Fed Chairman Ben Bernanke announced Sunday night Wall Street’s largest investment banks could borrow directly from the Fed just as commercial banks do now — and use questionable collateral, such as mortgage-backed securities, to boot.

Many critics say the central bank is pledging to rescue Wall Street without demanding an end to excesses that contributed to Monday’s jittery markets, creating a moral hazard that could lead to more excesses.

The Federal Reserve continues to give aid to the irresponsible, said one critic, Peter Morici, business professor at the University of Maryland. Others said the U.S. government seemed much quicker to bail out Wall Street bankers than people who cannot afford their mortgages.

As it moved swiftly Sunday to bring about the sale of Bear Stearns, Wall Street’s fifth-largest investment house, the Fed allowed JPMorgan to use Bear Stearns’ mortgage-backed securities as collateral for some $30 billion in financing.

The central bank also reduced the interest rate on these loans to 3.25 percent and lengthened the payback term from 30 to 90 days.

When reporters asked Treasury Secretary Henry Paulson whether the Fed and the administration seemed more inclined to bail out big banks than Americans facing a home foreclosure, he noted Bear Stearns stockholders are going to lose on their investments.

…

Bernanke and his colleagues have concluded these Wall Street firms have become too big to fail and so need backup assistance from the Fed when needed, said Naroff.

— William Neikirk, Washington Tribune (2008-03-18): Fed likely to stay on offensive: Rate cut expected amid controversy

You, on the other hand… well, sorry, honey, but you’re small enough to fail.

In fact, you’re small enough to get stuck with the bill for government efforts to prop up teetering financial titans.

Barry Bosworth, economist at the Brookings Institution, raised another question: Suppose another Wall Street firm gets into trouble over mortgage-backed securities and no one wants to buy them? Fed intervention might not be enough to save such a firm, he said.

This is a big break with the past, Bosworth said. Their job is to protect the overall economy on the financial side, and they can’t make distinction [between commercial and Wall Street banks] anymore.

Some fear the Federal Reserve might be forced into bailing out troubled firms directly, by buying mortgage-backed securities or assets, rather than offering easy-term loans. But that’s seen only as a last resort.

— William Neikirk, Washington Tribune (2008-03-18): Fed likely to stay on offensive: Rate cut expected amid controversy

The lesson to learn here is not, ultimately, that the federal government ought to be bailing out homeowners facing foreclosure instead of (or in addition to) Bear Stearns. It shouldn’t be doing anything of the sort. Government economic intervention is precisely what has caused this crisis, by using its money monopoly to systematically favoring large-scale, consolidated, irresponsible financial firms, and to forcibly smooth out the normal churning and higgling of capital markets for those firms’ benefit, at the expense of working people’s income and cash savings. They do it through the extortion racket that keeps a steady flow of cash to holders of government securities; they also do it through the counterfeiting racket that passes for money in these days, the supply of which a handful of politicians and banking bureaucrats can manipulate at will, so as to suck every last drop of purchasing power out of working people’s wages and cash savings, in order to disgorge it into the dollar-denominated accounts of the kind of people who get big loans of finance capital. Government economic intervention and the money monopoly in particular have been deliberately calibrated to redirect resources and control upwards into the responsible hands of politically-connected investment banks and speculators, and then to send you the bill (either visibly in your taxes or invisibly through inflation) for the massive screwjob that they’ve perpetrated on you. These interventions, which amount to the black ops of the class war, go on because in the explicit ideology of the ruling class, political economy should be rigged to safeguard the interests of the biggest, richest, most entrenched incumbents, no matter how royally they screw up and how recklessly they play with other people’s money, while the rest of us, little folk that we are, are expected to eat the costs of not only our own mistakes, but the bankers’ and politicians’ too, because we are somehow better off being extorted or defrauded in order to ensure that all of us keep on living with our economic fortunes perpetually dependent on the engorgement of these corporate behemoths. Shifting that dependency, in the particular case of home foreclosures, from businessmen to the very politicians who have spent all these years robbing us for the businessmen’s benefit will not help the problem. It will only mean that the businessmen are able to pawn off one more liability on the government, while the rest of us are forced to pay through the nose for a government-structured solution that changes nothing fundamental, and leaves us dependent on the good will of government bureaucrats instead of banking bureaucrats.

