Thank Goodness for Child Labor

IT’S CAPITALISM, STUPID, NOT CAPITOLISM

OR

A PERSONAL STORY ABOUT CHILD LABOR

Child Labor – we only outlawed it because we could, because capitalism improved productivity enough that we could let the kids go to school instead of making a living for their families.  It’s not like mom and dad were sitting at home living off their kids’ wages.  Everyone was working and conditions sucked.

The employers of those pitiful kids were driven by the profit motive.  That term is better stated as one’s desire to own the fruits of one’s labor and to have the freedom and the ability to dispose of that fruit as one sees fit.  That one word – Freedom – is the key.  If you try to eliminate the profit-motive, you are eliminating freedom, simple as that.

The profit motive, freedom, is the reason – and the only reason – we were able to write “child-labor” laws and let the kids spend the first 18-22 years of their lives being sponges instead of having to earn their way.

Can it really be true that it was a businessman’s “greed” and evil that made him hire children for $.10 per hour (or whatever it was) instead of hiring his mother or father for $5.00 to toil in his factory?  It was a necessity, it was the only way he could make a profit, and without a profit, the job wouldn’t have existed, the child and his family would starve.  Without the potential to make money, the businessman could not have borrowed or otherwise raised the money it took to build the factory to begin with.  It had to start somewhere.

Were there examples of “evil” and crooked businessmen who abused their power over a small portion of the labor force?  Of course there were.  But, be serious – if that practice were as widespread as we’re often led to believe, where were all the complicit, cruel parents, and why did they sit idly by?  The kids were working because the family needed them to, don’t you think?  If the vast majority of the businesses that employed child labor were the monsters we often see portrayed, and the families didn’t really need the extra money, wouldn’t the parents have let their kids stay home or at least do the work themselves?  The jobs were low-skill, low-pay jobs that enabled the factory owner to keep the factory open – and open the next one and the next one, increasing productivity and replacing, eventually, the kids with machines.  God bless those factory owners who fed families – including his own, by the way – while building a world in which the next generation of kids could spend their youth contemplating and protesting the evils of child labor, instead of shoveling manure out of the family barn.

Do you really think, for example, that a small businessman, a family farmer in Davenport, Iowa in 1905 worked his whole family from dawn ‘til dusk because he hated his only son, Frank E. Neal, Sr., or because he wanted to, God forbid, make a profit off of his own child?  No, we know he did it that way, because otherwise the family wouldn’t have had enough to eat – Frank, Sr. would have starved.

Because he didn’t starve, and since we live in a free country where innovation is driven by the profit motive, that farmer’s son later moved to Tennessee, became a letter carrier for the US Postal Service and sent his third son to Isaac Litton High School in Nashville.  That son then attended an insurance company’s training program, sold property and casualty insurance for several local and national agencies, and raised six children, four of whom make their living working for the independent insurance agency he founded in 1975.

Which of those two men – the farmer in Davenport or the businessman in Nashville – is an ogre, using the labor of his children to line his own pockets.  Neither.  My father, Frank E. Neal, Jr., is the same man as his grandfather and his father – just standing on their shoulders.  I’m grateful that my great-grandfather pushed my grandfather out of bed every morning to milk the cows and tend the crops.  If that’s abusing child labor, I’m all for abusing child labor.

Glenn Beck and Finance

Mr. Beck,

You contributed to the downfall of America on March 1 by perpetuating a couple of myths.

First, oil speculators CAN NOT force the price of oil up.  In every futures contract, there is a ‘long’ side and a ‘short’ side.  For a speculator to make money on the way up, someone has to lose money; for there to be a gain on the UP position, some third party will have speculated on the opposite movement, DOWN, and his loss is the first speculator’s gain.  So, unless there is a complicit, knowing loser on the other side of the trade, forcing the price up by speculation is impossible.  To say otherwise is to feed fear, the last thing we need.

Second, you spoke at some length about “bear-runs” – circumstances where companies’ stock prices were “forced” down by short sellers.  For starters, see above – there are two sides to every trade – some one else believed the opposite, that the share prices would be stable or rise.  In addition, the examples of Bear Strearns and Lehman are telling.  The problems in those two situations were not the short-sellers; the main problems were those companies’ business plans, plans which the short sellers believed would fail.  The short sellers invested their money such that they would profit if their assessment of the plans turned out to be accurate.

In the case of Bear, that problem was worsened by US Treasury Department intervention to (1) assume all of the liabilities of Bear Stearns and (2) sell the remaining assets for a price that didn’t take that $30 Billion white-wash into account.  JP Morgan stole the company with the government’s sanction, getting to keep the assets with the assurance that the contingent liabilities that were on Bear’s balance sheet would be paid by the government – nice work, if you can get it.

