Awkward Utopia

Once upon a time, we were all on the same team. We may have had different motivations, as Eric once pointed out on this blog and as can be seen from any given issue of The Economist over the years, but we usually came to the same place, arriving at the same conclusions that would lead to a better world. I’ve cut some slack to this “newspaper” over the years, too much, it is now apparent.

As The Economist has shifted left with its lofty, intelligentsia-driven, poll-sucking practicality, so has its quality of analysis. Both Registan and Awkward Utopia have documented this. Although I believe its blogs are not really The Economist proper, though I enjoy reading most of them (especially the news arts blogs), they could be seen as either colonies or outlets for more authentic feelings. In either case, we are in for some very dark times, as shown by this post on Free Exchange. Exhibit A (emphasis added):

This state of affairs leads many economists to lament the existence of unions generally, since they tend to constrain economic growth, but it’s important to note that union members are simply insuring against the potential loss of benefits they’d face if shunted out of their particular firm or industry and into another part of the economy. It stands to reason, then, that the package of benefits sought by unions might be less damaging to growth in situations where unions are fewer, larger, and more encompassing. In that case, a worker forced out of a firm for the sake of efficiency would stand a better chance of landing in an industry or firm with equally good worker benefits.

Listen, everyone already knows why unions do what they do. We know that from their perspective they, amongst other things, “insure against the potential loss of benefits.” But that’s not a novel point since it does not imply that we win if we have fewer, larger, more encompassing unions. In fact, if anything, it implies the opposite since such unions run amok will act like teacher’s unions that are powerful in large states like Florida’s, where the union is able to put a stranglehold on the entire system. Benefits are more standardized, but the cost of labor goes up and it’s harder to employ people period. Then those people will want more protections — because they can. It’s that simple. You can’t just have unions in a vacuum where the only issue is insurance against loss of benefits. There are a ton of other issues that can and will pop up making darn sure that whatever marginal (if extant) benefits derived from larger unions are far outweighed by the costs involved.

Exhibit B:

If that’s the case, though, and larger unions are more amenable to growth-friendly corporate policies, then why not extend worker benefits to include all workers? If job loss carries with it the risk of benefit loss, leading workers to fight job-loss in growth inhibiting ways, why not eliminate that risk by providing those benefits at a national level? If concerns about health insurance and pension plans are encouraging workers to ask for employment protections, it seems sensible to provide them to all, so that displacement from any job into any other job will not result in benefit loss and give unions reasons to ask for job security (or fight openness to global markets).

First of all, we should not extend worker benefits to include all workers because that would give workers less incentive to perform. Second, it would put pressure on a firm’s ability to innovate, thereby driving down the quality of the good or service in the industry, at least in the long run. Third, providing these benefits at a national level combined with idiotic labor laws will give far too much power to unions. We would see their re-emergence, and with it, the decline of sustained American prosperity that goes along with higher taxes and more control in the hands of union bosses insulated from the market or the competitive pressures of freedom writ large (capitalism). Fourth, the cost of unions whose main mission is to insure against benefit loss (if this is indeed what a modern US union’s mission is), then that is far better than whatever cockamamie anti-deadweight loss union would be due to its huge impact on the country — and world.

Exhibit C:

Obviously, such programs must be paid for and would probably necessitate tax increases, which come with their own economic distortions. But it may be time to acknowledge that such trade-offs are necessary. Given widespread popular economic insecurity and political pressure for greater protections against market shifts, the question is not whether or not to allow economic distortions of one form or another, it’s which we would prefer. Opponents of the welfare state generally might want to consider that success in the fight against universal health insurance might fuel public opposition to open borders and trade. Fighting on all fronts enhances the probability of defeat on all fronts.

Politics is not some static thing. It’s dynamic, and no it would not just be “paid for” and “necessitate” tax increases. It would be paid for by a tax increase the first year, maybe another tax increase the next year, until we have this inhibitive labor safety net as has been seen in the labor disaster engines (formerly including France) of late. The scale of the cost in the long-term is so huge it is hard to measure, given the trade-offs in higher prices, worse products, and less flexible markets.

There is not widespread economic insecurity. If you want widespread economic insecurity, look at the 2000 recession, the 1991 recession, the early 80s recession, the entire Carter Administration, or perhaps a look at the Great Depression — all helped along their ways by malinvestments spurred by government intervention. There isn’t any political pressure in the US to speak of for greater employment protections. Some perspective is called for: from the early 20th century onward, there was political pressure for that sort of thing and it was hard to assail. Since the 1980s, the unchanged political consensus has been that employees do not need more protections. If anything, the consensus has been and remains the opposite. Outsourcing was more of an issue in 2004 than it is now, for the love of Kirk.

Thankfully, there is one good point in this article, and it speaks of a tried and true political reality. Success against universal health care may very well expend too much political capital to be able to fight off opposition to trade. But that’s so much fear-mongering at this point. We must fight these things for our sake, our children’s sake, and the world’s sake. Surrendering on these issues will destroy the quality of our healthcare, the price levels fostering prosperity here, and send ripple effects through the global system slowing the astounding march of progress began in the 1980s.

I remember when The Economist was once a good ally to have in war, but now the newspaper will know what it is to despair in this time of its intellectual surrender. [More editing of this post to come -- have to run to class! Would love comments.]