An Incoherent Argument Against Higher Minimum Wages

June 18, 2024  |  592 words  |  Economics, Philosophy  

A day after the Ross Douthat – J.D. Vance interview appeared in The New York Times, Eric Boehm writing for the Reason website chimed in to question Vance’s idea of economic populism, by offering the standard libertarian defense of letting market forces determine wages.  

When Mr. Boehm writes: “But if your job is lost to marker forces – because someone else is willing to do the same work for less – that’s a problem he (Vance) implies the government has a role in solving,” I had to stifle a belly laugh.

Because someone is willing to do the same work for less?  Honestly, Mr. Boehm, do you really believe people routinely “work for less” of their own free will?

To clarify, I am not “someone who favors greater government intervention in the economy.”  Nor do I like the idea of government “picking winners and losers,” which is something else libertarians are always complaining about.

Arguing in favor of higher wages is not a matter of, as young Mr. Boehm asserts, thinking government officials know exactly what levers to pull and what incentives to offer.  Or thinking government officials know that a $20 per hour wage is enough, or can gauge how many factories a town or state needs, or which jobs are important enough to protect.  

No reasonable person thinks government officials hold the answers to such questions.  But some of us also realize that leaving the compensation of working people with no leverage to the largesse of the ownership class is not the best way to preserve or enhance the social fabric of society.  

Mr. Boehm selectively quotes Mr. Vance’s ideas about economic populism to critique them, but he strategically avoids mentioning the lead-in paragraph that spells out Vance’s definition of the problem:

“The main thrust of the postwar American order of globalization has involved relying more and more on cheaper labor.  The trade issue and the immigration issue are two sides of the same coin:  The trade issue is cheaper labor overseas; the immigration issue is cheaper labor at home, which applies upward pressure on a whole host of services, from hospital services to housing and so forth.”

(What Vance is saying, just to be clear, is that when you have a domestic population making very little money, that portion of the citizenry is going to have trouble paying for basic needs such as hospitals and housing, etc. and will need assistance of some kind, from some source, to do so.)

To hear Eric Boehm tell it, there is no problem in this country relative to wage levels.  We can sit back and let the immutable scientific law of supply and demand determine what people should be paid.  

This boiler plate libertarian explanation of how the economy should be allowed to function does break new ground in one important respect.  Boehm concludes that those on the right who express concern for low-end workers lack humility:

“Conservatives used to have enough humility to recognize that government officials won’t have the answers to all these questions.”  

Well, Eric, that is certainly a novel way of looking at the situation.  Here is another, slightly grittier way:  

The social fabric of our country would benefit from political leadership willing to defy the donor class by enforcing antitrust laws.  Encouraging the growth of unions to balance the influence and power that capital now exerts in the marketplace would also be a good move.  With the goal being to help hard-working Americans access their fair share of the financial rewards being generated by our booming economy.

Robert J. Cavanaugh, Jr.

www.robertjcavanaughjr.com

bobcavjr@gmail.com

Yes, but is ‘Trickle Down’ Enough?

May 22, 2024  |  582 words  |  Economic, Politics

Today’s Wall Street Journal carries a short opinion piece by Steven E. Rhoads, a professor emeritus of politics at the University of Virginia, who wants to remind readers that ‘trickle down’ works, allowing everyone to prosper.

When President Biden used his State of the Union address to encourage the American people to imagine a future in which “the days of trickle-down economics are over,” it rubbed Professor Rhoads the wrong way and moved him to put pen to paper.

He thinks establishing a wealth tax to address what Democrats consider the failures of ‘trickle down’ to provide a decent standard of living to those on the lower rungs of the economic ladder would be a big mistake.  Since, as Rhoads notes, it is the super-rich who have the greatest ability to invest in capital improvements and new entrepreneurial ideas that are most responsible for raising our standard of living.  

Not only that, but the super-rich are naturally inclined to act in a benevolent manner.  To prove this point Professor Rhoads cites a 2019 book, “The Billion Dollar Secret,” in which entrepreneur Rafael Badziag interviewed 21 self-made billionaires and found “they generally derived more pleasure from investing in technologies to create new and improved products – a benefit to everyone – than from spending on personal luxuries.”

This apparently demonstrates that 2020 presidential candidate Senator Elizabeth Warren was all wrong when she said the wealth tax she was proposing would be reserved for ”the diamonds, the yachts, and the Rembrandts,” and would not negatively impact economic growth.