With Lehman, the government doomed Lehman when it said “we’re not saving Lehman.”  (I’m not suggesting the government should have ‘saved’ Lehman – the government should have never been involved in the matter.)  We will never know if Lehman could have made it out of their over-commitments to real estate, but they were never given the chance.  Instead government intervention and mark-to-market accounting forced them into insolvency.  Eventually, Lehman filed for bankruptcy and, notwithstanding all the predictions to the contrary, the world did not end.  The market deals with failure almost as well as it does success.  It cleanses the system of bad business plans, and government intervention to keep the market from finding the bottom, so it can bounce, prolongs the pain and moves the bottom DOWN further.

Much can and has been written – much of it wrong – about the financial crisis of 2008.  More populist, anti-Wall-Street-trader rhetoric will not help the country avoid future crises.  More regulations, more government and more mud throwing will all worsen the problem and lead to worse outcomes.  A more clear understanding of how markets function – including how they function to punish failure – will make for a less interventionist government and better outcomes.

Tax Cuts for the Rich!

The Tax System Explained In Beer – by unknown author.

Suppose that every day, ten men go out for beer & the bill for all ten comes to $100. 

If they paid their bill the way we pay our taxes, it would go something like this : 

The first four men (the poorest) would pay nothing. 
The fifth would pay $1 
The sixth would pay $3 
The seventh would pay $7 
The eighth would pay $12 
The ninth would pay $18 
The tenth man (the richest) would pay $59 

So, that’s what they decided to do. 

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. 

“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20”. Drinks for the ten men would now cost just $80. 

The group still wanted to pay their bill the way we pay our taxes. 

So the first four men were unaffected. They would still drink for free. But what about the other six men- the paying customers? 

How could they divide the $20 windfall so that everyone would get his fair share? 

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. 

So, the bar owner suggested that it would be fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay. 

And so the fifth man, like the first four, now paid nothing (100%saving). 

The sixth now paid $2 instead of $3 (33% saving). 

The seventh now paid $5 instead of $7 (28% saving). 

The eighth now paid $9 instead of $12 (25% saving). 

The ninth now paid $14 instead of $18 (22% saving). 

The tenth now paid $49 instead of $59 (16% saving). 

Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings. 

“I only got a dollar out of the $20 saving,” declared the sixth man. 

He pointed to the tenth man, “but he got $10!” 

“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar too. It’s unfair that he got ten times more benefit than me!” 

“That’s true!” shouted the seventh man. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!” 

“Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!” 

The nine men surrounded the tenth and beat him up. 

The next night the tenth man didn’t show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill! 

And that, boys and girls, journalists and government ministers, is how our tax system works. 

The people who already pay the highest taxes will naturally get the most benefit from a tax reduction.. 

Tax them too much, attack them for being wealthy, and they just may not show up anymore. 

In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier. 
  
_________
For those who understand, no explanation is needed. 
For those who do not understand, no explanation is possible.

 

Who is John Galt?

Welfare vs. Self-Reliance or Pay Up or Shut Up!

Some months ago, Chris Matthews of MSNBC said without hesitation or qualification that America[ns] should pay reparations to ‘black people’ (defined to include the current President of the United States? Is he black or white under your proposed program?). He averred that a lot of white people are wrong on the matter and that something should happen, and soon.

OK, Mr. Matthews, do you really believe that? If so, how much is due and owing?  Take that number and divide by 100,000,000 (approximate number of adult white men/women in America). Now send your check in that amount to your favorite African American, Michelle Obama comes to mind. If she doesn’t want or need your handout, we will let her decide what to do with your money.

Do you find that idea objectionable? Why? Because you think I should write a check too, or because ALL taxpayers should contribute? Or just because you don’t really have a program in mind that would benefit the First Lady?

In any case, you want to force me (and a few million other people) to do something we find objectionable for any number of reasons. I would never do that to you. I have merely suggested that you do something that you [claim to] support – pay reparations.  I will always permit you to do what you think is right. PAY UP or shut up, really. Why are you trying to force me do something I think is wrong, or prevent me from practicing and preaching the things I believe?

See, I believe in self-reliance as fervently and with as much thought and compassion as you believe in welfare. I will not stop you from practicing what you believe; I ask only, please, that you let me retain the same liberty.

Job Creation Fallacies

Some months ago, Congressman Kucinich proposed encouraging early retirement to make room for newly hired employees who will cost less.  He said it would create one million jobs.  And not one of the brains on multiple news programs could find any of the dozens of fundamental flaws with that idea.

One of the commentators even said, “If the money comes from returned TARP funds, then it’s cost neutral, right?”  Are you kidding me?  Another said that it might sound like a good idea, but it would actually cost more to hire and train someone new than to keep the older person on the job.  Maybe that’s true, but it’s not relevant, is it?

