Sunday, September 13, 2015

Why Democratic Socialism Is Good For Everyone

A lot of people have the idea that Bernie Sanders wants to steal from the rich and give to the poor. They say things like "No one is entitled to anything. If you want something, you have to earn it!" There is one crucial flaw in that statement. Plus a few other small flaws.

I am, in fact, a Bernie Sanders supporter. My family is middle class. We are well above minimum wage. We get our health insurance through our jobs. Bernie's reforms would not directly benefit my family, but they would benefit the country, the economy, and society as a whole.

First, let us be clear that our current industrialized form of an economy only goes back about 200 years to the industrial revolution. Before that, the economy was unrecognizably different. The advent of the industrial revolution allowed the concept of unskilled labor to be a main concept of our economy.
First let's talk about how a free market works. Here's a summary of microeconomics in a few sentences. To the right is a basic supply and demand curve. You have a supply curve and a demand curve. The supply curve shows the cost of making a good. The more you make, the more it costs because after a certain point you have to build more factories or use more expensive techniques. Demand drops as you increase quantity because there are some people who really really want the item and would pay anything for it, but other who would pay less.

That point labeled equilibrium is the quantity and price where the market settles. Obviously there's a lot more to it, but this is enough to understand the labor market.

The market achieves equilibrium by the producers adjusting their production. Further, the market creates equilibrium by removing producers from the market. In other words, firms go out of business, stop producing, and move the market along the supply curve. It's a beautiful and elegant system.

Now let's consider the labor market. In the labor market, the supply side is workers. Some workers will work for any job they can get. Others need a much higher wage to get them into the market. However, there are far more people on the desperate end of the curve than the picky end.

Demand is created by employers. Of course, workers want to get as much as they can and employers want to pay as little as they can. The problem is that there are a lot of unskilled workers and a far more limited supply of employers. This means that the equilibrium can (and will) fall below the wage rate at which a worker needs to survive.

Fortunately, the free market has a mechanism which will shift equilibrium to support the producers. Unfortunately, the mechanism is to remove producers from the market. That requires workers to find income outside the market, leave the country, or die.
The free market solution to raising wages. Technically effective.
Morally repugnant.

Oh, maybe the free market is not the perfect solution to setting wages. So, this is why strict free market creates a problem.

The end game of severe income and wealth inequality.
Our economy is a consumer based economy. In other words, wealth is created by people buying stuff. People without money don't buy stuff. (Four years to get an econ degree to explain this concept.) As wealth becomes more and more misdistributed, more and more people are in a position where they don't have money to spend. This happened before the 1927 start of the Depression. When the rich get more money, they save it, invest it, spend it overseas. When the poor get more money, they spend it. They buy TVs, they eat at restaurants, they buy toys and video games and clothes and all kinds of other things. This spending moves money, creates jobs, and gets the economy going.

The cities that have experimented with increasing minimum wage have found that jobs have not been lost and economic activity has increased for the reasons described above.

Now, let's go back to the believe that some people have that nothing is owed to anyone and that you must earn anything you get. Their point is that you should work hard and find a better job to support your family. That is awesome if you have the education, support, energy, health, and confidence to do that. However, for most people who are in that position, they lack one or more of those traits. They do not know where to find that "better job". They cannot get more education. Many have children and families to support and can only survive from day to day.

Imagine, if you will, that you have children to support. You work as hard as you can and still cannot support your family. You are desperate, and the system is structured in such a way that know that you cannot ever get ahead. Now imagine that your whole community is in this position. How do you "earn" a better life when the system is stacked against you?

The easy way to change the system.
The only solution is to change the system. Break the system. When the establishment tells you that you cannot feed your children or support your family, your own choice is to take down the establishment.

The system can be changed in two ways: the easy way or the hard way. The easy way is the ballot box and through the legislative process. The hard way involves taking to the streets and tearing it down.

Our society certainly has issues, but it is still a great and free country of opportunity. And, writ large, I think the system we have is better than the one that would be created by violent overthrow. So I am personally against violent overthrow of our system. This is one of the main reasons I support the very sensible reforms that Bernie supports.

Making sure that corporations pay their fair share of taxes (as opposed to 1/4 of them using offshore tax shelters to pay nothing) and increasing the marginal tax rate on people making half a million a year is a much more modest redistribution than could occur if a massive, desperate, hopeless underclass develops in this country and a spark ignites their will the do something about it the wrong way. 

The hard way to change the system.
Raising the minimum wage, providing education and health care for all, and other such reforms is not about taking what the rich have and redistributing it. It's not even just about fairness (although it would be more fair). It's not just about preserving the dream that America is a land of opportunity for all (that's part of it too). Most importantly, it's about stabilizing a system which is increasingly becoming a powder keg and making sure that a more catastrophic redistribution can be prevented.