And that is the real lesson of this story: the class structure of the State and its economic regimentation. In Anarchy, with freed labor and freed markets, there is another way. A way for working people to be free to take control of their own lives, and to live by their own work, in their own homes, by voluntary mutual aid, and by gifts freely given. In which none of us, no matter how small, will be forcibly corralled into depending, for our security, healthcare, homes, retirements, and livelihoods, on the interests of entrenched big players–neither the economic fortunes of self-aggrandizing robber barons, nor the tender mercies of the political appropriations process. In which we will not be shaken down for extorted charity to cover the gambling debts of predators, parasites, and fools. That way is dumping the bosses off your back–both economically and politically–and the way to move forward on it is to move toward building a vibrant counter-economy, which can feed us while we starve out the monopolists, manipulators, and the rest of those who want to take our money, by force or fraud, so that they can go on living in the style to which they have become accustomed.

Further reading:

• GT 2008-03-13: The first rule of Fiat Club is, you do not talk about Fiat Club
• GT 2008-03-11: Colonialist logic
• GT 2008-01-04: Cognitive Dissonance of the Non-Libertarian Left
• GT 2008-01-11: Scratching By: How Government Creates Poverty As We Know It
• GT 2007-11-16: Urban homesteading

Dana Perino is under strict instructions … to not talk about the dollar.

Q I’d like to follow up on their refusal to talk about the dollar, if I could. I mean, we’re in a kind of a bad situation here, when OPEC says the reason for $105 or $106 a barrel of oil is the falling value of the dollar — and you won’t address that issue. Where do we go to find out who is right?

MS. PERINO: Well, as he just said, the Treasury Secretary is where you go to talk about the dollar. It’s a longstanding policy that predates this administration, and I’m not going to change it today. But Treasury can talk about it.

Q I don’t expect you to change it, but I do expect you to be able to say whether OPEC is completely wrong about this, or whether there is at least something to their claim that the dollar is responsible for the high price of oil right now.

MS. PERINO: Wendell, I’m under strict instructions, and have been from the beginning, to not talk about the dollar, and I’m not going to get fired to satisfy your question.

— White House Press Briefing, Friday, March 7, 2008.

Had you just sat through a long presentation on the rotten economic situation in the U.S., which studiously avoided any mention at all of the collapsing value of the government’s fiat currency, you might also want to get a some answers. In particular, answers about the calculated policies of the Department of the Treasury and the Federal Reserve to make the world safe for finance capital–and doing it by exercising the federal government’s money monopoly, so as to suck every last drop of purchasing power out of working people’s wages and cash savings (which increase, if they ever do, much later, and much more slowly, than the commodity prices that we have to pay in order to go on driving and eating).

You might want some answers; however, you’ll have to get them from somebody other than the White House press flack. She believes that if she says word one about the situation, she’ll likely be fired for it.

(Via Crooks and Liars 2008-03-11, via Lew 2008-03-12.)

Thanks to P.M. Lawrence @ LewRockwell.com (2008-03-10) for highlighting an interesting passage from an old book. Interesting to me, anyway, because of the way in which its aging rhetoric reveals what it once tried to conceal, and the way in which what it reveals lives on to this day, in the theory and practice behind countless privateering government development projects, both at home, and abroad. This is from Sonia E. Howe’s 1938 history of the French conquest and colonization of Madagascar, under the rule of political hit man Joseph Simon Gallieni.

There was the introduction of equitable taxation, so vital from the financial point of view; but also of such great political, moral and economic importance. It was the tangible proof of French authority having come to stay; it was the stimulus required to make an inherently lazy people work. Once they had learned to earn they would begin to spend, whereby commerce and industry would develop.

The corvée in its old form could not be continued, yet workmen were required both by the colonists, and by the Government for its vast schemes of public works.

No, they weren’t.

