Tag Archives: Marxism

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Why are teachers and other talkers paid less than engineers and other doers?

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The meme below makes fun of unionized public school teachers, who feel entitled to the same salary and benefits as doctors, software engineers, etc. in the private sector. So, the point of this meme is simple, it’s to point out that the teachers who belong to teacher unions are ignorant of basic economics, specifically, the law of supply and demand.

Basic Economics: Prices are set by supply and demand
Basic Economics: In a free market, prices are set by supply and demand

When there is more demand for a product or service than there is a supply for it, then prices go up. When there is more supply for a product or service than there is a demand for it, prices go down.

A good place to see this explained is in a book by famous black economist Thomas Sowell. Thomas Sowell has written many books, but he wrote one book in particular for people who have no knowledge of basic economics. It’s called “Basic Economics: A Citizen’s Guide to the Economy“. And the first few chapters explain how prices are set by supply and demand:

  1. What is Economics?
  2. The Role of Prices
  3. Price Controls
  4. An Overview of Prices

It turns out that there are two views of how wages are set in an economy:

The labor theory of value (LTV) is a theory of value that argues that the economic value of a good or service is determined by the total amount of “socially necessary labor” required to produce it.

LTV is usually associated with Marxian economics… The LTV is central to Marxist theory, which holds that the working class is exploited under capitalism, and dissociates price and value. Marx did not refer to his own theory of value as a “labour theory of value”.

Mainstream neoclassical economics tends to reject the need for a LTV, concentrating instead on a theory of price determined by supply and demand.

Marxists economists believe that the value of a good or service is determined by the “social utility” of the work produced. But classical (“free market”) economists believe that value is determined by the scarcity of the good or service relative to the demand from consumers.

So, a Marxist economist might say “teaching English to 5 year olds is valuable because it is relevant and meaningful”. But, a classical economist would say “conducting a security audit on distributed point-of-sale system is valuable, because very few people can do it, but many people want it”.

I’ve noticed that school teachers and non-STEM university students and professors are very likely  to hold to the labor theory of prices and wages. Robert Nozick wrote a paper about why this happens. It turns out that “wordsmiths” (his word) are conditioned by their performance in the classroom to expect success in the free market economy. But when they find that their “brilliance” in English poetry, Medieval history, or lesbian dance theory has no value to anyone else, they complain that the economy is being manipulated by powerful people. Marxism is a coping mechanism for people who value academic acclaim more than doing something useful for their neighbors. The Marxists study easy things that no one cares about, and then they can’t get paid because millions of people can do them. The free market people focus on the customer, so they study hard things like computer science and petroleum engineering that are in demand from customers. And they get paid more.

Starting and Mid-Career salaries by profession (click for larger image)
Starting and Mid-Career salaries by profession (click for larger image)

Consider this article from College Pulse about a survey of 10,590 undergraduate students:

Students with certain majors are far more likely than their peers to approve of socialism. Philosophy majors, in particular, have a positive view of socialism. Nearly 8 in 10 (78%) say they view the economic system favorably, followed by 64% of anthropology majors, and 58% of both English and international relations majors. Accounting and finance majors are least likely to view socialism positively (20% and 22% respectively).

Do you know what accounting and finance students have to study? Basic economics.

As soon as I got my first job as a software engineer, and finished my study of Christian apologetics, the very next thing I studied was economics. It was Dr. Jay Richards who got me interested in it, when I heard him speaking about economics in an apologetics lecture for Stand to Reason. I contacted him, and he recommended the works of two famous economists, F. A. Hayek and Thomas Sowell. And that’s what I want to recommend to you, too. Our continued liberty and prosperity depends on ordinary Americans taking the time to educate themselves about basic economics.

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What can we learn about communist leaders from the record of history?

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Now that we have atheistic communists in the majority of the House, Senate and White House, it might be a good idea to take a look at what atheistic communist leaders have done in history. First, let’s see how the atheistic worldview of communist leaders affected religious people.

Here is what Josef Stalin did during his rule of Russia in the 1920s and 1930s.

The Library of Congress offers this in their “Soviet Archives exhibit”:

The Soviet Union was the first state to have as an ideological objective the elimination of religion. Toward that end, the Communist regime confiscated church property, ridiculed religion, harassed believers, and propagated atheism in the schools. Actions toward particular religions, however, were determined by State interests, and most organized religions were never outlawed.

The main target of the anti-religious campaign in the 1920s and 1930s was the Russian Orthodox Church, which had the largest number of faithful. Nearly all of its clergy, and many of its believers, were shot or sent to labor camps. Theological schools were closed, and church publications were prohibited. By 1939 only about 500 of over 50,000 churches remained open.

What’s the attitude of Democrat candidates to Bible-believing Christians? My read is that they think that Christian values need to be suppressed by the government lest they offend Democrat voters, who seem to be very easily offended these days. You can already see their animus towards Christians in their Equality Act, which eradicates conscience rights in order to protect (some) LGBT people from feeling offended.

The Ukraine Famine

Take a look at this UK Daily Mail article about Josef Stalin.

