I know I studied economics way back when, no doubt in some undergraduate survey course, but the passage of time has helped me mercifully forget many of the economists and theories I studied.
In my daily research rounds of reading Google Alerts, I came across a site called the Christopher Hitchens (who he?) Watch. In the most recent blog posting, Greywolf (who he?) regurgitates the Iron Law of Wages from British economist David Ricardo (1772-1823).
You don’t want to read it, or be reminded of it, but here goes.
Ricardo held that competition among laborers (that is, from a steady stream of new workers readily available due to human procreation) will consistently drive down wages due to supply and demand. At the same time, staples and base necessities will consistently rise in price because more labor will be needed to provide for an ever-expanding population. In the long run, these forces will drive wages down to subsistence levels, where they will remain if human society is to survive.
Now, we’ve never reached that predicted subsistence level of wages due to a variety of factors (inventions, wars, immobile factories and workforces, unionization, and so on), but now that the world is one large labor market, Ricardo may have the last laugh–if one can get a laugh from such a prediction-come-true.
I thought Ricardo was particularly perceptive, however, when he wrote about governments’ creating “poor laws” to fight wage disparity (and this must be the world’s longest sentence):
The clear and direct tendency of the poor laws is in direct opposition to those obvious principles: it is not, as the legislature benevolently intended, to amend the condition of the poor, but to deteriorate the condition of both poor and rich; instead of making the poor rich, they are calculated to make the rich poor; and while the present laws are in force, it is quite in the natural order of things that the fund for the maintenance of the poor should progressively increase till it has absorbed all the net revenue of the country, or at least so much of it as the state shall leave to us, after satisfying its own never-failing demands for the public expenditure.
The scary thought is that it’s well within the reach and power of Obama and the Democrats, if they maintain power for two terms in the White House, to have “absorbed all the net revenue of the country” by 2016, or even 2012.
I guess that’s why we should listen to our more modern economist, John Maynard Keynes (1883-1946), who reminded us that none of this matters because, in the long run, “we’re all dead.”