The General therefore passed a temporary law, in which taxation and labour were combined, to be modified according to country, the people, and their mentality. Thus, for instance, every male among the Hovas, from the age of sixteen to sixty, had either to pay twenty-five francs a year, or give fifty days of labour of nine hours a day, for which he was to be paid twenty centimes, a sum sufficient to feed him. Exempted from taxation and labour were soldiers, militia, Government clerks, and any Hova who knew French, also all who had entered into a contract of labour with a colonist. Unfortunately, this latter clause lent itself to tremendous abuses. By paying a small sum to some European, who nominally engaged them, thousands bought their freedom from work and taxation by these fictitious contracts, to be free to continue their lazy, unprofitable existence. To this abuse an end had to be made.

No, it didn’t.

The urgency of a sound fiscal system was of tremendous importance to carry out all the schemes for the welfare and development of the island, and this demanded a local budget.

No, it didn’t.

The goal to be kept in view was to make the colony, as soon as possible, self-supporting. This end the Governor-General succeeded in achieving within a few years.

No, he didn’t.

The Malagasy natives supported themselves well enough on Madagascar, through the sweat of their own brow, for centuries before ever a white man ever arrived. What the Governor-General succeeded in achieving within a few years was not to make Madagascar self-supporting, but rather to use a mixed system of robbery and involuntary servitude to coerce otherwise unwilling Malagasy workers into working more than they otherwise would, in return for less than they would otherwise get, so that a self-supporting population could be browbeaten and bullied into not only supporting themselves, but also supporting a parasitic new class of governors and land-grabbers in the style to which the kleptocrats had become accustomed.

Of course, it is typical enough for politicians and politically-connected businessmen with a vast scheme to call out armed men to seize taxes and force labor, on the excuse that something so big couldn’t ever be pulled off consensually, which amounts to nothing more than demonstrating that robbery and slavery are the necessary means to an unnecessary goal. But what’s especially interesting to me here is the classical colonialist rhetoric, to the effect that it must be the inherent laziness and moral turpitude of the Malagasy natives that made them more interested in living their own lives and freely pursuing their own projects and traditions, rather than happily turning over their wealth and their lives to the vast schemes of the Government and the enrichment of its sponsored privateers. If they dare to prefer working on their own stuff to working on white people’s stuff, then clearly it will take the cudgel to teach them some civilized manners.

For the colonial mindset, this kind of attitude was like oxygen is for us–pervasive, invisible, taken for granted, and absolutely essential. In 1938, a European historian writing about colonialism in Africa would think nothing of saying commonplaces like these, and if it is jarring to read now, it’s only because, in the intervening years, the most explicit statements of that mindset have been questioned, vigorously challenged, and cast down out of cultural favor in Europe and the U.S. But the mindset itself is not gone, and its legacy lives on in the new words that the new powers that be have crafted to conceal what these old words now reveal to us. This is true of the way that the ruling elite in the U.S. and the other Great Powers talk about their military and government-financing projects abroad; it’s also true of the way that the ruling elite in the U.S. and the other Great Powers talk about their government seizure and government financing projects at home–whether in the form of taxes, government-driven technology plans, or the seizure, bulldozing, transfer, and subsidized remaking of undeveloped land.

So, Carla Howell got another voter referendum on the ballot in Massachusetts to completely repeal the state’s personal income tax. The last one, in 2002, was defeated, but with a remarkably high Yes vote (55% No-45% Yes). Voter polls show that this year’s ballot issue currently has only about 45% of the voters in the state against it, and about the same number for it, with the deciding margin still undecided.

Howell is spearheading the campaign on behalf of a ballot initiative that would cut the state income tax, currently at 5.3 percent, to 2.65 percent in 2009 and then do away with it entirely the next year.

Howell claims that eliminating the income tax would put an average of $3,600 in the pocket of every taxpayer, every year. … If the income tax is eliminated, the overall state budget, totaling $26.8 billion this fiscal year, would be cut by about 40 percent—reducing it to $17 billion, or what the state government ran on in 1995, according to Howell.

— Gabrielle Gurley, CommonWealth (Winter 2008): Voters get another shot at erasing the state income tax

Let’s watch how Michael J. Widmer, who spent at least ten years of his life drawing a tax-funded salary from the Massachusetts state government and now presides over the tax-exempt Massachusetts Taxpayers’ Foundation, reacts:

The president of the Massachusetts Taxpayers Foundation, who single-handedly led the charge against the first repeal effort and debated Howell several times, plans on building a coalition of groups to oppose the question this year. … Since the question did so well the last time, Widmer isn't surprised to see that it's bounced back. But Widmer argues that Massachusetts can ill afford to see $12 billion in fiscal 2009 revenues disappear into thin air.

