Source: Ian Welsh
2014 January 15
by Ian Welsh
Are you most productive doing what you love, or doing something you are indifferent to or hate? If you could try your hand at doing anything, would you be doing what you’re doing? Are you on track to eventually spend your life in the work of your dreams, or is it clear that will likely never happen?
There will always be lousy but necessary jobs that few people want to do. The garbage must be picked up, the toilets must be cleaned, and the bedpans must be emptied. But a society is a better society when more people are doing what they love, or at least working for themselves, out from under close supervision. Almost no one likes being micromanaged, and normal jobs are called wage slavery for a reason.
We want people to stretch themselves, we want them to reach for their dreams, we want them to get up each morning looking forward to the day’s work. We want that for the cold hard calculated reason that such people are more productive, and we want it for the warm soft calculated reason that we’d rather live in a society with as many such people as possible because they’re a lot more enjoyable to spend time around than people who hate their jobs.
It’s not hard to create a society which makes it more likely that people can do what they want. It’s not hard to create an economy which encourages people to start new businesses or to launch new careers. But such a society cannot exist if we prefer to be mean, if we want to punish people for failure. It cannot exist if we see someone else’s success as our failure or if we allow envy to infect our public policy.
People fail to pursue their dreams because they fear failure or because the opportunities aren’t available. Fear of failure is rational: pour everything into a new business which fails – and many businesses fail – and you can be left with no money, no source of income, and lose everything. In a country without universal health care, you could even lose your life if you lose your insurance and become ill or have an accident.
So the first thing a society needs to do is have in place a basic social safety net: a basic income below which people cannot drop, so they will not become homeless if they fail. Universal health care so they can pursue their dreams without being chained to a health insurance premium. Bankruptcy laws which allow most debts to be wiped away in the event of failure, not just so that people don’t lose everything, but so they can try again. Many entrepreneurs fail more than once before they create a business which works, and we want that, we want bankruptcy. We also want bankruptcy because it is important that lenders do their due diligence and accept the real risk of lending, rather than insisting that the government act as their bill collector. It is not in the government’s interest for people to become impoverished, as impoverished people cannot contribute to society nearly as well.
Credit and calculable law are needed for entrepreneurship. People must be secure in the title to their property so they can borrow against it. They must know that contracts are generally upheld and that basic physical safety is taken care of. Taxation must be calculable, though it doesn’t have to be low. Eras with top marginal income tax rates from 80% to over 90% have had far more growth than our own low tax periods, and much higher corporate tax rates do not correlate with low economic growth either. After all, first you have to make a profit, or make so much money you’re in the top bracket. As the saying runs, it’s a good problem to have.
Credit in the modern era is ultimately a product of government. Banks create money when they lend; they do not lend money they have on deposit, though the amount of money they can lend may be some multiple of what they have on deposit. Since the ability to create money is a government grant, and since a government grant is a grant from the people of a nation, the government has the right to influence or even set interest rates. This ability is already used, with central banks setting overnight rates, treasuries influencing bond rates at different durations, and so on. Mortgages in many countries will simply not be issued if they do not meet requirements set down by governments.
If we want people to do things, we have to make sure the money is available for them to do it. This can mean credit, or it can simply mean the government paying for or subsidizing what is needed. In many countries, health care is provided out of taxes. At one time, post-secondary education was virtually free for those who qualified, because governments understood that educated people make more money, create more jobs, and contribute more in general. With progressive taxation, a government can easily provide free or very cheap education, knowing that it will take a portion of every extra dollar earned as a result of that education. Rationing education is short-sighted and foolish, even on a pure cold-cash calculation.
A basic income is another thing governments do and can offer. In the modern day, this is generally done through a complicated hodgepodge of systems, from welfare to unemployment insurance to student loans and tax breaks. This is vastly inefficient, and should be simplified. If we aren’t willing to let anyone go without basic lodging and food, we should simply guarantee the necessary level of income to anyone over the age of 18 or whatever age children usually leave home. It is simple enough to do it in a way so that everyone is still better off working; it is vastly cheaper than paying an army of social workers to determine who is worthy, and it assumes the most basic tenet of liberty: that adults have the ability to know what they want to do. Nothing is more counterproductive than policies which, say, restrict welfare recipients from going to university, so they can’t improve themselves and have a better chance to contribute to society.
Knowing that they will always have enough to keep a roof over their head and food in their belly, people are far more likely to pursue their dreams, to do the work they really want to, and to start new businesses. It is true that some people will take advantage of such a system; it is also true that such a system will have much lower administrative costs than current systems. And since the basic income will not be a great income, but only basic, it will not be attractive to many.
