To Drill or not to Drill: That is the Question

So I was reading a couple of articles on the legislation in the United States that was stopped before it began on the possible drilling of off-shore locations for an increase in the domestic oil production of the US.  The bill was designed to allow lands, that were previously off limits, to be accessed for use in drilling to increase the domestic supply of oil in the US and help brunt some of the increase in costs on the amount per barrel.  Many politicians saw this as a way to help the consumer absorb some of the cost that they were paying at the pump, while others saw this as a “big oil” or  “anti-environmental” movement aimed at furthering the destruction of the planet. 

Trade Subsidies: The Good, the Bad, and the Ugly

In the market oriented world, trade subsidies are supposed to be an advantageous means to protect a country’s ability to produce a good and have a chance to be marketable on the global market.  Thus when one country produces a product at a lower cost and begins exporting it globally, another country has the ability to place an export duty or a trade subsidy on it so that their product meets the price of the same or similar product in that nations market.  Thus, if an African country can produce, say wheat, at a lower cost and ship it worldwide, then Europe would subsidize their farmers and pay them the difference in the market value so that the European farmers could sell their wheat at the same price as the African country.  Thus, the African country loses the battle because their product is no longer as competitive as it was when it was shipped from their ports. 

The New Deal: Savior from the Great Depression or Creator of the Welfare State?

Looking back over the history of not only the United States, but the history of most of the now modern world, the Great Depression was a defining moment in many people’s lives.  This was a time when the world economy came to a grinding halt for some, or slowed down so significantly that the people were desperate for any means possible to get out of their economic depression.  The evils of capitalism would not and could not allow for the economies of the world to rebound as fast as the people wanted or needed and thus drastic measures were required.  At least that is how the political figures in-charge defined their arguments for such “New Deal” policy and legislation. 

NATO: The Price of Defense

In a world that is ever changing and in a time where providing for your nation is tantamount to the survival of your people and society, we need to have a better understanding of the governmental regimes that are at play in our world.  From dictatorships to monarchies, democracies to socialist regimes, countries around the world are creating a future for themselves in which government has an important role and place in their society.  Some societies feel that government should be the “be all and end all” of their world and provide for it, everything they need to live the best life possible.  Others believe that the people should decide how they live their lives and that government should be there to provide stabilization and a governing force to protect their basic needs and tenants.

minimum wage in Germany

Adam Loos

“History, in brief, is an analysis of the past in order that we may understand the present and guide our conduct into the future,” stated former University of Chicago professor Sidney E. Mead. To understand and guide our conduct for the twenty-first century, one must examine the past. The German Union leaders and other prominent German politicians are calling for a minimum wage to be enacted. One labor leader is calling for a price floor of 7.50 euros an hour. Is this policy effective in establishing equality and limiting unemployment? If one wants to understand the future of the German nation, one must look at the history regarding minimum wage.

Australia introduced wage floors in the 19th century to create social equality. Historically, minimum wage is a detriment to the economic and social equality and stability of many countries. As lawmakers seem to fail to understand wealth creation, poor economic conditions result. Minimum wage laws reduce the quantity of hours or workers, increases unemployment and price levels, harm small businesses, constrain freedom, create social unrest, limit the least employable and ineffectively introduces welfare into the private sector.Minimum wage reduces the quantity of hours employed to minimize costs. This produces rising unemployment, due to a pricing out effect on the lowest qualified out of the work-force. General economics suggests this to be so, but when 308 members of American Economics Association were asked to respond to how they viewed “minimum wage increases unemployment among young and unskilled workers”, 73.5% agreed or partially agreed with the statement.

By excluding the lowest economic classes, it manifests itself in institutional racial prejudices in South Africa and the United States. Milton Friedman dubbed the minimum wage law as the “the most anti-Negro law on our statute book.” It is deemed as such because it sets a price floor on how cheap labor can be. It forced the African-American to compete on other levels besides cheap wages, where they were unable to compete (i.e. race, skill level, etc) This finding is supported by National Center for Policy Analysis study stating that “beginning in 1956, when the minimum wage was raised from 75 cents to $1, unemployment rates for the two groups began to diverge. Soon, unemployment rates were significantly higher for both black and white teenage males, but moreso for blacks. By 1960, the unemployment rate for black teen-age males was up to 22.7 percent, while the white rate stood at 14.6 percent.” The study maintains that “the minimum wage was further increased in 1967, 1968, 1974, 1975, 1976 and annually from 1978 through 1981. At each point, the unemployment rate for black teen-agers tended to ratchet higher. By 1981, the unemployment rate for black teen-age males averaged 40.7 percent four times its early 1950s level, when the minimum wage was much lower and its coverage less extensive.”