— Gabrielle Gurley, CommonWealth (Winter 2008): Voters get another shot at erasing the state income tax

Please keep in mind that, in the minds of people like Michael Widmer, the Massachusetts state government, and most of the professional blowhards who report and comment on their views, if the government doesn’t take $3,600 a year out of a worker’s paycheck, that money just vanishes into thin air.

You might have thought that money not taken out of your paycheck actually just goes to somebody other than who the government says it must go to — that is, first to the worker herself, and then, secondarily, toward whatever needs projects that worker may have, like her or her children’s education, retirement savings, healthcare, food, rent…. But from the state’s-eye view, those little projects of hers are worth nothing or less; unless that money passes through the hands of political appropriators and government bureaucrats, it may as well not exist, and it’s surely never going to do a lick of good for anybody or anything that counts (in the reckoning of the state).

If nobody is in charge of distributing all the food, how will Paris ever get fed?

First they taught us to depend
On their Nation-States to mend
Our tired minds, our broken bones, our failing limbs;
And now they’ve sold off all the splints,
and contracted out the tourniquets,
And if we jump through hoops, then we might just survive.

–Propagandhi, The State Lottery

There has been some interesting discussion among Jim Henley (2008-02-21), Tom Knapp (2008-02-29), and Kevin Carson over left-libertarian political programmes, strategic priorities, gradualism, and the welfare state. The debate began with an argument over Knapp’s World’s Smallest Political Platform for the Libertarian Party, and Henley’s worries that the platform, as expressed, doesn’t allow much room for gradualist approaches to repeal, or nuance in strategic priorities. Now, I don’t have much of a dog in that fight, because I’m not a gradualist, but I’m not in the least bit interested about limited-statist party-building or political platforms, either. At the level of moral principle, I have a very simple approach to taxation, government welfare programs, regulation, etc. If I had a platform, it would be three words — Smash the State — and the programme I favor for implementing that is for each and every government program to be be abolished immediately, completely, and forever, whenever, wherever, in whatever order, and to whatever extent that we can, by hook, by crook, slingshot, canoe, wherever the political opportunity to do so presents itself. Political coercion is an evil against which it may sometimes be prudent to retreat, but with which there can be no negotiated compromise. (All such compromises, so-called, are really just conditional surrender.)

In other words, on the one hand, I am an ultra-immediatist, in the sense that I believe that everything’s got to go, and that libertarians and anarchists should make no bones about saying so; and, on the other, I also — unlike certain gradualist anarcho-statists like Noam Chomsky or Ursula K. LeGuin — am an ultra-incrementalist, in the sense that I don’t think that we ought to put our efforts to abolish anything on hold until we’ve somehow (how?) managed to abolish just about everything.

I’m not actually sure whether Henley really is advocating gradualism in the sense that I oppose it; there’s a difference between gradualism in ideals and incrementalism in strategy, which language makes unfortunately easy to overlook. Defending immediate and complete abolition on principle, and the abolition of any coercive program you may get the opportunity to abolish, doesn’t entail any particular order of priorities in terms of the scope or order in which you might concentrate your own limited resources towards making opportunities for abolition that didn’t previously exist. And that’s where I think the interesting part comes in, and where there is a lot of room for interesting discussion about freedom, class, and strategic priorities when it comes to government interventions with distinctive class profiles. Here’s Henley:

… I have a sequencing objection. Figure the state as Annie Wilkes in Stephen King’s novel, Misery. She wants to help the patient so much she’ll never willingly let him go. To a libertarian, much of what the state does looks like providing crutches or shackles. To an anarchist, I suppose everything the state does looks like that. Crutches are actually important for the injured. If you’re to completely heal, though, you have to give them up at the right time. And some badly injured people are never going to be able to do without them – e.g. my mother with her walker.

