A Real-Time Account of Free Markets Eradicating Poverty

factoriesA few months ago we had a post, along with a video animation, on how free markets wipe out poverty and boost the overall standard of living. Lest one is inclined to think that it’s “just a theory”, read this recent account (“China: A Billion Strong but Short on Workers”, WSJ, 5/1/13) that puts that notion to rest. It’s yet more proof that free markets aren’t an ideology, but rather the natural order of things when government gets out of the way.

Following are excerpts from the above-mentioned account:

“Ms. Cui is contributing to China’s tightest labor market in years, putting upward pressure on wages that already are rising in the double digits annually.”

“The average monthly income for migrant workers rose 12.1% from a year earlier.”

“Creating jobs in hair salons and insurance companies, instead of in steel mills and soccer-ball factories, helps fuel growth in the world’s second-largest economy.”

“When the bra maker set up a factory in southeastern China’s Jiangxi province more than a decade ago, hundreds of people lined up outside looking for work. Today, the manufacturer for Wonderbra and Elle Macpherson Intimates struggles to find enough workers to operate its production lines at full capacity.”

“For years Top Form competed for labor with factories moving inland to take advantage of lower costs.”

 

Steve Pearlstein’s Straw-Men On Steroids

President Obama is notorious for frequently making  straw-man arguments – i.e. saying or implying that your political opponents make a certain argument or think a certain way, when in fact they do no such thing.

Is there an award for Straw-Man Columnist of the Year? If so, then the Washington Post’s Steve Pearlstein should take top honors.

His column today was one insult after another to job creators. Yes, the disdain for job creators, of all people, is even explicit in the column’s title: “I am a Job Creator: A Manifesto for the Entitled”.  Huh? Such an anti-business person writing a column in the Post’s business section? That’s like having a creationist write a column for the Science & Evolution section.

He says job creators feel “entitled” to all sorts of things such as:

I am entitled to a duty of care and loyalty from employees and investors who are owed no such duty in return.
I am entitled to operate my business free of all government regulations other than those written or approved by my industry.
I am entitled to load companies up with debt in order to pay myself and investors big dividends — and then blame any bankruptcy on over-compensated workers.
I am entitled to contracts, subsidies, tax breaks, loans and even bailouts from government, even as I complain about job-killing government budget deficits.

He lists dozens of wacky notions like that, providing absolutely no evidence of such attitudes. Not only do his targets of criticism not feel entitled to those things, but the assumptions behind all of those things are wrong as well. One often finds writers such as Pearlstein who try to overwhelm their critics by making accusation after accusation but never backing any of them up, hoping that their critics will be drowned out in all the noise. In opinion articles, you’re supposed to state a thesis and use evidence to prove that thesis. But he has dozens of little bite-sized theses, with no proof for any of them, because if you tried doing that you’d quickly realize they’re full of holes.

It’s impossible to rebut all of his accusations without writing a 10,000-word paper, so let me just focus on a few (which I shared in the comments section of his article):

Pearlstein is demonizing job creators again. Steve have you ever considered how hard it is to start a business and figure out how to bring in enough revenue to even pay one employee let alone pay yourself? It’s frightfully hard – which is why 99 percent of the people – presumably including yourself – never even bother trying.

You see, business owners and the other private-sector people you speak of get their money through wealth creation. They create something of value provided to other people who voluntarily exchange their money for it. The only private-sector folks who get their money by wealth coercion – not creation – are trial lawyers, who you probably never demonize. And of course, the people who get actual entitlements from the government obtained that money through wealth coercion as well. (If people financing those entitlements don’t pay their taxes, law enforcement will come a calling, with the use of force if necessary).

You speak of poor quality of private sector service versus government sector services. Steve when you have to sell something and lose your shirt if you don’t, you’re highly motivated to provide good service. In the government, by contrast, if you provide subpar quality service, the coerced money keeps a coming, so little motivation there. Just compare the lines at the post office with the lines at FedEx. Or just ask the former Soviet Union.

You speak of government-provided services like transportation infrastructure and education that business people use. The irony, Steve, is that government-provided entitlements are crowding out those traditional government services. Entitlements now make up two-thirds of the federal budget, up from one-third a few decades ago. They’re on track to reach 75 percent of the federal budget in a decade or so, squeezing out funding for roads and bridges and education and the like. When, Steve, was the last time you sounded the alarm about that? In fact, you’re probably among those who support every new entitlement program that comes along, in addition to resisting any “cut” (actually decrease in the rate of growth) in entitlements. You’re part of the problem of entitlements crowding out traditional government services, Steve, not the solution.

Moreover most business owners aren’t bigwig executives that you caricature. They’re small business owners trying to make ends meet and trying to pay their taxes. You know what happens when they’re a little late in their taxes? The penalties are enormous – the feds milk small business owners big time when that happens. Often makes one not even want to be in business.

Ever wondered why unemployment has been so high for the past four years? Because of people like you in and out of government, demonizing business owners.

Corporations are anything but “creatures of the state”

Bill Clinton recently said that in law school they’re taught that corporations are creatures of the state.

If that’s what they teach in law school, get your tuition money back.

To be a creature of the state means that you’re created by the state. The only corporations that are creatures of the state are companies like Fannie Mae and Freddie Mac, which were in fact set up by the state.

As for almost all other corporations, in most cases they got their start in someone’s garage or basement or home office and grew from there. They are creatures of the private-sector person or persons who started them. They weren’t set up by the state or by any government official in any way.

To be sure, the state can create a good climate for corporations, such as transportation infrastructure and enforcement of contracts, but all too often it also throws up obstacles along the way, like over-regulation, over-litigation, and excessive taxation.

Note to Bill Clinton and to law schools: with a very few exceptions, corporations are not creatures of (i.e. created by) the state in any way.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All (Revenue-Generating) Corporations Pay Taxes

The other day I heard TV and newspaper commentator Juan Williams complain that half of all corporations don’t pay taxes, a refrain that I’m sure is common among the left.

Sounds ominous, but actually it’s not. A very large percentage of corporations (I don’t have the exact percentage) are S-corps, or Subchapter S corporations, also known as pass-through entities. They don’t pay any corporate taxes at all. Instead, the earnings (if there are any) are passed through to the owner(s), and the owner pays income and/or payroll taxes on those earnings.

C-corporations pay taxes on earnings before they’re passed through to the owner. But lots of those don’t pay corporate taxes because they don’t have earnings – i.e. their expenses exceed their revenues.

And even if S and C corporations don’t pay corporate taxes, if they have employees, they pay a lot of payroll taxes – the employees pay half of the Social Security and Medicare taxes, and the corporation pays the other half. There are tons of other types of taxes they pay as well, such as unemployment taxes and various state and local taxes.

What’s a corporation? A building with lots of office furniture, computers, and equipment inside? Can a building pay a tax? Does a corporation experience consciousness? Can it feel pain? Does it have feelings?

A corporation is another word for a group of people working together. All of those people pay taxes (unless you’re the owner and you’re losing money).

So no, Juan, you’re wrong in your allegation that half of corporations don’t pay taxes. Corporations are groups of people (or even just one person, if it’s a single-member corporation), and assuming all of those people get income from their work, then all corporations pay taxes.