents.
In the absence of the fall in wage rates, the
workers who become unemployed are once again the
comparatively less skilled. But in this case, which
is that of the less-skilled workers in occupations
already requiring only the lowest levels of skill,
the workers who become unemployed are the
lowest-skilled in the economic system.
Thus even if, however unlikely, the imposition of a
minimum wage began in conditions in which it did not
directly and immediately create any unemployment
whatever, because of the shifting of funds from
elsewhere to pay it, it would end up creating
unemployment among the least skilled members of the
economic system.
What is present in this analysis is merely an
application of Henry Hazlitt’s one-sentence summary
of his great classic
Economics In One
Lesson: Namely, that
“The art of
economics consists in looking not merely at the
immediate but at the longer effects of any act or
policy; it consists in tracing the consequences of
that policy not merely for one group but for all
groups.”
That lesson was apparently never learned by Card and
Krueger and their supporters. Judging the short-run
effects of an increase in the minimum wage in a
given state, such as New Jersey or California, on
the unemployment rate of low-skilled workers in that
particular state, which is what Card and Krueger
did, does not begin to address the effects of
raising the minimum wage. To do that, one must
consider the effects, long-run as well as short-run,
on the whole economic system. When one does this,
one sees that the minimum wage does indeed cause
unemployment among the least–skilled,
most-disadvantaged members of the economic system.
Overcoming
Poverty Requires Repealing Minimum-Wage Laws
Throughout the Economic System
The preceding analysis has an important implication
concerning how people who are genuinely concerned
with improving conditions for those who are least
well off might go about actually achieving that
goal. Namely, instead of imposing and raising
minimum wages at the bottom of the economic ladder,
repeal them
throughout the economic system. To
whatever extent the ability of labor unions to
impose above-market wage rates for skilled and
semi-skilled labor could be reduced, to whatever
extent licensing-law restrictions on the number of
people allowed to practice in the various
professions could be relaxed, the number of workers
employed in all these lines would be increased. The
consequence would be that the number of workers
forced to compete at the bottom of the labor market
would be correspondingly decreased and their wages
increased.
Throughout the economic system, human ability would
be better employed. Overall production would be
greater and thus prices on the whole would be lower.
The poorest members of the economic system would
earn more and pay less. Not forcibly imposed minimum
wages of any kind but the
abolition of such forcible impositions is the means to
overcome poverty. Repeal minimum-wage legislation,
pro-union legislation, and licensing legislation.
That is what will help to eliminate poverty.
This article is copyright © 2007, by George Reisman.
Permission is hereby granted to reproduce and
distribute it electronically and in print, other
than as part of a book and provided that mention of
the author’s web site
www.capitalism.net
is included.
(Email notification is requested.)
All other rights reserved. George Reisman is the
author of
Capitalism: A Treatise on Economics
(Ottawa, Illinois: Jameson Books, 1996) and is
Pepperdine University Professor Emeritus of
Economics.
Labels:
Card and Krueger,
minimum wage,
unemployment
Friday, January 12, 2007
The New York Times Pushes the Doctrine of Class
Warfare
My last post
showed how The
New York Times promotes the Green party
line.
The one before
that
showed how it has supported the Red party line. Like
a traffic light,
The New York Times
alternates between Red and Green. (There is actually
little fundamental difference between the two. The
Reds want to abolish the individual’s pursuit of
happiness on the grounds that it results in
exploitation, monopolies, and depressions. The
Greens want to abolish it on the grounds that it
results in acid rain, destruction of the ozone
layer, and global warming.)
Today we are back to Red, with two transparent
attempts of
The Times to promote the doctrine of
class warfare.