But the crazy nurse wants you to keep your crutches whether you need them or not, and she’ll chain you to the bed, if necessary, to keep you in her care. If she has to, she’ll cut off your foot, for your own good. … So we want to remove most or all crutches and shed most or all shackles, depending on how, for lack of a better term, anarchistic we are. But which shackles and which crutches when? The liberal libertarian answer is: first take the crutches from those best able to bear their own weight, and remove the shackles from the weak before the strong. So: corporate welfare before Social Security before Aid to Families with Dependent Children. Drug prohibition before marginal income tax rates.

Most libertarians would agree that it’s a messed-up state that:

• Creates a massive crime problem in poor minority neighborhoods with a futile, vicious and every more far-reaching attempt to prevent commerce in popular, highly portable intoxicants that leaves absurd numbers of young men with felony records, making them marginally employable.

• Fails to provide adequate policing for such neighborhoods.

• Fails to provide effective education in such neighborhoods after installing itself as the educator of first resort.

• Uses regulatory power to sharply curtail entry into lines of business from hair-care to ride provision, further limiting the employment options of people in such neighborhoods.

• Has in the past actively fostered the oppression of said minority, up to and including spending state money and time in keeping its members in bondage.

• To make up for all of the above, provides a nominal amount of tax-financed welfare for the afflicted.

But it’s a messed-up libertarianism that looks at that situation and says, Man, first thing we gotta do is get rid of that welfare!

— Jim Henley, Unqualified Offerings (2008-02-21): Ask Me What the Secret of L–TIMING!–ibalertarianism Is

Kevin Carson takes sympathetic notice of Henley’s metaphor of crutches and shackles, quoting an earlier passage in which he’d used quite similar language to make the point:

If the privilege remains, statist corrective action will be the inevitable result. That’s why I don’t get too bent out of shape about the statism of the minimum wage or overtime laws–in my list of statist evils, the guys who are breaking legs rank considerably higher than the ones handing out government crutches. All too many libertarians could care less about the statism that causes the problems of income disparity, but go ballistic over the statism intended to alleviate it. It’s another example of the general rule that statism that helps the rich is kinda sorta bad, maybe, I guess, but statism that helps the poor is flaming red ruin on wheels.

— Quoted by Kevin Carson (2008-03-03): On Dissolving the State, and What to Replace It With

I agree a lot with the broad point that Henley and Carson are both making here. In setting strategic priorities, we have to look at which forms of government coercion do the most concrete damage, which forms of government coercion has intended victims who are most vulnerable to it, which forms have intended victims who can more easily evade or game the system on their own, and, perhaps most importantly, which forms serve as the real historical and ideological anchors for establishing and sustaining the distorted statist social order, and which forms are relatively superficial efforts to stabilize or ameliorate the effects of those anchors. I think that on all these counts, a serious look at how calls the shots and who takes the bullets will show that the welfare state, such as it is, is a fairly small and superficial effort to ameliorate the effects of deep, pervasive, and incredibly destructive economic and institutional privilege for big, centralized, bureaucratic state capitalism, and (as much or more so) for the class power of the State itself over the poor folks that it beats up, locks up, institutionalizes, bombs, robs of their homes and livelihoods, and so on. Moreover, it’s a fairly small and superficial effort which doesn’t violate anybody’s rights per se; it’s the coercive funding of government doles, not their mere existence, that involves government violence, and in that respect, while I think they should be abolished, they’re on quite a different footing from things like the warfare state and the underlying government monopolies and privileges that the welfare state is intended to correct for, which involve coercion both in funding and in the very things that the funding is used for. All this tends to support strategic priorities in favor of (as Tom Knapp himself originally put it) cutting welfare from the top down and cutting taxes from the bottom up.

That’s all well and good. But I want to sound a note of caution. When we’re setting our strategic priorities, one thing that we need to keep an eye out for is the fact that not all of what the government passes out as a crutch really is one; the enemy we’re fighting, after all, is a consolidated mass not only of force, but also of fraud. Lots of so-called crutches really have a secret shackle attached to them — welfare per se is a crutch, but remember that welfare comes with a professional busybody social worker attached. Moreover, lots of so-called crutches are themselves crowbars; they’re the tools that the State uses to break your legs, and then have the supreme impudence to claim that they’re helping you to walk by doing it. As I said to Kevin (internal links added for this post):

Broadly speaking, I agree with your and Henley’s point about strategic priorities. It’s an odd form of libertarianism, and a damned foolish one, that operates by trying to pitch itself to the classes that control all the levers of power in both the market and the State, and to play off their fears and class resentment against those who have virtually no power, no access to legislators, are disproportionately likely not to even be able to vote, and who are trodden upon by the State at virtually every turn. It makes just about as much sense as trying to launch a feminist movement whose first campaign would be to organize a bunch of men against their crazy ex-girlfriends.

