Economic rationality, or how ideology has broken our economy.

by JonathanH 22 Replies latest jw friends

  • JonathanH
    JonathanH

    So I won't name where I work (some may already know) but since I decided to go to college I started working in at a retail chain so I could get flexible hours. The pay is poor, and it is a pretty silly job, but it puts at least some money in my pocket while I work towards something better. Anyway, they recently made every one attend a big meeting where they rolled out the new "restructure" of the work force. There were some very inspirational videos and our managers were very positive, but what it amounted to was people were being laid off around the country, some supervisor positions were being eliminated and all the rank and file workers were just going to pick up the slack for no extra pay. There will be a new carrot on a stick of bonuses that nobody will realistically ever be able to earn because it isn't based on their own performance but the store's performance as a whole, so "in a way, everybody in the store is getting a raise!"

    Later there was much discussion among the employees about how we were getting shafted while the people at the top of the corporate food chain just gave themselves millions in bonuses for these cost cutting measures. Somebody mentioned unionizing (uh oh) but was quickly reemed by another employee that went on a rant about "entitlement", and how everybody here is whining about nothing; The corporation did exactly what it was supposed to, it acted in its own self interest to insure that this years profits would be higher than last years profits. He complained that instead of working harder for a chance at advancement in the store we were just being entitled and whiny and wanting money that we hadn't earned.

    Part of what he said is true, the other half is irrational in a common way that is destroying our society. Economic rationality is an important social and economic theory. Namely that each individual agent acts in such a way as to attempt to maximize the amount of wealth that they attain. This creates a system of balances between various economic forces that engage in a constant tug of war.

    A company acts in an economically rational way by behaving in a self interested way to improve profits. This means getting as much as they possibly can out of its employees while paying them as little as possible. They will use as many tools at their disposal to accomplish this. They will fire people that attempt to create unions, or they engage in anti union propoganda, they will lobby for laws that are beneficial and to keep the minimum wage low, they will create a corporate culture that insists that the workers are lucky, should be happy to work there, and that it is a great company, they will lay off people who are deemed redundant. These are all economically rational things to do. There is no shortage of those that espouse the ideology that there is nothing wrong with a company doing what is necessary to keep costs down in order to stay competitive, even if the result and methods may harm some individuals that are simply unfortunate collateral damage. A corporation needs to behave in an economically rational way to survive.

    This is counter balanced by employees acting in an economically rational way by demanding more money, leaving for better paying jobs, or organizing their labor force to negotiate as a group. This is to insure that those lower on the totem pole can still make a living wage, and leverage their labor to keep a balance and create a economically stable middle class.

    These latter actions however have become vile deeds. They are the epitome of greed and even worse "entitlement" (which has become a sort of conservative profanity or epithet, rife with political meaning). Essentially we have created a culture where it is the height of american virtue for a corporation to pursue an economically rational course, but the greatest of american vices for the labor market to act in an economically rational way. The only economic rationallity that is a virtue for the labor market is to take up the mantra of Boxer the horse from George Orwell's Animal Farm; "I will work harder." The only economically rational thing the labor force can do that is still considered virtuous is to work hard and hope somebody rewards them for it. If you leave because you are unsatisfied with working conditions, you are a quitter. If you say your wages are insufficient and should have more you are "entitled." And don't you dare talk about organizing the labor force for group negotiations, lest you align your self with the most sinister of literary figures, Ellsworth Toohey.

    We have created a cultural climate in which the lower classes must feel ashamed of pursing economically rational courses while they praise those on the rungs above them for their virtuous actions of upholding the american way. This extends even politically where the lowest classes actually vote against their own economic interests in order to uphold an ideology that explicitly holds them down. It is virtuous to cut taxes for the wealthy while tearing down welfare programs and defunding free clinics and other services for the poor. It doesn't matter whether or not you agree with those programs, but it is economically rational for the poor to vote to keep those programs running. And yet they don't. The poorest states in the US are frequently the most conservative states in the US. The middle class will continue to disappear and the lower class will continue to get poorer. Because now, it is the "right" thing for them to do.