In a January 8, 2007 article titled
“Working Harder
for the Man,”
Times
columnist Bob Herbert writes:
[T]he top five Wall Street firms (Bear Stearns,
Goldman Sachs, Lehman Brothers, Merrill Lynch and
Morgan Stanley) were expected to award an estimated
$36 billion to $44 billion worth of bonuses to their
173,000
employees, an average of between $208,000 and
$254,000, “with the bulk of the gains accruing to
the top 1,000 or so highest-paid managers.” … There
are 93 million production and nonsupervisory workers
(exclusive of farmworkers) in the U.S. Their
combined real annual earnings from 2000 to 2006 rose
by $15.4 billion, which is less than half of the
combined bonuses awarded by the five Wall Street
firms for just one year.
As if to answer the question of whether his
intention is to provoke a riot or revolution
inspired by the notion of class warfare, Mr. Herbert
concludes his article with these words:
There’s a reason why the power elite get bent out of
shape at the merest mention of a class conflict in
the U.S. The fear is that the cringing majority that
has taken it on the chin for so long will wise up
and begin to fight back.
I provide an exhaustive critique of Marxism and the
doctrine of class warfare in my book
Capitalism.
Here I will observe only that the activities of
businessmen and capitalists are the driving force of
virtually all increases in real wages. It is their
savings that pay the wages of workers and buy the
capital goods with which they work and on which the
wage earners’ productivity depends. It is the
innovations of the businessmen and capitalists that
underlie both continuing capital accumulation and
the continuing rise in the productivity and real
wages of the workers. To the extent that real wages
fail to rise, the explanation is to be found in the
frustration
of the activities of businessmen and capitalists by
misguided government policies that undermine capital
accumulation and the rise in the productivity of
labor.
In this brief space, I only want to concentrate on
challenging Mr. Herbert’s assertions alleging a
gross disparity between the earnings of a
comparative handful of Wall Streeters and the great
mass of wage earners.
As soon as I saw that Mr. Herbert was comparing the
alleged meager growth in
real
earnings of wage earners with the alleged very
substantial current monetary earnings of the Wall
Streeters, a warning flag went up in my mind, simply
because such a thing is not a legitimate comparison.
It’s comparable to comparing one entity’s net gain
with another entity’s gross revenues, e.g., Toyota’s
net profit with General Motors’ sales revenues.
To compare apples with apples, I was immediately
curious to know what the growth in wage earners’
monetary
earnings had been between 2000 and 2006. To find the
answer, I turned to the
Survey of Current
Business, which is the leading source of
statistics on national income, wages, and profits,
and gross domestic product. Page D 15 of
the January 2007 issue of that publication
reports total annual compensation of employees as
$7524.4 billion as of the 3rd quarter of 2006, which
is the most recent quarter for which data have been
published.
At the same time, page 197 of
the August 2005 issue of the
Survey of Current
Business reports total compensation of
employees as $5837.4 billion as of the 3rd quarter
of 2000. Subtracting this number from the total
compensation of employees in 2006 gives a difference
of $1687.0 billion. If this, apples-to-apples number
is compared with the alleged $36 billion to $44
billion of Wall Street bonuses, it is 38 to 47 times
larger, not half as large.
But what about the growth in wage earners’ real
earnings, their earnings adjusted for the rise in
prices? Might that not turn out to be a mere $15.4
billion, as alleged by Mr. Herbert? The answer is
no, far from it.
To calculate the change in real earnings, it’s
necessary to allow for the rise in prices between
2000 and 2006. According to the
Bureau of Labor Statistics, which is the source
of the data, the Consumer Price Index for Urban Wage
Earners and Clerical Workers stood at 168.9 for 2000
and at 196.8 as of November of 2006, the most recent
month for which data are available. This is an
increase of 17 percent. If this rise in prices is
applied to the employee compensation of $5837.4
billion in 2000, that number is raised to $6801.7
billion. The difference between this
inflation-adjusted figure and 2006’s total employee
compensation of $7524.4 billion is $722.7 billion.
This is the rise in
real
total employee compensation over the period. This
number is more
than 47 times larger than the number alleged by Mr.