To be clear, I am not arguing against ‘trickle down.’  I agree with economist Alfred Kahn (1917-2010) who wrote: “The most powerful engine of productivity advance is technological progress, generated in large measure by expenditures on research and development and embodied in improved capitals goods and managerial  techniques.” That process confers benefits on everyone, Kahn added, “precisely by trickling down.”

I also agree with professor emeritus Stephen E. Rhoads when he writes:  “When employees use better equipment and have better managers, they become more productive.  This makes them more valuable to their companies and stirs competition in the labor market, causing their real incomes to rise.”

At least I agree that is what should happen.

Instead of being concerned with the widening gap between the wealthiest Americans and everyone else, Rhoads thinks we should be expressing gratitude for the entrepreneurs and the super-rich.  Rather than tax what appears to be their exorbitant and out-sized wealth, we should go easy on them because they generate jobs and create new products we all enjoy.

Leaving the rich alone so they can perform their job-creation magic is a message I first encountered in Michael Novack’s 1982 best-seller, The Spirit of Democratic Capitalism, which among other things was a pean to just these folks, and stroked the egos of entrepreneurs everywhere.

Mr. Novak (1933-2017) went from being a dissident Catholic lay theologian in the late 1960s to the darling of the Reagan Revolution.  He rode that recognition for the rest of his life, living out his days as a resident scholar at the prestigious American Enterprise Institute, a bastion of free-market economic conservatism.

Professor Rhoads ends his short piece by worrying “excessive taxation” could deplete the funds that entrepreneurs use to start and sustain useful ventures.  Well, maybe.  Or maybe our billionaires and super-rich can still start and sustain those useful ventures, if they can manage to get by with one less vacation home, one less yacht, and a few less diamonds.

Robert J. Cavanaugh, Jr.

www.robertjcavanaughjr.com

bobcavjr@gmail.com

The Truth’s Long, Hard Slog

May 21, 2024  |  1,685 words  |  Economics, Philosophy

The conservative Catholic commentator Christopher Manion has been around a long time, and is well into the eminence grise stage of his career.  Perhaps not as well-known as some other conservative Catholic thought-leaders who possess a somewhat higher public profile, Manion nevertheless has a reliable following in certain circles.

One such circle of support is Christendom College in Front Royal, Virginia, where Dr. Manion was invited in February to share his political expertise in a lecture sponsored by the school’s Political Science and Economics Department.

That expertise comes from his time long ago as staff director of the Senate Foreign Relations Subcommittee on the Western Hemisphere, under Senator Jesse Helms (R-N.C.).  Prior to that Manion earned his Ph.D in government at Notre Dame University.  After his brief stint in government Dr. Manion went on to teach politics, religion, and international relations at Boston University, Catholic University of America, and Christendom College.

He continues to be a contributing editor and critic for Saturday Review and High Fidelity magazines, and has appeared in The Wall Street Journal, The Journal of Economic Development, and The National Catholic Register with op-eds and book reviews.

I think it would be fair to say Dr. Manion is typical of the conservative Catholic intelligentsia that considers Pope Francis an abomination from a doctrinal point of view, someone who regularly contradicts two millennia of Church teaching on faith and morals.  Still, I was caught off guard by an essay Manion posted on April 13, entitled Tucho Fernandez Strikes Again.

The piece starts off innocently enough, with a rather standard-issue dismissive harumph in response to the latest pronouncement by one of Francis’ renegade apparatchiks (Cardinal Tucho Fernandez, in this instance).  But then the article takes an unexpected turn.  Out of the blue and for no apparent reason, Christopher Manion decides to cast aspersions on the Church’s well-documented economic teaching, under the subheading The Truth’s Long, Hard Slog.

To quote from Dr. Manion’s essay:

“For the past century and more, the Magisterium has had a tough ride.  When we look at Rerum Novarum (Leo XIII, 1891), and its introduction of ‘Social Justice’ (undefined) into the ‘magisterial’ realm, that vague assertion, plus the equally vague and new meaning of ‘magisterial,’ had a powerful impact on what became the Church’s ‘Social Teaching.’”

“’In 1931’, writes Thomas Patrick Burke, ‘Pope Pius X1 used the term social justice in his encyclical Quadragesimo Anno, giving it official recognition throughout the Roman Catholic Church.’”  