  • DaCheech
    DaCheech

    go to socialist spain and taste 25% unemployment

  • jamesmahon
    jamesmahon

    Go to socialist Sweden and taste a 7.8% unemployment rate, socialist Australia 5.1%, socialist Norway 3.0%. Reasons for unemployment are a bit more complicated than the how interventionist the government is. Please do not selectively use statistics to make a point.

  • Sam Whiskey
    Sam Whiskey

    Jonathan, I'm not sure why people like to complain about their economic condition, especially when it is within their grasp to DO something about it. Clearly, you are, going to college to get an education so that you can DO better for yourself. What we have in America now is a "you owe me" prevalent attitude. While we know that working in a department store is never going to make the lay employee rich, we also know that the people who took the risk to open the store are being rewarded financially. There will always be employees, no one is entitled to wealth. There will always be people at the bottom of the employment chain. If your skills are a commodity, then expect commodity pay. But if your skills are in high demand, then expect greater pay.

    As you point out, there are many who demand better, but what do these same people say when a business goes bankrupt? Are they joyful that a business is now gone? Or do they continue to moan about the lack of jobs available? What the average lay person does not understand is that in every business, there is always an analysis of risk to reward. i.e. - if you want to buy a car and your credit rating stinks, you get to pay the lender 20% interest for taking a greater RISK with you than the next guy with great credit.

    If you want to move up the financial ladder, take on risk. The higher the risk, the higher the potential return. (This is why investment bankers, hedge funds and venture capitalists make a fortune) There will always be the "have's" and "have nots". If you look at the "have's", somewhere in their history, they took a risk. Vice versa for the "have nots".

  • dgp
    dgp

    This means getting as much as they possibly can out of its employees while paying them as little as possible.

    Jonathan H, I can identify with much of what you say. I copied the sentence above to say that, where I live, this is exactly wha bosses believe. And it has resulted in a very serious problem, namely that employees don't feel it's in their interest to protect the company's interests, that they have no real intention to do quality work, and that they leave as soon as possible.

    I feel this is the stupid entrepreneur's creed.

    Let me give you an example of what I mean. Once, I had to buy ink for my printer. I went to this store, and the person who came to talk to me said they had none, but she knew where I could find exactly what I wanted. Without my even asking, she put a small piece of paper in my hand and left. It was the phone number of the competition. What this person was doing was to refer all the customers to the competition. It's not that they didn't have any ink cartridges; it is that the owner was not there to make sure his salespeople actually sold items. The competition had bribed the company's salespeople in a very clever way.

    One way they have stretched this belief that economic rationality is the same as squeezing the poor is that, in some companies, there is no way you will get a job if you're older than 30. As a seller of services that I am, it is easy for me to see that they don't value experience. They just want a monkey there, who will take peanuts. Younger people don't have children and will accept lower salaries. That is not "economic rationality" but unfair advantage.

    I don't think "economic rationality" necessarily means "firing employees". I wonder how many of us would rather pay the fee involved in talking to a real person instead of having to navigate endless phone menu options. "Thank you for calling XYZ, where we're great and you know it because we say so".

    We have to distinguish "economic rationality" from "maximizing my profits no matter what". Of course the boss who fires you wants to have a justification.

    In Spain they failed not because they hired more people, but because they made stuff they would never use. Like airports no one uses. And, in general, because they lived beyond their means. Of course, what your "means" exactly are is the heart of the matter.

  • slimboyfat
    slimboyfat

    Workers of the world unite! Unity is powerful. I feel change is coming. At least I hope it is, capitalism has had its day.

  • NoRegrets
    NoRegrets

    My wife and I both belong to unions and I feel lucky every day that we do! Aside from many other benefits (literal benefits and legal ones), we both lived in an area where unions were scarce. We moved to a larger metropolitan area where we could be in unions doing the SAME work. We make about 4 times more than we did being non-union! You can argue politics for and against unions all day long but that's the bottom line! The stagnant and/or falling wages of the American middle class are parallel to the decline of union membership!