Herbert. It also ranges from more than
16 to more than 20 times the Wall Street bonuses
alleged by Mr. Herbert.
Mr. Herbert needs to explain how he arrived at his
numbers. Until he provides a reasonable explanation,
I leave it to the reader to judge his honesty and to
decide whether or not and to what extent the culture
of The New
York Times has changed since the days of
Jayson Blair,
The Times'
reporter who simply fabricated claims.
*****************
I turn now to
The Times’ second attempt to promote the
doctrine of class warfare. This occurs in an article
which appeared on the same day titled
“[Bush] Tax Cuts Offer Most for Very Rich, Study
Says.” (“Bush” is in brackets because it
appeared only in the title of the print edition of
the article.)
The article opens in a way that easily suggests that
while tax rates at the very top are being
dramatically reduced, they are actually being
increased
for middle-class taxpayers.
WASHINGTON, Jan. 7 — Families earning more than $1
million a year saw their federal tax rates drop more
sharply than any group in the country as a result of
President Bush’s tax cuts, according to a new
Congressional study.
The study, by the nonpartisan Congressional Budget
Office, also shows that tax rates for middle-income
earners edged up in 2004, the most recent year for
which data was available, while rates for people at
the very top continued to decline.
If one reads the article very carefully, from
beginning to end, one learns that what is actually
being complained about is merely the fact that the
tax rate of the top 1 percent of taxpayers was
reduced by a larger number of percentage points than
the tax rate of middle-income tax payers. One also
learns that the rise in the tax rate on the middle
class, so prominently featured by
The Times,
was a very minor one that took place in the course
of a four-year
sustained decline in tax rates on the middle class
amounting to more than 40 percent. In
the article’s own words:
Families in the middle fifth of annual earnings, who
had average incomes of $56,200 in 2004, saw their
average effective tax rate
edge down to 2.9
percent in 2004 from 5 percent in 2000.…
(My italics.)
It may have escaped
The Times’
reporter, and his editor, but 2.9 percent is less
than 60 percent of 5 percent, which implies a
reduction in middle-class tax rates of more than 40
percent. This is a
decrease,
relatively speaking, compared to what the rate was
in 2000, a huge decrease. It is
not an
increase. This decrease deserves to be featured, not
presented as the very
opposite
of itself.
The article goes on to complain that
Households in the top 1 percent of earnings, which
had an average income of $1.25 million, saw their
effective individual tax rates drop to 19.6 percent
in 2004 from 24.2 percent in 2000. The rate cut was
twice as deep as for middle-income families.…
What is allegedly unfair here is that while the tax
rate of the top 1 percent falls by 4.6 percentage
points from 24.2 percent to 19.6 percent, the tax
rate on the middle income tax payers falls only by
2.1 percentage points from 5 percent to 2.9 percent.
Not only does
The Times’ reporter, and his editor,
choose to ignore the very substantial, more than 40
percent reduction in middle-class tax rates from
2000 to 2004, but also to completely ignore the fact
that relatively speaking the reduction in rates on
the top 1 percent was
far less
than the reduction on the middle class. A tax rate
that is still 19.6 percent is approximately 81
percent of a tax rate of 24.2 percent. Thus,
relatively speaking, while the income tax rate on
the middle class fell by more than 40 percent, it
fell by less than 20 percent on the top 1 percent of
taxpayers.
Apparently, the only thing that would satisfy
The Times (and the authors of the “nonpartisan”
Congressional Budget Office study) would be if the
tax rate on both groups were reduced by the same
number of percentage points. In that case, the
middle income tax payers would pay a tax rate of
only .4 percent, while the top 1 percent paid 19.6
percent.