Excerpt:

Now, 75 years after one of the great forgotten crimes of modern times, Stalin’s man-made famine of 1932/3, the former Soviet republic of Ukraine is asking the world to classify it as a genocide.

The Ukrainians call it the Holodomor – the Hunger.

Millions starved as Soviet troops and secret policemen raided their villages, stole the harvest and all the food in villagers’ homes.

They dropped dead in the streets, lay dying and rotting in their houses, and some women became so desperate for food that they ate their own children.

If they managed to fend off starvation, they were deported and shot in their hundreds of thousands.

So terrible was the famine that Igor Yukhnovsky, director of the Institute of National Memory, the Ukrainian institution researching the Holodomor, believes as many as nine million may have died.

[…]Between four and five million died in Ukraine, a million died in Kazakhstan and another million in the north Caucasus and the Volga.

By 1933, 5.7 million households – somewhere between ten million and 15 million people – had vanished. They had been deported, shot or died of starvation.

The Holodomor is just one of the atrocities committed by Soviet Union communists. You may also have heard that they operated a system of labor camps for dissidents that killed millions more. The total number of people killed by Stalin is estimated at 20 to 40 million.

Stalin actually wasn’t very good at mass murder compared to another communist, Mao Zedong.

Can you name the greatest mass murderer of the 20th century? No, it wasn’t Hitler or Stalin. It was Mao Zedong.

According to the authoritative “Black Book of Communism,” an estimated 65 million Chinese died as a result of Mao’s repeated, merciless attempts to create a new “socialist” China. Anyone who got in his way was done away with — by execution, imprisonment or forced famine.

For Mao, the No. 1 enemy was the intellectual. The so-called Great Helmsman reveled in his blood-letting, boasting, “What’s so unusual about Emperor Shih Huang of the China Dynasty? He had buried alive 460 scholars only, but we have buried alive 46,000 scholars.” Mao was referring to a major “accomplishment” of the Great Cultural Revolution, which from 1966-1976 transformed China into a great House of Fear.

The most inhumane example of Mao’s contempt for human life came when he ordered the collectivization of China’s agriculture under the ironic slogan, the “Great Leap Forward.” A deadly combination of lies about grain production, disastrous farming methods (profitable tea plantations, for example, were turned into rice fields), and misdistribution of food produced the worse famine in human history.

Deaths from hunger reached more than 50 percent in some Chinese villages. The total number of dead from 1959 to 1961 was between 30 million and 40 million — the population of California.

[…]Mao kept expanding the laogai, a system of 1,000 forced labor camps throughout China. Harry Wu, who spent 19 years in labor camps, has estimated that from the 1950s through the 1980s, 50 million Chinese passed through the Chinese version of the Soviet gulag. Twenty million died as a result of the primitive living conditions and 14-hour work days.

Whenever I bring up the historical record of communism to Democrats, they always tell me that their leaders have good intentions. But the communist leaders of the past aren’t any different from the communist leaders of today. Communist leaders all start out with noble ambitions of wanting to help the poor. The problem is that they don’t know anything about economics, so whatever they try doesn’t work. Communist policies like nationalizing private industries, printing money, purging wealthy people, imposing tariffs, and imposing price controls cause enormous poverty. And then they need someone to blame for their failure to produce the results they promise.

If we were serious about helping the poor, then we would elect leaders who had experience lifting the poor out of poverty. A business leader or a governor of a state. It’s not a popularity contest. We need to choose someone who has already had success at helping the poor. And the best way to help the poor is by helping them to find work so they can earn their own success and chart their own course. After all it’s not words that affect our lives. Or the feelings we have about words we like. What affects our lives is policies that produce results. Intentions and rhetoric don’t matter, ultimately.

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How a small, poor country became the top economy in Latin America

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One way to learn about whether specific economic policies work or not is to look at different countries that have tried them. Believe it or not, patterns do emerge about what works and what doesn’t work, as you look across different times and places. I’ve been reading a book called “Money, Greed and God” with my friend Carla, which talks about what has worked to reduce poverty.

The author basically outlined two approaches. In the first approach, the government 1) confiscates the wealth of the most productive workers, 2) nationalizes (takes control of) the businesses of the most successful entrepreneurs, 3) restricts trading between citizens and with other countries, with minimum wage, price controls and tariffs. In the second approach, the government does the opposite: 1) lowers taxes on the most productive workers, and 2) lets entrepreneurs compete to provide goods and services to consumers, and 3) lowers restrictions on internal trading and trading with other countries, e.g. – eliminating minimum wage, tariffs and price controls.

Let’s take a look at two Latin American countries that went in opposite directions. Venezuela and Chile. Then we can finally find out which policies actually achieve results for the people.

Here is how Chile started out in 1973.

PROBLEM: Price controls and tariffs:

Prices for the majority of basic goods were fixed by the government in 1973. Even though Chile was and still is a small economy, the level of protection­ism was high. By the end of 1973, the nominal average tariff for imports was 105 percent, with a maximum of 750 percent. Non-tariff barriers also impeded the import of more than 3,000 out of 5,125 registered goods. Just as economic theory predicts, large queues in front of stores were usual in Santiago and other cities in Chile as a result of the scarcity caused by price controls.