Manion then continues to quote Thomas Patrick Burke quoting from the encyclical:

The right ordering of economic life cannot be left to a free competition of forces.  For from this source, as from a poisoned spring, have originated and spread all the errors of individualist economic teaching.  (QA, 1931)  

Now back to Christopher Manion:

“Franklin D. Roosevelt didn’t lose any time wrapping himself in the authority of the Catholic Church.  In 1936, he quoted this encyclical in a speech before a large crowd in Detroit. ‘It is a declaration from one of the greatest forces of conservatism in the world, the Catholic Church,’ he said, and it is ‘just as radical as I am… one of the greatest documents of modern times.’”  

“He (meaning FDR) quoted from the Encyclical at length:

It is patent in our days that not alone is wealth accumulated, but immense power and despotic domination are concentrated in the hands of a few, and those few are frequently not the owners but only the trustees and directors of invested funds which they administer at their good pleasure…

The accumulation of power, the characteristic note of the modern economic order, is a natural result of limitless free competition, which permits the survival of those only who are the strongest, which often means those who fight most relentlessly, who pay least heed to the dictates on conscience.

This concentration of power has led to a three-fold struggle for domination:  First, there is a struggle for dictatorship in the economic sphere itself; then the fierce battle to acquire control of the Government, so that its resources and authority may be abused in the economic struggle, and, finally, the clash between the Governments themselves. (QA, 1931)

Manion continues:

“Counseled and cheered on by Msgr. John A. Ryan, author of the 1919 pastoral letter of the National Catholic Welfare Conference and its chief spokesman in the 1930s, Roosevelt and the American Democrat left have invoked ‘social justice’ to mean whatever they want it to mean.”

“That vague (and often vapid) use of ‘Social Justice’ – and its claim of Magisterial authority for whatever political opinion it is used to defend or assert – has caused untold confusion and real damage ever since.  Popes since 1849 have condemned socialism on grounds of fundamental principle – but since Rerum Novarum, the Catholic Left has opposed that absolute and objective denunciation by countering it with ‘Social Justice.’”

Okay, but I have a few questions.  Why does the Catholic Left’s alleged opposition to the Church’s clear rejection of socialism undermine the Church’s economic teaching?  Why does the Left’s use of the term “social justice” sully a pope’s use of that same term?  (If “confusion” is the concern, the answer is for thought-leaders to do a better job of explaining and instructing, not to abandon a valuable concept altogether.)  Why does Franklin D. Roosevelt’s praise for Quadragesimo Ano somehow make that encyclical less profound and any less pertinent?

Back to Dr. Manion’s essay:

“And we should not forget that in the time of Leo XIII, ‘Christian Socialism’ was a new thing that captivated intellectuals both cleric and lay.  95 percent of the world’s population was living in abject poverty in that era.  Today, that figure is no more than 10 percent, and most of those still suffering are living under socialism.”

“Pope Leo would be astounded at the abundance that the free market has allowed the world to achieve since the nineteenth century.  Today’s ‘Social Justice Warriors’ know it.  But they have to keep beating the same tiresome tune because they have nothing else to fill the vast abyss they have created by turning their back on the Church’s moral teaching in Humanae Vitae, Casti Connubi, and two thousand years of the Church’s teaching on sex, marriage, and children.”

Ah, here we arrive at what strikes me as the key to Dr. Manion’s consternation.  This last passage clearly shows his pre-occupation, and the pre-occupation of all other conservative Catholic commentors for that matter, with ‘violations’ of Church teaching on sex and marriage.  He (they) feels these violations have been perpetrated and even encouraged since the Second Vatican Council by the Catholic Left, who have casually thrown around the term social justice to obscure their calumny.  

And in a case of assigning guilt by association, he (they) feels a special antagonism toward the current pope in this regard, seeing Frances as persona non grata for being a ringleader of sorts for the sex and marriage dissidents.

Manion obviously has an axe to grind with what he sees as the disreputable Catholic Left, and this has apparently clouded his judgement regarding the elaborate teaching of the Catholic Church on economic behavior.  In this he seems to demonstrate a bad case of the virus known as “There are no good Democrats.”  (Perhaps you are familiar with the liberal strain of this same virus, “There are no good Republicans.”)  

I say this because in Christopher Manion’s analysis, the landmark encyclical Quadragesimo Anno should be held out as suspect for the simple reason FDR admired it and quoted from it extensively.