Such logic implies that the elimination of the
income tax can simply never be fair, unless by some
magical means it could be accompanied by the
ex nihilo
creation of a correspondingly large subsidy for
everyone else. Thus if the income tax paid by the
middle class were .4 percent, while the tax rate on
the top 1 percent of taxpayers were 19.6 percent,
fairness would allegedly require that reduction of
the 19.6 percent rate to zero be accompanied by the
subtraction of 19.6 percentage points from .4
percent. This, of course, would mean the creation of
a negative
income tax rate of 19.2 percent for the middle
class. That is the logic of
The New York Times.
The Times
and its reporters and editors regard the doctrine of
egalitarianism as an axiomatic truth and insinuate
it at every turn in all aspects of the newspaper.
With respect to egalitarianism and all that goes
with it, there is no distinction between news column
and editorial at
The New York
Times. Apart from such features as
classified advertising, the entire paper is one
huge, day-in and day-out editorial for
egalitarianism, collectivism, and Marxism.
When one reads
The New York
Times, one should know what one is
getting. It is not unvarnished news, but the news as
seen through the lens of a distinct philosophical
and political doctrine, a doctrine that is hostile
to the freedom, prosperity, and happiness of the
individual, and thus to the foundations of the
United States.
This article is copyright © 2007, by George Reisman.
Permission is hereby granted to reproduce and
distribute it electronically and in print, other
than as part of a book and provided that mention of
the author’s web site
www.capitalism.net
is included.
(Email notification is requested.)
All other rights reserved. George Reisman is the
author of
Capitalism: A Treatise on Economics
(Ottawa, Illinois: Jameson Books, 1996) and is
Pepperdine University Professor Emeritus of
Economics.
Saturday, January 06, 2007
The New York Times Pushes the Green Party Line
The New York Times
must have a guilty conscience about the continuous
distortions of the news that appear in its pages.
Evidence of this guilt is provided everyday in
The Times’
claim
that its “news and editorial departments do not
coordinate coverage and maintain a strict separation
in staff and management.”
That claim is necessary only because
The Times
has become sensitive about the matter. And with good
reason. Because even though there may not be formal
meetings, strategy sessions, and the like to
coordinate its news reporting with its leftist
editorial slant, that leftist slant nevertheless
very definitely does permeate its reporting.
Perhaps it’s the result simply of the fact that
The Times’ editorial writers and its reporters were all
educated in the same kind of universities, all
promoting the same leftist ideas in economics,
politics, history, and the various branches of
philosophy. Whatever the explanation, the paper’s
editorial writers and reporters consistently come at
things from the same perspective and, with only
occasional exceptions, end up pushing the same party
line.
A good example of this appears in today’s (January
6, 2007) edition. On the first page of the business
section, there is an article titled
“The Land of
Rising Conservation.”
The article is a pure puff piece for
environmentalism/conservationism. Its theme is that
Japan is the model country of energy conservation,
pointing the way for the United States on the basis
of the use of the latest technology. Indeed, the
subtitle of the article, in the print edition, is
“Japan Offers a Lesson in Using Technology to Lessen
Energy Consumption.” A leading illustration of this
technology is an alleged futuristic “home fuel cell,
a machine as large and quiet as a filing cabinet
that…turns hydrogen into electricity and cold water
into hot—at a fraction of regular utility costs.”
The article compares Japan with the United States in
terms of annual energy consumption per home and
trumpets the fact that in Japan’s it is less than
half of that in the United States. It also declares
that while Japan’s “population and economy are each
about 40 percent as large as that of the United
States, yet in 2004 it consumed less than a quarter
as much energy as America did, according to the
International Energy Agency, which is based in
Paris.”
The article credits Japan’s superiority in “energy
efficiency” to the “guiding hand of government,”
which has forced “households and companies to
conserve by raising the cost of gasoline and
electricity far above global levels. Taxes and price
controls make a gallon of gasoline in Japan
currently cost about $5.20, twice America’s more
market-based prices.” The same relationship
apparently applies to energy prices in general. An
advisor to the Japanese Parliament is favorably
quoted as saying, “Japan has taught itself how to
survive with energy prices that are twice as high as
everywhere else.” The sharply higher energy prices,
the article explains, are the source of tax
revenues, which “[t]he government in turn has
used…to help Japan seize the lead in renewable
energies like solar power, and more recently home
fuel cells.”
