Random Rose: Mr F Gets Published!

I’m very proud of Mr F.

He may be a little right wing.  He may be young and idealistic (in an economistic sort of way). He may even be wrong. But he’s written an article, he’s set out his views stylishly and with lucidity, and he’s put it out there.  And he’s mine!!

Anyway, here it is.  Feel free to agree or disagree – I’m sure Mr F could do with the feedback, as not as many people as might be, stop by The Libertarian.

It seems to be conventional wisdom in Australia that we have the 40-hour week, sick leave and holidays because of unions. That the conditions now are as they are because of unions. That workers would be worse off without unions fighting for them. But it’s a belief which doesn’t stand up to even a rudimentary understanding of economics.

Let’s start by quickly going over what wealth is and the way in which it is created.

Wealth is stuff people want. TVs, computers, processed food, music, information; these are all wealth. Hundreds of years ago, society was less wealthy because there was less stuff that people wanted around. People had to settle for worse food, or less food, harder beds and had limited choices for leisure. So for a society to be more wealthy there has to be more and/or better stuff available to its people.

There are two ways to get more and/or better stuff: increase the inputs to production and thus increase the outputs of it (such as finding a large, rich source of oil), or increase the efficiency of production. Increases in efficiency come primarily from technology. The increase in wealth that we’ve seen over the last few hundred years in Western society are driven by increases in productivity. Efficiency increases also have the benefit of enabling increased inputs to production; for instance, we’re now able to drill for oil on the deep sea floor, where we once couldn’t. Take a look at the way crop yields have grown since 1911:

 

 

So, we know there are two, and only two, ways to increase the collective wealth of society. We should be able to stop here. It has already been proven that unions cannot increase the collective wealth of society. But it is useful to go further.

When a union strikes, it does not increase society’s collective wealth. That’s impossible – abstaining from work does not in any way, indeed cannot, increase the amount of stuff available in total in society. It doesn’t improve efficiency or the inputs to production. All it can hope to do is redistribute wealth; the unions see it as taking from the companies’ profits and giving to the workers in increased wages or better conditions.

Surely, there’s nothing wrong with unions taking some money from the billions of dollars some companies earn? Unfortunately, company profits do not go into a void. They either go back to normal people – shareholders – who then spend the money in the economy, or to further investment in the company itself. This further investment is absolutely crucial to progress. It is how progress is made, how wealth is created. Companies in this way increase efficiency and make better and more useful products for us all. Intel (the computer chip manufacturer) spends millions of dollars researching new computer technology, and this research is the reason computers double in speed each year. If the money is taken from the dividends the company pays shareholders, the value of the company must necessarily decrease, which means the company has less access to capital when it needs it, which also destroys progress.

Back in the early days of the Industrial Revolution, we didn’t have 40 hour work weeks and great conditions because they were impossible to provide given the productivity at the time. As productivity increased, conditions got better (see the earlier crop yields chart for an example of why workers have better conditions now).

And there’s a market explanation for the reason firms will improve conditions: competition. How many applicants would a firm get today if they offered $1 per hour for a factory position, the sort of wage seen in the Industrial Revolution? None at all. Nobody denies the fact that companies want to reduce their expenditure and lower wages, but competition from other firms acts as a force preventing that (on the other hand the drive for increasing net profit by cutting operating costs is absolutely crucial to ensure efficiency in production, but that’s for another time).

And finally, unions harm workers by enforcing mediocrity. There will always be good jobs available for hard workers, and they will quickly rise through the ranks. But unions bring everyone down to a lowest common denominator. Take teachers unions as an example. Right now, there is a national shortage of maths and science teachers. In a free market they would be paid more than they currently are. But the teachers unions forbid paying different types of teachers different amounts, and thus the desperately needed maths teachers get paid the same as the oversupplied English teachers. This doesn’t help good workers, it doesn’t help parents or children, it doesn’t help the organisation that runs the schools, it doesn’t help society and in the long run it doesn’t help bad teachers either as mediocrity does not thrive in non-unionised workforces, and those used to it will have trouble.
 

Mr F is clearly not expecting to be employed as a chicken filleter.

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About turnipsforbreakfast

Rose has two blogs, www.butimbeautiful.wordpress.com, and www.turnipsforbreakfast.wordpress.com. Enjoy!
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15 Responses to Random Rose: Mr F Gets Published!

  1. Seb says:

    So, he is a supply-sider. The problem with supply-side economics is that, like Communism, it talks a good game but it has never been shown to work anywhere in the world.

    • That’s what I tell him. Economics isn’t an exact science, where you can say ‘if x, then y’ and prove it repeatedly. It’s more like history, where you have to work out the rules in hindsight and there are hundreds of variables.

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  2. iamnotshe says:

    Go Mr. F, Go Mr. F. Publishing is a good thing.

  3. His thinking will evolve; there are so many variables to be understood and absorbed. However; for the moment he is one sure thinker who shall make his mark, not only in economics, but as a major player in a major firm… Be proud, Mother; you have every right to be…! 🙂

    • I think he needs contact with a wide variety of intelligent thinkers, not just committed libertarians. At the moment his thinking is very naive – he needs some really good arguments (better than the ones i can give). But it’s great that he IS thinking.

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  4. Peter T says:

    Yeah – I don’t think the word “proven” means what he thinks it means.

  5. I think if unions were such a bad idea people would not have fought and sometimes died to create and maintain them. The fact that monsters like Thatcher are so opposed to them rather suggests they continue to be useful. If only to piss off the powers that be. Unfortunately money is power, and so unions are often necessary to protect the poor. Still, well done for him getting published.

    • That’s what I think. I suppose in some situations unions become entrenched, so that workers can’t choose not to be in them. Unionism in Australia is, I believe, voluntary now, so unions are losing a lot of their members. Presumably those workers think they can do better without, and good luck to them. But unions were formed because workers needed them to balance the power of employers, and those circumstances are still present, in some industries, countries and periods.

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  6. shovonc says:

    Sounds grumpy. Wouldn’t have a drink with him.

    • With Mr F? You couldn’t, he hasn’t reached drinking age yet! He’s only 17..my 17 year old baby, almost grown up and still mouthing off a bit, but I like that he can express his opinions even if they aren’t quite what Mother taught him!

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  7. whiteladyinthehood says:

    It was very interesting reading a point of view from a 17 year old. I think he has inherited some of his mother’s writing passion.

  8. My favourite thing about Mr. F’s article is that his proud mama has posted it on her blog! And though this oversupplied English teacher sees a few flaws with his arguments, she also sees that he is thinking and formulating strong arguments. Give him a few years, Rose, and he’ll come around to his mother’s politics 🙂 And in the meantime, keep showing him how proud you are of him!

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