Because Dr. Manion sees today’s Catholic Left as ignoring the Church’s absolute and unquestioned denunciation of socialism, and countering it with cries for ‘Social Justice,’ apparently this means mention of the term social justice in any papal encyclical over the last 133 years should be understood as vague and often vapid.

Then there is what I can only describe as the chutzpah Manion displays in claiming Leo XIII would have no choice but to reconsider his pioneering encyclical Rerum Novarum (On the Rights and Duties of Capital and Labor), because now only 10% of the world’s population lives in abject poverty, versus 95% in Leo’s time.  

Allow me to say the observation ‘abject poverty is way down’ in the Third World, while blessedly and thankfully true, is rather glib and often serves as the plug-and-play conservative defense of the economic status quo in the First World.  This statistic is trotted out whenever anyone (like, say, the last ten popes) dares to point out unfettered capitalism’s rather obvious excesses and shortcomings – the routine violations of human dignity, the systemic failure to promote individual flourishing, to name just a few.  

As if all we are supposed to ask of our economic system is to lift more of the world’s destitute population out of abject poverty.

This April 13 essay really breaks new ground.  Dr. Manion is not simply repeating the same old complaints, blaming the ills in the present-day Catholic Church on the Catholic Left, the Second Vatican Council, and the current wayward pontiff, as conservative commentators are wont to do.  

Manion takes things a step further by making a surprise economic connection.  In the process he calls into question two of the most venerable documents in the Church’s catalogue of modern-day economic teaching – Rerum Novarum (1891) and Quadragesimo Anno (1931). 

That dog does not hunt, in my humble opinion.  

Not that I want this little critique to come across as uncharitable toward Christopher Manion.  I have always respected him and still do, even though I view the papacy of Francis through a much different lens than he does.

I trust Dr. Manion is operating in good faith when he tars and feathers the concept of “social justice” as it was first introduced by Leo XIII and then given official recognition by Pius XI.  This no doubt represents an honest attempt to uncover what he believes is a contributing cause of today’s drift from sexual morality.  I just happen to vehemently disagree with Christopher Manion on this point, and think he is barking up the wrong tree.

Robert J. Cavanaugh, Jr.

www.robertjcavanaughjr.com

bobcavjr@gmail.com

Volkswagen in America

April 30,  2024  |  727 words  |  Economics, Philosophy

Auto workers at a Volkswagen assembly plant in Chattanooga, Tennessee voted to join a union this month, after similar attempts to unionize at that same plant failed to gain the necessary majorities in 2014 and 2019.  

This time around the rank-and-file may have been inspired by last year’s successful strikes at Detroit’s Big Three automakers (General Motors, Ford, and Stellantis), when the United Auto Workers (UAW) secured substantial  raises, thousands of new jobs, and bonuses for retirees.

Oddly enough, Republican Governor Bill Lee of Tennessee had strongly opposed this effort.  In the run-up to the union vote he cautioned such a change might jeopardize jobs.  In the aftermath of the election Mr. Lee was quoted as saying he thought the Chattanooga workers “made a mistake.”  Since multiple Southern states have incentivized automakers to relocate outside of Detroit to avoid the UAW, I guess Governor Lee is worried this vote will prompt Volkswagen to consider leaving Tennessee for a neighboring, still-non-union state.

For the UAW, this victory could represent a major turning point in its efforts to represent more of the auto-making workforce in our Southern states.  It now turns its attention to another German auto manufacturing plant, a  Mercedes factory in Vance, Alabama, that is expected to hold a union vote in a few weeks.  

The Volkswagen location in Tennessee was a logical starting point for a broader UAW organizing effort across the South, since as a German-based company Volkswagen is used to giving its workers more of a say in the overall operation of the company.  In fact, German law prescribes that worker representatives must maintain up to half the seats on the supervisory boards of large corporations.

This is a fundamental component of what is known as a “works council.”  Such councils now exist throughout Europe, with different names and in a variety of related forms.  But the oldest and arguably most successful version of a works council can be found in Germany, with its origins dating back to the early 1920s during the post-WWI Weimar Republic.

“Worker representation” sounds like what a union does.  But while a works council is a shop-floor organization representing workers, it is meant to function as a compliment to, or even independent of, a trade union.

In Germany, a works council is comprised of a group of elected employees who collaborate with management to help reduce workplace conflict, increase the bargaining power of employees, correct market failures through public policy, and provide workers more say in key decisions within the company.

