Benefits for Starbucks employees include 100% payment of college tuition and fees, health insurance, and surely other perks not mentioned here. Starbucks corporate and its shareholders pay a lot to acquire employees simply because low-paid workers are so incredibly expensive. With Starbucks in particular and the community qualities of its stores, constant turnover would erode what makes Starbucks, Starbucks.
Starbucks came to mind while reading Glenn Hubbard’s latest opinion piece asserting that economic populists “have a point.” This is Hubbard throwing a bone to populist conservatives who supposedly have a heart in ways so-called market fundamentalists don’t, and who Hubbard asserts “focus on people and places hard hit.” Such a statement implies that the profit motive sometimes leaves people behind, and national conservatism exists to protect those people. No thanks.
More realistically, market forces are the greatest friend the worker has ever known. That is so because in a market economy, workers are most capable of realizing their value, and more. See Starbucks. See the billions invested annually by businesses at all levels to enhance the working conditions of employees, along with even greater amounts invested in productivity enhancements that enable ever higher pay for employees.
Furthermore, Hubbard contradicts himself. Consider the bouquet he throws to the populists owing to their alleged “focus on people and places hard hit.” The sentence doesn’t stop there. It continues with “by the disruption that accompanies openness and growth.” The problem with Hubbard’s baseless assertion about the presumed downside of market-driven dynamism (a redundancy no doubt) is that it doesn’t leave people behind.
If that were true, New York and and Los Angeles would be the poorest cities in the U.S., and Milwaukee and Flint the richest. Figure that one hundred years ago the four cities mentioned were the biggest manufacturing locales in the U.S. New York and Los Angeles left the past behind, while Flint and Milwaukee held on tight. It shows.
The simple truth is that market-driven dynamism is what protects people the most simply because the investment without which there is no growth relentlessly migrates to where the future is being created. This is important in light of Flint’s relative desperation, and Milwaukee’s similarly pedestrian appearance compared to other U.S. cities.
Thinking about both, it’s precisely because dynamic markets didn’t work their magic that the people who drive all economic progress left. National conservatives of the Oren Cass variety hug themselves for expressing a desire to maintain the jobs of the past, but it’s the very maintenance of the past that repels the people and investment capable of creating the future necessary for plentiful jobs, and avoidance of the fate of locales like Flint, but also Aliquippa, Buffalo, Akron, and other once-great cities and towns. Sadly, Hubbard’s essay doesn’t get better.
He adds that “the state can play a useful role in the market economy.” Really? How? How could intervention in the knowledge-pregnant economy by knowledge-bereft politicians play “a useful role”? Hubbard adds in the next sentence that “Supply-chain restrictions and export controls can be tools to deny national-security sensitive technologies to adversaries such as China.” Ok, if we ignore that trade is the greatest foreign policy mankind has even happened upon, we can’t ignore that short of Nvidia, Intel, and other producers quite literally hoarding their technologies, they will reach “adversaries such as China.” If you’re producing you’re trading with the world.
Hubbard writes that “While competition at home and abroad expands the economic pie, it says little about the relative slices.” Which doesn’t matter. What matters is that people are working together or working with machines. That’s the only way they can specialize on the way to soaring productivity as Adam Smith so expertly revealed in the opening pages of The Wealth of Nations. Rather than fully embrace the previous truth, Hubbard backtracks to the baseless notion that work divided harms those lucky enough to divide it, only for the Columbia professor to suggest programs “supporting community colleges that understand local job needs rather than establishing more government training programs.” Except that if a community college professor (or any professor) had a sense of “local job needs” then this person would be a billionaire as opposed to a professor. Which is the point.
While according to Hubbard “Populists have some reasonable skepticism about excessive deference to markets,” the deference is there precisely because neither governments nor community colleges can discover the future without which jobs are very scare. Indeed, the crucial reality is that the closing of a business or factory could never consign a city to desperation, but the protection of a failing business or factory most certainly could. That is so simply because the investment is a look ahead, and investors aim to match their capital with those intent on creating the future. Policies meant to maintain the present or bring back the past are worse than nuclear bombs for what they do to cities. Hiroshima and Nagasaki have recovered, but Flint and Aliquippa haven’t.
Republished from RealClear Markets
