Economic Illiteracy Is Behind The Call For “Paycheck Fairness”.
News media has been buzzing lately about the “Paycheck Fairness Act” sponsored primarily by Democratic elected officials in Congress. The rhetoric is exactly what one would expect: there is discrimination in the job market, observable in the “wage gap” between men and women workers (and other gender identities). So we need a law to fix this problem. As usual, any and all problems arise due to some mystical shortcoming in people’s voluntary choices — and they can always be corrected by glorious government.
However, the driving force behind this and other similar reforms is not the apparent desperate urge of their proponents to use the one tool they find effective — and then hammer away on all the disturbing “nails” they see. If we are to take these politicians at their word, we conclude that their motivation is one of social justice: the passionate dislike for — often even hatred of — unfair, unjust, discriminatory, if not oppressive, behavior. Wherever someone is unfairly or unjustly treated, it is a symptom of a disease — and requires a call for action.
To put this in more familiar terms, the driving force behind these reforms is a passion for justice.
Political Power vs. Economic “Power”
Granted, the means chosen by these policymakers are highly unlikely to lead to the desired ends. The inequality of some getting paid less for the same work, or the inequality of some being rich while others are poor, is hardly solved by instituting arbitrary power among men to redistribute from the haves to the have-nots. Indeed, if money is power, which is the common claim and the assertion on which the immorality of inequality rests, then how can a “right” to use political power over life and death of others be a solution?
For progressives, political power is not a problem in the sense that economic influence is. The former is only, and strangely, a matter of the “wrong” people having it. With good people in government — goes the myth of the selfless public servant — there is no problem. The latter, however, is different. Apparently it is a problem that someone has something while others do not.
In some sense, they are right to see a difference: political power is very different from economic power, as Franz Oppenheimer famously noted. An important difference is that political power suggests a promised ability – wherever there is political power, a person who is good-at-heart (and, it should be added, wise) could bring about justice. This power is indeed “given” to certain individuals in order to change society for the better.
Economic influence, in contrast, is not granted others in seemingly controlled manner. There is no formal election where willing economic actors are appointed as stewards of ‘society’s’ riches. Instead, some people are rich as a result of actions that they themselves took, supposedly beyond anybody else’s control. It is easy to see that a lack of economic understanding — and thus the inability to see the value that some provide to others and as a result accumulate personal wealth — would lead one to erroneously conclude that wealth must always be unjust.
Such economic illiteracy is a major problem of our time, and is augmented by popular democracy as voters at seemingly no cost to themselves can place immense power in the hands of some who seek it.
The Unfairness of Government Intervention
But illiteracy about the economic workings of a market is neither better nor worse than illiteracy about the actual working of an economy. While market forces are at play, they are hampered, restricted, and contained within artificial boundaries by supra-economic political means. The workings of any modern economy is severely distorted, and thus the outcome necessarily unfair and unjust.
Those who have accumulated enormous wealth have often, of not always, to a significant extent been able to do so because they have been favored at someone else’s expense. Of these, some are directly in bed with government and make fortunes dealing with and offering services to politicians; others benefit from barriers to entry of all kinds.
It is in this sense not wrong to say that “you didn’t build that,” as then-president Barack Obama put it. To the extent anyone accumulates wealth based on the fact that others have not been able to compete because of political restrictions, that wealth is unearned and unjust. That wealth is accumulated not as a result of providing valuable goods and services, but because others could not do the same — or do better.
This has nothing to do with starting a business that employs others to “do the work.” Such contracts can be fully legit. To say that a business owner “didn’t build that” business because he or she hired others is nothing short of insane. Those who say such things are blinded and misguided by their ideology.
But to say that a business owner “didn’t build that” business to the extent that he or she benefited from regulations that kept others from competing with it, certainly is not. The same is true to the extent wages were offered by the employer, and accepted by the employee, below what would be the open market rate as though they were the actual market rate.
Whoever benefits from the arbitrary restriction of market forces certainly “didn’t build that” – it was built on the shoulders of others: those who would have competed had they been allowed, those who would have innovated in that market industry had they not been prohibited or penalized by artificially high costs, and consumers who did not have the options they otherwise would have had.
And it was also built on the relative exploitation of employees, whose alternative occupations remain unavailable because of the dysfunctional economy under the yoke of government. Labor would earn much higher wages overall, and have many more opportunities at hand, were it not for the fact that regulations are a wet blanket suffocating the economy and thus keeping opportunities from appearing.
The true extent of government’s effect on the economy lies in the opportunities that remain unrealized, not in the observable limitations.
It’s Time for Truly Just Wages
In a sense, there is truth to the words of Alexandria Ocasio-Cortez, America’s new face of economic illiteracy, commenting on the Paycheck Fairness Act: “It is time that we pay people what they are worth and not how little they are desperate enough to accept.”
Indeed, it is time for just wages. Those are not wages set by politicians such as Ms. Ocasio-Cortez, however, but by an actual market where one is paid according to one’s actual contribution to satisfying consumers’ varied wants. The only way of figuring out that real worth of work is to allow everyone to try to find the best use of their abilities, to pursue whatever opportunities they see or believe that they see, and thus through their actions satisfy wants and generate opportunities for others.
True “paycheck fairness” is only possible in a market that is open to all, and where participation is both voluntary and unrestricted. That is, in Oppenheimer’s words, where the economic means prevail and the political means have been abolished and forgotten.