It will also put pressure on businesses to treat their employees better. If a business cannot make a job more attractive than living at barely above subsistence, then perhaps that job shouldn’t exist. Do all the fast food jobs really make our societies richer? If a job really needs to be done, like janitorial work or garbage collection or cleaning the bums of our parents and grandparents, then does it not deserve to be compensated well? If your CEO doesn’t show up for work, or if the janitor who cleans the toilets doesn’t show up, who do you miss most? And do you really want the person looking after your parents in an old-folks home or hospital to hate their job?
Most money from a basic income, assuming high progressive rates on the rich and the same corporate tax rates as were the norm in the ’50s and ’60s, will wind up back in government coffers in any case, after it goes through multiple hands and supports many jobs.
These are the first two things required to increase the number of people who do work they want to do, or at least don’t hate: freedom from fear of devastating loss, and the availability of opportunities to gain the necessary skills, education, and credit.
The third thing is to reform laws, so people can do what they love.
Consider Silicon Valley in California, one of the greatest entrepreneurial hotspots in the world. New tech business after new tech business has been started there, from Hewlett-Packard to Apple. Millions of jobs have spun out from Silicon Valley to the rest of the world. What made Silicon Valley possible? Well, the first thing is government money, both to buy products like early computers and to support Stanford University, which histories of the Valley put at the heart of its culture. But another reason Silicon Valley happened in California and not in Massachussetts, say around MIT (though there is a tech corridor around MIT), is this: California law makes non-compete agreements illegal.
A non-compete agreement is a legal contract which states that someone can’t work in a business which competes with their current employer, generally for a few years. So if you have a great idea for a new product in the same line of business, you can’t quit and go set up a new company.
Silicon Valley’s history is of startup after startup directly competing with the company the founders left. There would be no Silicon Valley as we know it if California allowed non-competes.
This is a general principle. If law does not allow people to do what they want, well then, they can’t do it. Barriers to entry, barriers to the creation of new businesses, are too much to deal with in this article, but just note that what is good for a specific business is rarely good for business as a whole. If I own a business, I don’t want my employees to leave and compete against me. That’s bad for me. But it’s good for whatever business I’m in for there to be more competitors and new products, and it’s good for society as well.
Likewise, laws on protected works and intellectual monopolies in terms of copyrights and patent law can stifle the creation of new businesses. If a person or company is forbidden from creating a product, or must pay overly high licensing fees, the business will not happen. There is a balance here: some protection for actual inventors and creators is needed, but in our current society we are very far from the correct balance, and much law that seems to protect creators in fact only creates intellectual rents, stifles the economy, and inhibits competition. To cover intellectual property properly would take another huge article, so I won’t go into it further here. The basic principle is simple: if it’s illegal to start a business or engage in a career, or it costs too much to be worth it, people won’t. Every time we pass a law which protects incumbents from competition or which protects the work of the past, we ossify our economy and make it harder for people to do the work they want to do, sticking more and more of them in jobs they hate.
The more people who are both free and able to work in jobs they enjoy, who are able to start new businesses, who are able to pursue professions they prefer, the better off everyone will be. This is true both in pure economic terms and in softer terms: happy people are healthier, and they are far more fun to be around than unhappy people.
In economies which are running cold, people turn mean. Seeing scarcity all around, they feel that they are in competition for scarce good jobs, scarce good education, and scarce happiness. They start blocking other people and insisting that everyone pay upfront instead of behind. Bosses, knowing that there aren’t enough jobs, become mean as well, treating employees badly, knowing they have nowhere to go, and confident that if they lose one, or a hundred, or a thousand employees to mistreatment, more will be ready to work, impelled by fear of hunger and poverty.
We can’t all be rich, but we can all be prosperous, and we become prosperous as a group, as a society, not blocking each other, but by opening up opportunity for all, treating everyone as adults, and understanding that other people’s success is our success in the broadest sense. It is certainly true that in a competitive market environment there will be losers, and if your closest competitors win, you can lose as a result; but for everyone else in society, the success is beneficial, so long as those who succeed do not shut the avenues to success behind them. And if failure does not mean disaster, if there are second and third and fourth acts in life, and those who try are allowed to try again, then the fear that both stops people from trying and makes those who are successful try and stop those behind them is greatly reduced.
Societies are prosperous together. Individuals are rich separately. Let us remember this, and remember that fundamental economic success for societies requires generosity and kindness, not parsimony and cruelty.
More Time for Leisure – National Dividend: Cultural Inheritance of Society – C.H. Douglas's "Practical Christianity" – Individual Creative Freedom