If you’re familiar with Democratic presidential candidate Andrew Yang, it’s probably through his proposals on Universal Basic Income. Effectively, a monthly “allowance” of approximately a thousand dollars to everyone in America. It’s an interesting idea, and its. easy to see what Andrew Yang’s shooting for.
But, I oppose it…and not just because it’s literally the most stereotypically liberal economic idea on the face of the planet. It’s because, given the plumbing of our current system, UBI will end up backfiring, causing runaway inflation and shifting yet more of our economy to the rich and to overseas corporations. In essence, Universal Basic Income is just flushing cash down the broken plumbing of America’s corporate system…and we’ll be the ones stuck paying for it.
Where do Prices Come From?
To state the obvious: Corporations exist to maximize profit. Period. They pay the minimum and charge the maximum they can get away with. For all things, at all times. Including the goods they produce, and the labor required to sell it. Corporations are cheap and endlessly greedy, by definition.
So, who sets the limits on how little a corporation can pay, and how much they can charge? In short: The competition.
Contrary to the current popular ideas of value, as long as a company isn’t operating in the red, they don’t set the value of anything. Because of competition. Or more accurately, the infracompetitive cycle between corporations within the same industry, acting as a single entity.
Walmart doesn’t set the price on a loaf of bread according to what they paid for it. Nor does it matter what labor costs that specific corporation, or how many loaves thieves have stolen from the store. No. Doesn’t matter. Walmart looks to Target across they street, see what Target’s charging, and adjust their own prices accordingly.
On, to VALHALLA!!
The same goes for wages. Walmart doesn’t decide what they’re paying for labor. Target does. Local labor markets do. Walmart (being a profitable company) is going to charge the maximum and pay the minimum relative to local market conditions. Not according to internal conditions or some mythical profit goal. Which is always “all of it.”
Am I telling you to steal from Walmart, because they’re lying about theft affecting prices? No.
But I will say this: If a horde of Vikings descended on every Walmart in the country, and pillaged their shelves dry…then as long as bread trucks kept coming to Target, Walmart still couldn’t charge a dime more for that loaf than the nearest Target. Walmart adjusts its costs and pay according to local market conditions, just like any other profitable company.
This applies not just to competing companies, but also to competing outlets within the same company. Since we’re talking about Walmart, it’s probably fair to point out that in some limited sense, because of the way the corporation’s set up, theft actually does affect shelf prices at individual stores. At least, over a short period of time. If one store experiences high losses, they may increase prices on some things to balance inventory. But, this increase is still relative to prices set by competitors and other Walmarts in the area.
Ultimately, then, theft, transportation and other overhead costs within a specific entity have no bearing at all on pricing. Conversely, neither do profits over and above those expenses. Both prices and wages adapt to fit the local market, always in an effort to maximize profit on the company’s part.
Water Seeks Level, Always
So, what does any of this have to do with UBI?
Given the nature of market adaptation, this should be a pretty easy question to answer: What happens if we just give away money? To everyone, equally, and without favor? What happens if we, in effect, double the living income of the majority of America with some kind of monthly allowance?
Answer: The price of everything will double with it. And wages will probably drop proportionately.
If we were to do as Mr. Yang suggests, and give everyone in America an extra $2,000 a month, that “freedom dividend” would almost instantly get eaten by market adaptation. If we put 50% more money in everybody’s pocket, the price of bread, rent, electricity and dog food would jump by 50% practically overnight. Whatever’s left of cash excess would be swallowed by a decrease in wages. The water of our economy always seeks level; simply filling the glass lopsidedly won’t prevent that.
But it will hurt most the people it’s intended to help. Because generally, it’s the price of consumer goods, stuff poor people buy, which will most greatly be affected by price increases. It’s the wages of those same people which will drop the most. And so, in the end, all we’re doing is subsidizing labor by excessively taxing the very people contributing that labor.
Conclusion — The Path to Hell
Apart from ending up as yet another massive, taxpayer-funded give-away to Corporate America, UBI might actually destroy our economy completely. Because not only would the price of goods go up, wages would go down since taxpayers are effectively subsidizing corporate payrolls. Best case scenario, we quickly return to baseline poverty, after causing massive inflation and giving away hundreds of billions to corporate America.
And this is the problem I have with a lot of Yang’s proposals. I like the guy, and I think he’s coming from a good place in terms of intentions. But Andrew and people like him seem to carry a certain degree of idealism about the nature of corporate America. Which makes sense, coming from the business background Yang does; I can kind of understand why he’d romanticize certain aspects of capitalism the way he does. But, that affinity, that idealism leads to very bad things when it ultimately acts to serve the interests of the regressive rich.
Far from being a boon to the poor, Yang’s proposals almost seem tailor made to tax the poor and benefit the rich. The regressive effects of his economic policies are so pronounced, so glaringly obvious that they might as well have come right from the workbench of Rand Paul. If you didn’t know better, you’d almost think Yang was yet another libertarian corporate shill masquerading as a Progressive. That’s how regressive his policies end up. The Koch Brothers couldn’t have written it better.
Do I believe that about him? Of course not. I’ve met Andrew Yang, and he seems like a stand-up guy. I believe what he says in terms of intentions. Absolutely. But, this really is a classic case of paving the road to Hell. Hate to say, but real solutions just aren’t as simple as handing out money. Water will always seek level in Corporate America. Real change means completely re-plumbing the system, making structural changes to it rather than just flushing more cash through.
So, sorry, Andrew. I like you, man, but all UBI can do is flush more labor capital into the sewers of Corporate America. Taking the poorest among us with it. That’s just how the system’s plumbed right now. All the more reason to focus on making structural change, rather than just flushing cash down the toilet.
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