In 1988, upon hearing about the impending minimum wage laws, the Cato Institute wrote a piece stating that “Contrary to the claims of many members of Congress, government cannot create wealth by simply passing new laws. Otherwise, Congress would long ago have passed laws prohibiting poverty and establishing a minimum wage of $100, or even $1,000, an hour. In such a world, everyone could be a millionaire. But ours is a world of scarcity, and wealth is a product of the market process, not of legislative fiat.” When legislators give raises, who must pay for them? The employed will be paid in three different ways. As aforementioned, employed hours can be cut by minimizing the work force. The employer may take a profit cut, at the expense of research and development, paying off loans or expansion. Lastly, the cost may be passed onto the consumers with price increases.

Many businesses that employ minimum wage workers are restaurants, super-markets and clothing stores. These businesses raise prices quickly in order to restore profit margins. Unfortunately, the government responds far slower in order to meet the inflation created by the minimum wage, leaving the poor with same amount they started with. In a competitive market where prices can’t be raised or businesses is lost, the business will simply cut jobs instead of absorbing the economic loss. Lawmakers often believe that the “wealthiest of the wealthy” will soak the losses minimum wage exerted on large corporations. The problem comes regarding small businesses in highly competitive markets which do not have the profit margins to cover great losses and are not able to raise prices for fear of losing businesses.

Marred by a history of creating inequality, racial prejudice, misplaced welfare, and lack of results, and increasing unemployment; it is difficult to understand Germany’s call to minimum wage. One should hope that the German voters persuade the politicians to vote against a wage floor.

Barroso, Climate Change and Civil Society

Oliver Tree

 

 Wrestling with global financial meltdown for top news spot, climate change is never far from the headlines. So it is no surprise that EU President Jose Manuel Barroso has grabbed the limelight with yet another drastic plan to deliver us from our collective environmental sins. 

 

When it comes to climate change there is a scene in the film Men In Black that for me neatly summarises the debate. A wizened Tommy Lee Jones turns to a newly recruited Will Smith declaring that “1500 years ago everybody knew that the earth was the centre of the universe, 500 years ago everybody knew that the earth was flat and 15 minutes ago you knew that people were alone on this planet…think what you will know tomorrow”

 

No mater what the natives of Kreuzberg or the Rainbow Warrior would have you believe, science does not work in ‘facts’. During the later half of the 19th Century and well into the twentieth the ’science’ of phrenology predicted with factual certitude that racial groups and their physical characteristics determined people’s cognitive potential. Currently there are several competing theories about the exact reason for how airline wings work, no scientist can explain why hot water freezes faster than cold or indeed how the supposedly un-aerodynamic bumblebee flies. Science is constantly evolving in a non-linear fashion, progressing faster and further in some areas and clearly lagging behind in others. It is not for me, or indeed you, to sit and declare categorically one side of the climate debate or the other.

 

  Now I know what you are thinking, ‘oh no here we go again’ another free-marketeer  denying that the climate is changing or at the very least that humanity has anything to do with a natural process. You would be wrong however. Refuting climate change and/or anthropomorphic explanations outright is equally as facile as proclaiming its scientific certitude.

 

My point is this; the bandwagoning Bonos of this world may well be right. Those who deny everything to do with climate change may well turn out to be right. However, to extend the agenda setting remit of governments and international organisations on the basis of this scientific ‘knowledge gap’  is definitely wrong.

 

 For arguments sake, if climate change is man made and if  it is reversible then surely the last institution one wants taking the lead are international bodies that fail to resolve more meagre international issues and governments that consistently struggle to educate your children, supply adequate police forces and provide effective healthcare solutions. Governments and international bodies, no matter their motives, are in their very nature consistently the worst providers of efficient services and innovative solutions. Daily they struggle with the complexity of modern society;  who on earth would want to trust them with saving the planet?

 

There are alternatives. I direct the open minded reader to the following alternative solutions on the issue. The soon to be published Civil Society Report on Climate Change and The Commons blog offer introductions and explanations as to why a free market solution provides a logical and tested route to solving climate change and other pressing global issues.