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Show The Paper That Dares To Take A Stand THE December 9, ECONOMICS AND POLITICS OF ment. In fact, the policy of letting the free market determine the height of wage rates is the only reasonable and successful policy. If wage rates, either by union pressure and compulsion or by government decree, are raised above this height, lasting unemployment of a part of the potential labor force develops. These opinions are passionately rejected by the union bosses and their followers among politicians intellectuals. and the The panacea they recommend to fight unemployment is credit expansion and inflation, euphemistically called "an easy money policy. As has been pointed out above, an addition to the available stock of capital previously accumulated makes a further improvement of the industries technological equipment possible, thus raises the marginal productivity of labor and consequently also wage rates. But credit expansion, whether it is effected by issuing additional banknotes or by granting additional credits on bank accounts subject to check, does not add anything to the nations wealth of capital goods. It merely creates the illusion of. an increase in the amount of funds available for an expansion of production. Because they can obtain cheaper credit, people erroneously believe that the countrys wealth has thereby been increased and that therefore certain projects that could not be executed before are now feasible. The inauguration of these projects enhances the demand for labor and for raw materials and makes wage rates and commodity prices rise. An artificial boom is kindled. full-employm- ent WAGES, UNEMPLOYMENT, AND self-styl- ed INFLATION Ludwig von Mises OUR ECONOMIC SYSTEM - the economy or capitalism is a system of consumers supremacy. The customer is sover- eign; he is, says a popular slogan, always right. Businessmen are under the necessity of turning out what the consumers ask for and they must sell their wares at prices which the consumers can afford and are prepared to pay. A business operation is a manifest failure if the proceeds from the sales do not reimburse the businessman for all he has expended in producing the article. Thus the consumers in buying at a definite price determine also the height of the wages that are paid to all those engaged In the industries. It follows that an employer cannot pay more to an employee than the equivalent of the value the latters work, according to the judgment of the buying public, adds to the merchandise. (This is the reason why the movie star gets much more than the charwoman.) If he were to pay more, he would not recover his outlays from the . purchasers; he would suffer losses and would finally go bankrupt. In paying wages, the employer acts as a mandatory of the consumers, as it were. It is upon the consumers that the incidence of the wage payments falls. As the immense majority of the goods produced are bought and consumed by people who are themselves receiving wages and salaries, it is obvious that in spending their earnings the wage earners and employees themselves are foremost in determining the height of the compensation they will get. What Mahee Wagmt Mm? The buyers do not pay for the tion of domestic capital and the investment of foreign capital. As the capital required is lacking, the Indian enterprises are prevented from employing sufficient quantities of modern equipment, are therefore producing much less per r, and can only afford to pay wage rates which, compared with American wage rates, appear ss shockingly low. There is only one way that leads to an improvement of the standg ard of living for the man-hou- wage-earnin- masses the increase in the amount of capital invested. AD other methods, however popular they may be, are not only futile, but are actually detrimental to the g of those they allegedly want to benefit. The fundamental question is: Is it possible to raise wage rates for all thoee eager to find jobe above the height they would have attained on an unhampered labor well-bein- market? Public opinion believes that the improvement in the conditions of the wage earners is an achievement of the unions and of various legislative measures. It gives to unionism and to legislation credit for the rise in wage rates, the shortening of hours of work, the disappearance of child labor, and many other changes. The prevalence of this belief made unionism popular and is responsible for the trend in labor legislation of the last decades. As people think that they owe to unionism their high standard of living, they condone violence, coercion, and intimidation on the part of unionized labor and are indifferent to the curtailment of personal freedom inherent and closed-sho- p in the union-sho- p clauses. As long as these fallacies prevail upon the minds of the voters, it is vain to expect a resolute departure from the policies mistakenly called progressive. toil and trouble the worker took nor for the length of time he spent in working. They pay for the products. The better the tools are which the worker uses in hia job, What Causes Unemployment? the more he can perform in an Yet this popular doctrine mishour, the higher is, consequently, his remuneration. What makes construes every aspect of economic reality. The height of wage rates wages rise and renders the material conditions of the wage earners at which all those eager to get more satisfactory