But … Aren’t there a lot of so-called social programs out there which the government fraudulently passes off as crutches, when in fact they are crowbars? Since you mentioned it, consider the minimum wage–the primary effect of which is simply to force willing workers out of work. If it benefits any workers, then it benefits the better-off workers at the expense of marginal workers who can less afford to lose the job. Or, to take another example, consider every gradualist’s favorite program — the government schools — which in fact function as highly regimented, thoroughly stifling, and unbearably unpleasant detention-indoctrination-humiliation camps for the vast majority of children and adolescents for whose benefit these edu-prisons are supposedly being maintained.

Or for that matter, consider phony pro-labor legislation like the Wagner Act, the primary function of which is actually to capture unions with government patronage and bring them under greater government regulation.

Aren’t there a lot of so-called crutches, usually defended by corporate liberals and excoriated by conservatives, which really ought to be pressured and resisted and limited and abolished as quickly as possible, precisely because, bogus liberal and conservative arguments notwithstanding, they actually work to shackle the poor or otherwise powerless for their own good?

— Rad Geek, in comments (2008-03-03) on On Dissolving the State, and What to Replace It With

Really, to keep my metaphors straight, I should have said cripple the poor or otherwise powerless. Oh well. In any case, Kevin agreed, and added some quite true and important points:

I agree entirely. That’s why I think the setting of priorities for dismantling the state must be combined with educational efforts and building counter-institutions.

Frankly, eliminating the minimum wage and food stamps is at the very bottom of my list of priorities. My guess is that when the landlord and banking monopolies are eliminated, along with intellectual property, Taft-Hartley, and all the regulatory barriers to mutual insurance, eliminating the minimum wage and food stamps will be a moot point because it will be so hard to find anybody on them.

But I also advocate vigorous ideological struggle to counteract the matrix version of reality parroted by the vulgar liberals at Daily Kos, and to expose the role of the state capitalist ruling class in creating the regulatory-welfare state.

And that’s especially true in the case of crutches that play a central role in serious exploitation, like professional licensing and safety codes whose main purpose is to enforce the power of cartels to bleed consumers dry and shut workers out of opportunities for self-employment.

— Kevin Carson, comments (2008-03-03) on On Dissolving the State, and What to Replace It With

But while I agree with him on almost all the details of his reply, I think there’s an important distinction that it misses:

I agree with you on food stamps, but not on the minimum wage. In fact it’s laws like the minimum wage which I especially had in mind when I mentioned crowbars being passed off as crutches. While I agree that a free market would almost certainly result in substantial increases in real income and substantial decreases in cost of living for virtually all workers — to the point where they would either be making well above the current minimum wage, or at least where fixed costs of living would have dropped enough that it amounts to the same — there’s also the question of what we should be pushing for in the meantime in-betweentime, when there aren’t fully free markets in labor, capital, ideas, and land. In that context, the minimum wage law is, I think, actively destructive. Conditional give-aways, like foodstamps, are one thing; the program itself doesn’t violate anyone’s rights (it’s the tax funding that’s the problem), and people can always choose not to go on foodstamps if they decide (for whatever reason) that it’s doing them more harm than good. Not so with minimum wage; the only way to shake off this so-called protection is to seek out someone who’ll let you work under the table, and hope the government doesn’t catch on. The result is forcing one class of workers out of work in favor of another, more privileged class of workers. Hence, I’d argue we should treat abolition of the minimum wage a lot differently, in terms of strategic priorities, from how we treat government welfare, food stamps, etc.

— Rad Geek, in comments (2008-03-04) on On Dissolving the State, and What to Replace It With

Here’s Kevin’s response to the distinction in treatment that I wanted to urge:

I’m not sure the minimum wage really has that effect (and again, my purpose is not to defend the MW, but to move its abolition to the bottom of the priority list).

