Sunday, February 27, 2011

An Economics Lesson

I have a commodity to sell.

My production of this commodity is limited and finite over roughly a 60 year time span. I am only one of many people with this, or a similar, commodity who are all trying to sell in a common market. The value of my commodity is relative to fluctuations in the market. Sometimes there is more of my commodity than prospective buyers need, which reduces its value, but sometimes there is less of it than buyers need, and so its value is increased. Its absolute value, however, is always greater than zero. My goal in a relatively free, capitalist market system is to sell my commodity for the highest possible amount, bearing in mind the above market fluctuations in its relative value. Sometimes I will be able to get more for my commodity than others, but my goal remains to get the maximum value possible for it.

The prospective buyers of my commodity typically have greater economic leverage than I do as an individual producer. Often they have the need and means to purchase not only my commodity, but those of many others as well. Our commodities are absolutely necessary to allow these buyers to produce commodities of their own, which they will, in turn sell in the same relatively free, capitalist market. Their goal is similar to mine in that they want to get the maximum value for the commodities they produce, being constrained by similar market forces. One of the ways they can maximize what they get for the commodities they produce is to pay as little as possible for my commodity, because that lowers their costs of production.

Still with me, Readers Mine?

Now, on a level economic playing field (and again, we’re modeling a relatively free market capitalist system here), where I’m trying to get the most for my commodity and prospective buyers are trying to pay as little for it as they can, what would happen naturally is that we would wind up meeting somewhere in the middle. I might not get as much as I’d like for my commodity, but they probably have to pay more for it than they’d like, so it’s something like a fair price for them and fair value for me. Everyone is – if not happy – at least able to take home some scratch and keep on economically keeping on.

Unfortunately, the playing field is not level. The prospective buyers of my commodity have much greater economic leverage than I do. Remember, they have the need and ability to buy not only my commodity but also those of others, sometimes many others. For my commodity, though necessary and valuable, is far from being uncommon. Sometimes this means that buyers are able to purchase it well below what should be a fair market value, because if I won’t sell my commodity to them at that price, they can find someone who will, despite the fact that the price offered is lower than what they themselves need to get by. In short, the potential buyers of my commodity have the power to control the market, which, if you’ve been paying attention, is pretty much antithetical to the idea of a relatively free, capitalist market economy.

So, how do I compete with entities which possess so much more economic leverage than I do, and who are using that leverage to manipulate and distort the market? Well, if I get together with other people like me, who are also trying to sell their commodities in a market vulnerable to this manipulation, and we work together, refusing to sell our commodities (which, in the end, our prospective buyers have to have) for less than a fair market price, we limit the pool of potential commodity sellers the buyers can purchase from, and force them to raise their price back up to a fair market level. It’s the same idea behind credit unions where a bunch of people with a little bit of money join together in order to compete fairly with a few people with lots of money. Or like a food co-op where a bunch of independent small farmers join together to sell their produce competitively with chain grocery stores.

Okay, here’s the kicker.

My commodity (and yours) is my labor. The entities with the power to manipulate and control the market to my detriment are large scale employers, both private and public. My credit union or co-op? A union. A union that allows me and my fellows to operate in the free market capitalist system as any participant in that system should be able to: by buying and selling at fair market prices as determined by the market.

Is it perfect? No. Is it necessary? Does it provide for better conditions and more dignity in work than non-union situations? Yes. Hell yes. Eight hour days, 40 hour weeks, overtime, sick days, health care, child labor laws, safety laws all of these were brought to you by the American union movements, and most of them within the past 100 years.

So, when you’re watching what’s happening in Madison Wisconsin and many other places, and you hear politicians ranting and raving about “out of control public sector unions” ask yourself how many rich firemen do you know? How many millionaire policemen? How many high school, community college, or university teachers driving Bentley’s? How many postal workers belong to your local yacht club? How many EMTs wearing Versace coveralls? Because those are the folks who belong to those “out of control public sector unions.” Now look at the number of politicians and business executives who fall into the rich, millionaire, Bentley-driving, yacht-club membership, Versace set. Which group is comprised of your neighbors, and the people you can count on to be there to help when bad things happen?

Solidarity. Forever.

1 comment:

  1. Versace makes coveralls? Suddenly, I feel a need to go shopping . . .