PROBLEM: Government taking over private businesses:

The decline in GDP during 1973 reflected a shrinking productive sector in which the main assets were gradually falling under government control or ownership through expropriations and other government interventions in the economy.

PROBLEM: Deficit spending and government printing money:

The fiscal situation was chaotic. The deficit reached 55 percent of expenditures and 20 percent of GDP and was the main cause of inflation because the Central Bank was issuing money to finance the government deficit.

SOLUTION: lower or eliminate restrictions on trade:

The most important economic reform in Chile was to open trade, primarily through a flat, low tar­iff on imports. Much of the credit for Chilean eco­nomic reforms in the following 30 years should be given to the decision to open our economy to the rest of the world. The strength of Chilean firms, productive sectors, and institutions grew up thanks to that fundamental change.

SOLUTION: let competing entrepreneurs in the private sector provide goods and services to consumers:

A second fundamental reform was to allow the private sector to recover, adding dynamism to the economy. In fact, important sectors such as elec­tricity generation and distribution and telecommu­nications were still managed by state companies. After we implemented a massive privatization plan that included more than 50,000 new direct share­holders and several million indirect (through pen­sion funds) shareholders, these companies were managed by private entrepreneurs that carried out important expansion plans.

SOLUTION: let people take responsibility for their own lives instead of depending on government:

The 1981 reform of the Chilean pension fund system deserves special mention. Under the leader­ship of Minister José Piñera, an individual capitali­zation account program was designed with specific contributions, administered by private institutions selected by the workers. The Chilean Administra­doras de Fondos de Pension (Pension Fund Administrators or AFP) has been replicated in more than 20 countries, and more than 100 million workers in different parts of the world use these accounts to save for retirement.

SOLUTION: allow parents to choose the school that fits their needs from competing education providers, and push school administration down from the federal government to the municipal level, where it would be more responsive to voter’s needs:

In 1981, Chile introduced a universal educational voucher system for students in both its elementary and secondary schools. At the same time, the central government transferred the administration of public schools to municipal governments…  The financial value of the voucher did not depend on family income.

RESULTS: And I was able to find a nice short, description of how all that worked out for them on the far-left Wikipedia, of all places:

The economy of Chile is a high-income economy as ranked by the World Bank, and is considered one of South America’s most stable and prosperous nations, leading Latin American nations in competitiveness, income per capita, globalization, economic freedom, and low perception of corruption.

In 2006, Chile became the country with the highest nominal GDP per capita in Latin America. In May 2010 Chile became the first South American country to join the OECD. Tax revenues, all together 20.2% of GDP in 2013, were the second lowest among the 34 OECD countries, and the lowest in 2010. In 2017, only 0.7% of the population lived on less than US$1.90 a day.

According to the Heritage Foundation, Chile is ranked as the 18th freest economy in the world. The World Bank ranked Chile as the 50th highest GDP per capita for 2018, just below Hungary and above Poland.

Now, you can contrast those results with Venezuela. I have been blogging about Venezuela for years on this blog, and documenting how they raised taxes, banned guns, nationalized private sector companies, raised tariffs, and increased regulations. They are now ranked JUST ABOVE NORTH KOREA for economic freedom – #179 out of 180 countries measured. Basically, they did the opposite of everything that Chile did – transferring power away from parents, workers, business owners, churches and municipal governments to the powerful centralized federal government.

Wikipedia explains how Hugo Chavez took over in 1999 and enacted a communist revolution.

More:

Since the Bolivarian Revolution half-dismantled its PDVSA oil giant corporation in 2002 by firing most of its 20,000-strong dissident professional human capital and imposed stringent currency controls in 2003 in an attempt to prevent capital flight, there has been a steady decline in oil production and exports. Further yet, price controls, expropriation of numerous farmlands and various industries, among other government authoritarian policies… have resulted in severe shortages in Venezuela and steep price rises of all common goods, including food, water, household products, spare parts, tools and medical supplies; forcing many manufacturers to either cut production or close down, with many ultimately abandoning the country as has been the case with several technological firms and most automobile makers.

They confiscated private property, took over private sector businesses, implemented tariffs and price controls, redistributed wealth via massive welfare programs, and pushed all decision-making out of families and municipal governments up to the federal government. By depriving the producers of their earnings, the country caused massive shortages of goods and services, to the point where people are fleeing the country, consuming zoo animals, and selling their bodies as prostitutes in order to get food and water.

Application

In the next election, we are not picking a tribe because of how they make us feel about ourselves. We are not choosing in order to see ourselves as “nice” and “not nice”. We need to look at specific policies being proposed, and see what works and what doesn’t work. The examples of Chile (rags-to-riches) and Venezuela (riches-to-rags) are helpful for voters who want to get RESULTS instead of FEELINGS.

I’ll leave you with a list of links from previous posts so you can see how communism worked out for Venezuela.

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