is improvement jobs can be employed depends on in the technological equipment. the marginal productivity of labor, American wages are higher than or, in other words, on the workers wages in other countries because contribution to the usefulness of the capital invested per head of the product. The more capital other things the worker is greater and the invested, the plants are thereby in the position being equal-- is to use the most efficient tools and higher wages climb on the free labor market, i. e., on the labor machines. What is called the American way of life is the result of the market not manipulated by the fact that the United States has government and the unions. At put fewer obstacles in the way of these market wage rates all those saving and capital accumulation eager to employ workers can hire as many as they want. At these than other nations. The economic backwardness of market wage rates all those who such countries as India consists want to be employed can get a job. precisely in the fact that their There prevails on a free labor marpolicies hinder both .the accumula- - ket a tendency toward full employ . The Utah Independent Page 1976 11 pressed in other words, the pu rchas-in- g power of the monetary unit drops. Then the same amount of nominal wages wage rates expressed in terms of money means less in real wages in terms of commodities that can be bought by the monetary unit. Inflation can cure unemployment only by curtailing the wage earners real wages. But then the unions ask for a new increase in wages in order to keep pace with the rising cost of living and we are back where we were before, in a situation in which large scale unemployment can only be prevented by a further expansion of credit. This is what happened in this country as well as in many other countries in the last years. The unions, supported by the government, forced the enterprises to agree to wage rates that went beyond the potential market rates,' that is, the rates which the public was prepared to refund to the employers in purchasing their products. This would have inevitably resulted in rising unemployment figures. But the government policies tried to prevent the emergence of serious unemployment by credit ' expansion inflation. The outcome was rising prices, renewed demands for higher, wages and reiterated credit expansion; in short, protracted inflation. - Inflation Can't Go On indlouly But finally the authorities became frightened. They know that inflation cannot go on endlessly. If one does not stop in time the pernicious policy of increasing the quantity of money and fiduciary media, the nations currency system collapses entirely. The moneInflation and Unemployment tary units purchasing power sink! Under the conditions of this to a point which for all practical is not better than zero. boom, nominal wage rates which purposes before the credit expansion were This happened again and again, in this country with the Contitoo high for the state of the marnental Currency in 1781, in France ket and therefore created unemin 1796, in Germany in 1923. It is ployment of a part of the potential labor force are no longer too high never too early for a nation to and the unemployed can get jobs realize that inflation cannot be again. However, this happens only considered as a way of life and because under the changed monethat it is imperative to return to tary and credit conditions prices sound monetary policies. are rising or, what is the same ex To be continued next week AMERICAN FEDERATION OF SMALL BUSINESS 1963 Incorporated PUBLISHED 407 SOUTH DEARBORN AS A PUBLIC STREET SERVICE CHICAGO, - FIRST LOCATE THE TO ENSLAVE A NATION THEN DISARM IT. GUNS -- If you are 50 year old, you have had over 75 FREEDOMS legislated away from you in the past 35 years, from burning leaves to a fine if you pull off the road to fix a flat tire. They are now after the LAST ONE. YOUR CONSTITUTIONAL RIGHT TO KEEP AND BEAR ARMS. Which of the following excuses are keeping you from helping to save OUR REPUBLIC? 1. 2. 3r 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. don't have time. Let someone else do it. I never join anything. I'm more effective on the outside" I don't want to be controversial. I vote . . . isn't that enough? There is nothing I can do. I husband I leave those matters up to my ( Nobody wants to hear bad news. That's too deep for me. It's none of my business. I can't get involved. It couldn't happen here. I never talk "politics". THE HELL WITH IT. I ( ) wife. IT IS TIME WE DEMAND THAT OUR ELECTED SENATORS AND CONGRESSMEN RETURN TO AND FOLLOW THE CONSTITUTION OF THE UNITED STATES OF AMERICA. ILLINOIS 60605 CLICHES Continued from page 10 patterns, slowdowns, strike orders, and the like; the monopolistic practice of excluding nonmembers from job opportunities; the warlike picketing of private property; the shootings, bombings, wrecking, destruction, open violence, and intimidation? What kind of power is this? If it is a coercive threat to life, liberty, and property, then in theory the government must suppress it. Otherwise, such coercion will, in effect, displace the duly constituted government and pervert it into an agency of assault against life and property. In any event, it seems highly improper to refer to this major, coercive aspect of modern labor unionism as a form of economic power. Economic power is a blessing not a burden to individuals and to society. Paul L Poirot |