Every time that someone proposed the raising of the minimum
wage, a debate followed that more or less took on the air of the debates that
preceded it. A new proposal to raise the minimum wage has just been made again,
and from the looks of it, the debate that has followed wants to proceed in the
same old fashion when the reality we see all around us is that things have
changed so much in the world, the requirement is that a new approach in our
thinking about such matters is urgently needed.
When two or three decades ago it became clear that the
underdeveloped countries were beginning to develop, and that they will have a
major impact on the economies of the developed world, it was argued that the
emerging nations will turn themselves into factories producing low tech
products which they will ship to the developed countries in exchange for the
high tech machines with which to produce those low tech products. The young in
the advanced countries were told to prepare for the future by getting an
education in the high tech industries, and everyone will live happily every
after both in the developing world and the developed one.
But things turned out in such a way as to make a mockery of
that vision. Yes, the developing economies bought new machines and paid dearly
for them, but they also saw entire factories transferred from the developed
countries to theirs by none other than the foreign owners of those factories.
And while the advanced economies were laying off people, the developing ones
were hiring. While the advanced governments were borrowing to plug their
deficits and balance their budgets, the developing ones were having the
surpluses they could lend to others. While the youngsters in the developing
economies turned against education in favor of getting super rich by joining a
music band or a sports team, the youngsters of the developing world learned the
math and the sciences that led them to the high tech industries and the
inventions that leapfrogged them ahead of their counterparts in the advanced
world.
And so, raising the minimum wage against this background
became a whole new kettle of fish. For example, who in his right mind would
hire a 16 year old in America that could not drill a straight hole in a half-inch
flange but command a 25 thousand dollar salary when you can hire 12 Asian
adults who can run a computer operated milling machine, and work twice as long
for that same 25 thousand dollars? If you insist that this be done, the
ramifications on the balance of trade, the value of the currencies and
immigration will be so huge, the existing order will change, and you will have
no control over it.
So then, what to do? Well, we must prepare for the future,
but do so more realistically than before. Let us not plan what to do by what we
think the others ought to do, and convince ourselves it is what they will do
because that's good for us. Instead, let's think of our situation in isolation
from the rest of the world, and when we have designed a plan for ourselves,
determine how we can hook up with the rest of the world while keeping intact
what we put together for ourselves.
To design a plan, we recall the arguments that bring into
focus how an economy works. Those who advocate trickle down economics want to
give the advantage to the producers because they form the companies that create
the jobs that benefit the consuming workforce. Those who advocate the trickle
up economics want to give the advantage to the consuming workforce because it
creates the demand that the companies need to borrow and expand their
businesses. The fact is that one of them will be right and the other wrong
depending on where the cycle of the economy stands. For example, if you just
had a big invention and the industries need to retool, to give them the
advantage would be the right thing to do. On the other hand, if you had a crash
that caused massive layoffs, the thing to do is to advantage the consuming
workforce.
Looking at America
at this point in time, we see that it is going through an unusual period. It is
not in an either-or situation but in both situations at the same time. In fact,
America
needs to invent and retool which means it calls for a dose of trickle down
economics; but it also needs to shore up a consuming workforce that finds
itself with very little savings. And this means that America calls for a dose of trickle
up economics.
The thing to do in practical terms is to combine all the
called for solutions in one large plan. That is, using the financial muscle of
the government, think of a way to encourage the production of low tech and high
tech industries while populating the factories with youngsters who will get
paid while serving a period of learning and apprenticeship. The smartest of
these kids will then be offered to continue their education at a higher level,
and perhaps become inventors, engineers or scientists.
And while this is happening on a massive scale throughout
the country, the industries that will feed these factories will benefit
greatly, and go through a period of renaissance. All of this will reduce America 's
reliance on foreign countries to supply it with cheap goods and the money to
pay for them.