    You can also make the argument that unions cost American's jobs because they price us out of the market. I can attest that to be untrue! Perfectly profitable, union factories have been shuttered simply to squeeze a little more profit by moving things overseas.Greed is NOT good! The problem with that is then you have a poorer consumer class that can't afford your product!

    Another thing that most unions due is literally help to create work for their members. I belong to a construction trade union and I know first-hand that the Local hits the brick hard with developers, sets up meetings, and does whatever it can to encourage projects to get off the ground! They also spend a lot of money to train us through an apprenticeship and with continuing education throughout our careers to help us be as valuable as possible!

    NR

  • JonathanH
    JonathanH

    Sam whiskey, you make my point for me. My point isn't whether or not the ideology is right or wrong, capitalism doesn't care about ethics. Capitalism is essentially a darwinian system that has no concept of ethics or morals. That isn't a value judgment that is just reality. And just like a darwinian system, the success of the ecosystem is predicated on the idea that every organism does it's damndest to survive. But what we have done is create a culture in which lions are awesome and we tell the antelopes that running is wrong. If you don't want to be eaten, then don't be a damn antelope. But running? Well that is just entitlement. Economic rationality dictates that every agent attempts to get as much as they can. But we have demonized one side of the equation and glorified the other so that economic rationality is only virtuous for a segment of the population. This is bad for the ecosystem.

    Furthermore your idea that it's just personal choice only makes sense on an individual scale, but does nothing for the group as a whole. Sure I can go to college and improve my situation, but there will still be millions upon millions who can't or didn't go to college. And you may say "well that was their choice." Ok, well let's assume every single one of them went to college. Logistics for our education system aside, what now? Now you have somebody with a degree in economics and a minor in mathematics appreciating the irony of the fact that they are stocking shelves at wal-mart. The only way our society functions is that there are people on the bottom that can't improve their situation. Which means that the economic lower classes are both a necessity and by product of a darwinian economic system. It is literally impossible for everyone to win. Which means we tell the poor that they are necessary for the rest of us to live in luxury, but that we hold them in contempt and show open disdain for them because of that.

    We all have to act with personal responsibility as individuals to try and improve our lot, but as a society we have to recognize that it is impossible for everyone to improve their lot and that we require people to lose and we actually try to make people lose because that's how the rest of us win. The hyper conservative ideology of late is like watching a National Geographic special and complaining that the real problem with the Sahara is all of the damn lazy antelope. It is both inevitable and necessary that the antelope get eaten, so maybe would shouldn't hold them in contempt for it. We certainly aren't blaming the lion. Rational choice theory and economic rationality have to be restored, and that means the people at the bottom have to be able to use every tool at their disposal to improve their lot just like the people at the top are allowed to do anything to improve their lot. The demonization of the lower class will only lead to the destruction of the middle and lower class.

  • rather be in hades
    rather be in hades

    what i don't nderstand is why people feel the need to drag down union workers, rather than banding together to lift themselves up.

    reminds me of this line from one of my favorite tv shows, the boondocks:

    "...the only thing a crab is good for is holding back other crabs. a crab don't wanna see another crab make it...a crab is like, 'if i'm gonna die, we're ALL gonna die..."

    http://www.youtube.com/watch?v=ipg4EL_JUyE

    the show itself was more or less about racism and the strggles for people in the inner city trying to get out of the ghettos (the crab barrel), bt the parallels when it comes to the working/middle class are incredible. why on earth wouldn't we all try to build each other up, rather than tear each other down? this isn't socialism, it's simply getting an honest wage. even henry ford knew the benefits of paying his workers well.

    sidenote: this isn't to say nions don't have their problems, but it's far better than the alternative. the reason unions exist in the first place was to combat the awful working conditions that existed before and as we can all see, the little man always gets the ax first when the chips are down.

  • Bobcat
    Bobcat

    This article might give you some perspective.

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