I hadn’t read Harper’s in years. Like 20 or 30 years. I remembered it as a magazine of intelligently written essays about meaningful subjects. Reading it, I felt like I was using my time wisely.
In the Fort Lauderdale airport waiting for our Emirates flight to Dubai, I picked up two magazines. One was a special issue of Time on “The Science of Good and Evil.” The other was the most recent issue of Harper’s, with the irresistibly titled cover story “Is Poverty Necessary?”
As I began reading, I was trying to remember whether the magazine had a political slant. I got my first hint in the first sentence of the second paragraph. The author, Marilynne Robinson, writes, “Back then [in 1989], I shared the American assumption that such things [as environmental risks in England] were dealt with responsibly, or at least rationally, at least in the West outside the United States.”
She then tells us that “in order to understand all this, [she] read classical economics, using Marx’s Capital as an annotated bibliography.” And she wasn’t kidding.
The argument that ensues is largely based on Progress and Poverty by Henry George, an obscure American economist, published in 1879. George, Robinson says, argued that “the wage of a worker should be a share in the value his or her labor creates.” And that “this excess of value should be a resource of the community.”
I didn’t bother to find out if that was an accurate summation. If it was, I can understand George’s obscurity. Neither of those two statements makes any sense. The value of something is not a fixed thing. It’s not even a real thing. The value of anything – a product, a service, an idea, or a living being – can be established only by what someone is willing to pay for it. And that can be influenced only by supply and demand.
You can decide that your bike is worth (has a value of) $150. But if no one is willing to pay $150 for it, guess what? You are wrong. Could it be worth $150 one day? Sure. And if you are willing to wait and see, you’ll find out. But what it’s worth then doesn’t change the fact that what it’s worth now is less than you think.
Likewise, you can decide that an hour of your labor is worth $50 or $500. But again, if no one is willing to pay you that much, you are wrong.
This is the problem that Robinson runs into later in advocating government-mandated minimum wages. Because governments operate on the basis of force, they can indeed determine prices. Taxes and tariffs are ways to determine the prices of goods. And minimum wage laws can determine the prices of human labor.
But here’s the problem: There is a difference – a big difference – between the price of something and its value. This is at the core of what’s wrong with people that believe in government solutions to economic problems. The use of force can raise and lower prices. And the use of force – via tariffs, embargoes, and sanctions – can even influence the supply of goods and services. But force can never determine demand. Because demand depends on value. And only the free will of the market can determine that.
This should not be a surprise to anyone that’s spent more than a few hours thinking about economics. Nor should it nonplus anyone that has studied the history of wealth redistribution.
It doesn’t work logically because the premises are wrong. It doesn’t work theoretically because the most important facts are wrong. And it doesn’t work practically because it completely ignores human psychology.
When I read an essay like Robinson’s – a well-articulated but profoundly bad idea about economics – I wonder what level of exposure the author has ever had with the actual dynamic of a real business. My best guess is that they have spent a lifetime in academia. Or worked for the government or a non-profit. But what are the chances that they have ever worked for an actual business whose survival depended on creating value?
I’d say next to none.
In Robinson’s mind, the world is a place that has 99% poor and struggling people and 1% rich folks. She looks at all the wealth that these rich people have and she thinks, “Why don’t we simply move some of that wealth from the 1% to the 99% and get rid of all this poverty?”
Just distribute all that wealth equitably and poverty will go away.
It takes an amazing amount of ignorance to believe that.
Distributing wealth, no matter how you do it, will never eradicate poverty because it cannot.
The problem with poverty is an insufficiency in the production of wealth. And an insufficiency in the creation of wealth is caused by an insufficiency in the production of profit.
Do you want to know how to get rid of poverty?
Create something – a product or service – whose value is greater than what it cost you. Then sell it. This produces what is known as a profit. Profit is unnatural and difficult to produce. But it is the only thing that can get rid of poverty – your own poverty and anyone else’s that you want to devote those profits to.