So, euthanasia is next?  When we decide that Grandpa has taken someone else’s spot on ACME Inc’s payroll, we’re going ask him to ‘volunteer’ to retire.  What will stop us when we decide he’s eating someone else’s meal; we’ll ask him voluntarily to go on a ‘diet.’   And, when Grandma’s taking up someone else’s time on the mammogram; tell her to take a pill?

How does this (or any other government ‘stimulus’) idea “create” any thing new?  Does it reduce the amount of food we need to exist tomorrow?  Does it create a new task or product?  Does it increase the output of the economy?  Does it in any way ADD anything to anything?

And one of the Republicans’ counter-proposals that Mr. Obama seems to approve is a $5,000 tax credit for a new hire – is that a good idea?

When I ran a company, I never hired a new employee because I thought it was my responsibility to ‘create a job’, because I wanted that person to have a job, so that person could afford health care, so Obama could get more votes in his reelection campaign, or so John Boehner could be Speaker instead of Minority Leader.  I ONLY did so whenever I had something for him to do that was productive and valuable to me.

And I sure as hell didn’t fire one person to make room for another, no matter how old my CFO might have been, or even if the government was willing to ‘pay’ 10% of the new-hire’s salary – I would still be stuck with the other 90% for a gal who would stand around looking for something to do.

When we BUY something (hiring a new person is buying more labor) we buy it because we need it, not because a door-to-door salesman told us it was the best vacuum cleaner ever made and it is 10% off today, and today only.  And it’s even better than that old Hoover in the closet, too!

Would telling everyone they get a 10% rebate from the government encourage someone without the means to do so to buy a new Jaguar convertible?  Of course not.  Nor will $5,000 encourage any employer to hire someone he otherwise would not hire.  It affects economic behavior, if any, only on the margins, bridging the gap between what the employer and employee think is the fair wage.

Want new jobs?  Here’s the answer.  Repeal all laws that breach the Federal government’s constitutional limits on power, or short of that, leave the federal law books alone and take a five-year break from making any new laws.  Adjourn Congress, subject to national security emergency declaration by President Obama, so that businessmen can figure out how to be productive even when weighed down by the tens of thousands of pages of rules and regulations that purport to control and improve economic behavior.  In five years, America will have out-innovated even the most energetic regulator, and for a generation or so not even Congressman Waxman will be able to catch-up to turn off the wealth creation machine.

Glenn Beck is fanning the wrong flames

First, I believe that Mr. Beck’s intentions are pure.  I fear, however, that the attacks on him have, understandably, triggered innate defense responses.  Consequently, he’s fighting and waging the wrong battle.  He’s fighting hate with fire; that will not end well.  I admit that understanding what we are facing is necessary, but it is not a complete, winning strategy.  Inflaming the left without making the contrary arguments calmly and repeatedly will result in a power struggle to the death of the Republic.

Support for freedom and individual rights thrives if, and only if, it is nurtured.  Beck’s TV shows (so too the opposition’s) are filled with telling his audience who to be against.  He cites polls showing this or that preference of some position by some majority.  Over and over he suggests that the supporters of the majority view, as revealed in that magic crystal ball called a poll, needs rise up and impose its will on the rest of the country.

He will never be more wrong.  We must not tolerate our politicians or TV pundits mimicking Joe Barton (See his Tea Party speech here) who wrongly thought he could pander to the Tea Party Patriots by identifying with the tank driver in Tiananmen Square, likening the Democrats to the little girl.  I don’t want to cajole anyone to agree with me, I want to be free, including free of Democrats or Republicans passing laws that tell me how to live and where my money should be “invested” by the federal government.  A government that is not neutral is tyrannical.

The sovereignty of the individual as set forth first in the Declaration of Independence, all men are created equal and are endowed by their creator with certain unalienable rights, is the most important and radical political statement in the history of mankind.  Never before was the individual recognized as the center of all things.  That uniquely American, foundational truth gets overlooked when the power struggle for a majority begins.  Candidates bob and weave to bundle together enough votes from disparate interest groups to form a majority.  Then, once in office, the newly-powerful elected official hides behind the “voice of the people,” the power of democracy, and a “mandate” to [unlawfully] infringe on the freedoms of the people who voted against him in favor of those who voted for him.

That cycle will accelerate the downfall of the Republic that Mr. Beck genuinely claims to be working to avert.  I pray he finds his bearings and stops preaching fire and brimstone, and instead instructs his opponents about salvation.  Even during violent battles, Abraham Lincoln saved the union by appealing to his enemies best nature, not by attacking their worst flaws. 

With malice toward none, with charity for all.

Please rediscover that spirit, America.  Please.

–  See Lincoln’s Sword by Douglas Wilson for a scholarly treatment (and inspirational read) of President Lincoln’s use of rhetoric to save the Union.