I know the arguments on how they reduce employment, but they all carry an implied ceteris paribus; and most of the polemicists at Mises.Org and the like strenuously advoid any suggestion that things might not be equal.

It’s most likely that, in an industry that employs minimum wage workers, there is little or no competitive pressure to minimize wage costs because all the local employers in that industry are paying the same wage. And if there’s a high elasticity of demand for fast food, etc., it will probably be passed on to customers unnoticed, as one small component in the price of a Big Mac.

In addition, the argument assumes a competitive labor market and cost-minimizing firms, and neglects the possiblity that minimum wage increases may come out of quasi-rents and simply reduce profit. That’s unlikely to be the case for minimum wage employers per se, which tend to be small businesses with narrow profit margins; but it’s more likely to be true in better paying employers who peg wages to the minimum wage plus some differential.

— Kevin Carson, comments (2008-03-05) on On Dissolving the State, and What to Replace It With

I didn’t mean to suggest that Kevin was trying to defend the minimum wage, and I’m sorry if I inadvertently gave the impression that that’s what I’m arguing against. I take it that he’s not trying to defend government welfare, either; just suggesting that libertarians re-order their strategic priorities in terms of which evils to first and most intently put their limited resources towards combating. The point I’m urging is in a similar vein; I’d like to encourage left libertarians, in particular, to make a further distinction of priorities, and put minimum wage laws higher up the To-Agitate-Against list than they put government dole programs. They’re both objectionable, and I’d argue that both should be abolished (immediately, completely) at the first opportunity. But they’re objectionable in different ways, and shouldn’t be considered as part of a single welfare state package when anarchists look at what kind of opportunities to try to drum up for ourselves. The bare existence directly coerces individual workers, and for the most part tends to hurt the most economically vulnerable workers the most, in ways that the existence of welfare state programs (where the problem is not the program per se, but the coercive funding) do not.

I’m not sure I understand Kevin’s argument when he says, And if there’s a high elasticity of demand for fast food, etc., it will probably be passed on to customers unnoticed, as one small component in the price of a Big Mac, and I wonder whether he meant to write low elasticity of demand. If there’s a high price-elasticity of demand for fast food, then that would mean that quantity demanded is highly sensitive to price increases; in that kind of industry that bosses should be more likely, not less, to try to make up the difference in labor costs by stopping new hires, firing workers, reducing hours, and instituting work speed-ups.

And this isn’t just at the level of ceteris-paribus theory. There is that, and it’s important, but on this one, I can speak from the shop floor. I was working at a pizza joint in Michigan when the governor pushed a minimum wage bill through the state legislature, hiking the state price floor on labor to $6.95 per hour — with a tiered plan that raised it again to $7.15 per hour last July, and will raise it to $7.45 per hour this year. I was an inside cook at the time, and most of us already made above minimum wage, except for a couple of high schoolers.

In our shop, the main issue was the drivers. They got the minimum hourly wage for non-tipped employees on their paycheck (mainly so that the corporate office could invoke some plausible deniability on not reporting and paying FICA tax on their tips). When the increase went through, one of the immediate results was that corporate sent their know-nothing goons down from the office to start chewing out our GM over the hours for our regular late-night driver, who worked about 20 hours of overtime every week, because it’s hard to find other drivers who are willing to regularly work a 5:00pm-4:00am shift.

The other immediate result is that corporate forced our store to institute a $1.00 delivery fee — and to change the compensation structure for drivers. Drivers used to get $1.00 per run plus a commission based on the size (in dollars) of the order; after the change-over, they got a higher hourly wage and a flat commission of $0.75 per run, no matter what the size of the order. The result was that if you took more than four deliveries in an hour — or if you took just about any large-order deliveries — then you actually made less money that hour than you would have before Jennifer Granholm gave us all her government-mandated raise.

The delivery fee might make it look like a significant part of the cost of the minimum wage hike was being shifted onto customers, rather than onto workers. But (1) most of it was taken out on workers; the change in compensation for runs reduced pay to drivers, especially lunchtime drivers, by far more than the price increase increased store revenue. And (2) the fact is that customers usually just deducted the cost of the delivery fee from they would normally give as a tip to the driver. I know from questions that a few of them asked me after the delivery fee was instituted that a lot of them were under the mistaken impression that the delivery fee went to the driver. Thus the total costs to the customer didn’t budge; they just got re-allocated so that more would go to the boss instead of to the driver.