Despite The
Times’ and its reporter’s obvious
enthusiasm for the Japanese government’s energy
policies, a careful, critical reading of the article
results in a very different kind of appraisal.
(Unfortunately, such a reading is not likely to be
performed by many of
The Times’
readers.)
It turns out that that futuristic home fuel cell,
that allegedly operates “at a fraction of regular
utility costs,” requires a government “subsidy of
about $51,000” per unit. This is what makes possible
its purchase “for about $9,000, far below production
cost.” (I hope I will be forgiven for failing to see
the intelligence of a policy that makes people pay
twice the price for energy in order to provide funds
to make possible the production of electricity at a
sharply higher cost.)
But there is more. It also turns out such
technological advances are only part of the story.
There is also a major “human interest”/cultural
angle that contributes to Japan’s "superiority" in
“energy efficiency.” This centers on a Mr. Kimura
and his family. (He owns the futuristic home fuel
cell that a
Times’ photograph shows standing in
front of his house.) Without any apparent awareness
of the significance of the information being
revealed and certainly without any embarrassment
about it, The
Times’ reporter writes this about the
subject of his human interest.
Mr. Kimura says he, his wife, and two teenage
children all take turns bathing in the same water, a
common practice here. Afterward, the still-warm
water is sucked through a rubber tube into the
nearby washing machine to clean clothes. Wet laundry
is hung outside to dry or under a heat lamp in the
bathroom. The different approach is also apparent in
the layout of Mr. Kimura’s home, which at 1,188
square feet is about the average size of a house in
Japan but only about half as big as the average
American one. The rooms are also small, making them
easier to heat or cool. The largest is the living
room, which is about the size of an American
bedroom.
During winter, the entire family, including the
miniature dachshund, gathers here, which is often
the only room heated. Like most Japanese homes, Mr.
Kimura’s does not have central heating. The
hallways, stairwell and bathrooms are left cold. The
three bedrooms have wall-mounted heaters, which are
used only when the rooms are occupied, and switched
off at night.
The living room is kept toasty by hot water running
through pipes under the floor. Mr. Kimura says such
ambient heat saves money. He says the energy bill
for his home is about 20,000 yen ($168) a month.
Central heating alone would easily double or triple
his energy bill, he says.
“Central heating is just too extravagant,” says Mr.
Kimura, who is solidly middle class.
The government has tried to foster a culture of
conservation with regular campaigns like this
winter’s Warm Biz, a call to businesspeople to don
sweaters and long johns under their gray suits so
that office thermostats could be set lower.
So there you have it: the Green party line
presenting poverty as technologically advanced, as
the wave of the future, and as morally virtuous. We
can supposedly all look forward to the day when we
will be as advanced as the Japanese and energy will
cost us twice as much as it now does. When we too
will be unable to afford central heating and will
have to live in houses half their present size. When
we will have to gather our entire family into the
one heated room in the house. When we will have to
follow one another into the same bathwater, and then
use that bathwater to wash our clothes, which we
will have to dry outdoors, as our great-grandparents
did. When we will have to wear long underwear and
sweaters to keep warm indoors. What a glorious,
green
future! What green slime
The Times
pours on the readers of its alleged news reports.
This article is copyright © 2007, by George Reisman.
Permission is hereby granted to reproduce and
distribute it electronically and in print, other
than as part of a book and provided that mention of
the author’s web site
www.capitalism.net
is included.
(Email notification is requested.)
All other rights reserved. George Reisman is the
author of
Capitalism: A Treatise on Economics
(Ottawa, Illinois: Jameson Books, 1996) and is
Pepperdine University Professor Emeritus of
Economics.