Such a council ensures all laws, rules, and health provisions benefit the company’s workforce and are applied correctly.  Yes, it naturally advocates for the employees’ best interest, but it does so through established dialogue with management.  Both the works council and the employer agree on the contractual provisions for wages and working conditions that are binding on all employees.

And get this:  A works council is mandatory in Germany for companies with five or more full-time employees.  But works councils only form at the request of employees, so companies can operate without a works council until the workforce formally requests one.

While I hope the UAW’s next organizing effort at a Mercedes factory in Alabama proves to be successful, even more valuable would be the introduction of the works council concept at these auto plants.

It has already happened, at least in a nascent form, for fast-food workers in California.  The FAST Recovery Act, signed into law in 2022,  established a fast-food council that will be made up of workers and corporate representatives from the industry that will hash out standards for wages, benefits, and other working conditions.

This new council gets close to the European model in one important respect: sectorial bargaining.  Under such a model, employees and employers across an industry negotiate conditions all at once, instead of company-by-company, or location-by-location, as currently dictated by U.S. labor law.

Giving workers a voice that allows them to bargain as a unit, as unionization does, is a good thing.  An even better thing would be figuring out how to move away from the often-lethal us-versus-them mentality that descends on too many contract negotiations, once a workforce does go union.  With a goodwill commitment from both sides in the fight, the works council might help American industry find the sweet spot and discover a modicum of much-needed labor-management cooperation.

Robert J. Cavanaugh, Jr.

www.robertjcavanaughjr.com

bobcavjr@gmail.com

Lovesac Wisdom

April 23, 2024  |  540 words  |  Economics, Philosophy

Not a day goes by without a new batch of unsolicited suggestions for self-improvement hitting my inbox.  Fueled by the latest research, these highly-annotated ideas are meant to help me develop a higher level of empathy and improve my emotional intelligence, making me a more effective employer and manager, a better husband and father.

The latest pearl of wisdom came in the form of a promotional blurb for the newly-published memoir of a young man who built a wildly successful, publicly-traded furniture company from the humblest of beginnings in his parents’ basement.  In Let Me Save You 25 Years: Mistakes, Miracles and Lessons from the Lovesac Story, Shawn D. Nelson, the 47-year-old founder and CEO of The Lovesac Company (NASDAQ: LOVE), details how he turned his teenage daydream into a global brand.

The promo lets potential readers know the book is filled with personal stories that illustrate certain maxims Mr. Nelson has gleaned from the trials and triumphs experienced during his gritty journey.  Here is one I can certainly relate to:

Never lose your willingness to sweep floors, and you will become a uniquely effective leader known for your integrity.”

It sounds to me like Shawn D. Nelson might be a proponent of Servant Leadership.  This concept has been around for at least two millennia, of course, but was coined for specific application in the business world by Robert K. Greenleaf in his seminal work first published in 1970, The Servant as Leader.  After spending 40 years at AT&T, Greenleaf retired in 1964 as director of management research.  

He cited as influences his father, who stood for him as a role model for servanthood; E.B. White, whose writings emphasized seeing things as a whole; the culture at AT&T, which showed him it was possible to nurture the spirit of employees while making a profit; and the work of a nineteenth-century Danish Lutheran clergyman by the name of Nikolay Frederick Severin Grundtyig, who showed how servant leadership could transform a country.

Lots of academics and scholars have expounded on Greenleaf’s work since then, helping to carve out an alternative to the conventional hierarchical-oriented leader who sees his/her primary role as delivering profit to shareholders.  The alternative has introduced a more nuanced view of leadership that still achieves profitability while also embodying socially-responsible virtues like stewardship, ethical behavior, and collaboration. 

Such virtues should not be news, since in most cases they were transmitted to us as young children at our parents’ feet.  Just as an aside, neither my father or mother built a wildly successful business, or became a big-time corporate executive.  They were just your basic, salt-of-the-earth types who taught me to do unto others as I would have them do unto me.

Simple, straightforward advice which has stood me in good stead as I have made my way in the world as an employer and manager, a husband and father.  Though it is always good to hear from hard-charging entrepreneurs who have found a measure of humility along with their outsized success.  And I do welcome the work of all those experts who are busy detailing how best to apply such timeless concepts as servant leadership in the business world, while helping to redefine what constitutes ‘good leadership’ in that world.

Robert J. Cavanaugh, Jr.

www.robertjcavanaughjr.com

bobcavjr@gmail.com