So at our store, at least, we could thank Jennifer Granholm’s raise for imposed hours-reductions, reduced tips, and providing management with the pretext for a really massive screwjob on effective pay for those who were working at the minimum hourly wage.

In other shops, there aren’t always the same opportunities for chiseling workers on non-hourly pay in the way drivers at our shop got chiseled. But in a broader sense, I don’t think our shop’s experience was atypical. Any retail or food service company, even if all pay comes from fixed hourly wages, can use hours reductions, halting new hires, and death-march speed-ups for those still on the crew. And that they will do that sort of thing, rather than adding cents onto meal specials that already focus on 99-cent deals and nickel-and-dime savings, seems like a perfectly predictable pattern that a lot of bosses in the low-wage service sector are going to follow, as long as there’s a lot more of us looking for hours than there are of them dangling the hours in front of us.

Of course, that last bit there is the root cause of the problem — government-imposed distortions of the markets in labor, capital, land, and ideas (inter alia) artificially constrain opportunities for people to make a living for themselves, distorting the labor market to keep disproportionate power in the hands of a small and privileged class of rentiers. Without those market distortions, a law against paying workers $4 an hour would matter about as much as a law against selling pork-chops in Mecca — objectionable on principle, but mainly negligible as a strategic matter, due to a dearth of identifiable victims. But as long as those coercive distortions are substantially in place, we do have to keep in mind how bosses will predictably react to additional coercive counter-distortions that are piled on top to correct for the predictable effects of the first distortion, without actually changing anything about the root causes. And with the predictable patterns of reaction in mind, and their current position of power within the labor market, I don’t think we have to turn into a bunch of vulgar Friedmaniacs or Misoids to agree with them that the effects of keeping, or worse, raising legally-enforced price floors on labor are going to be generally quite destructive, and most destructive to those who need most badly to find a place to sell their labor.

Now, when it comes to workers in my position, who were already working at above minimum wage, I agree that they might well see some wage increases from a minimum wage increase, by way of pegging and ripple effects. I never did, but maybe others might. There are some cases in which minimum wage increases might benefit relatively more privileged workers, but it’s the marginal workers — the ones who are working right at, or right above, or would be willing to work below the current minimum wage — who I’m most concerned about, because they are the ones whose backs it’s taken out on. Usually not in the form of firing existing workers — which is highly visible and has a significant marginal cost for the boss — but very often in the form of hours reductions and by simply not making new hires — which call much less attention to themselves and have much lower marginal costs, but can effect just as much in the way of ratcheting down labor costs.

I have lots of other strategic priorities that are higher on my list than the minimum wage. It’s enough work for me trying to take on war, government policing, international apartheid, the American Stasi, government schooling, institutional psychiatry, violence against women, gay-bashing, trans-bashing, government regimentation of healthcare, land-grabbing and privateering, government-enforced licensure cartels, the IRS, and the Wagner-Taft-Hartley framework, and trying to sell all of this to Leftists who mostly get only about half of it and libertarians who mostly get only the other half, without adding yet another windmill-charge at the pet notions of ACORN types and the corporate liberal consensus! But I do think that there’s a big asymmetry between government relief projects like TANF or food stamps, on the one hand, and the minimum wage and other coercively protective labor legislation, on the other.

I agree with Kevin more or less completely on the former. But the point I’m trying to stress is that, in spite of fact that the anti-minimum-wage argument has mainly been promulgated with a vulgar libertarian tone, the thing for left libertarians to do in response is not to kick it back down to the bottom of the priorities ladder, but rather to take it up themselves and re-conceptualize the debate — to treat minimum wage laws and the rest of coercively protective labor legislation as of a piece with government licensure cartels, zoning laws, the health and building codes favored by the Public Interest and Private Property Values racket, etc., as an integral part of the corporate liberal system of coercive power, which coercively ratchet up poor folks’ fixed costs of living while coercively ratcheting down their opportunities to scratch up a living.