Tuesday, July 22, 2008

How should history judge leaders and public figures?

How should history judge leaders and public figures? More specifically, how should motives versus results be weighed in this decision? If we judge a person by what they achieve for mankind, among the greatest benefactors are Bill Gates, John D. Rockefeller, Michael Milken, and JP Morgan. Their organizational talents, entrepreneurial spirit, and new ideas made people better off. Some of these people that did so much are thought of so little. Sometimes they are dismissed as criminals, thieves, and just all around greedy bastards even though they made life better for millions. Politicians will talk about how they have created jobs, but these are the kind of people that create jobs and entire industries. If we looked at motives instead, we might see the most productive among us as greedy or having otherwise impure motives. Many politicians sell themselves as having good motives such as helping the poor. Some policies are apparently well meaning, but further examination shows a different story. The late, great Milton Friedman said,

"Let me give you a very simple example. Take the minimum wage law. Its well-meaning sponsors -- there are always in these cases two groups of sponsors. There are the well-meaning sponsors and there are the special interests who are using the well-meaning sponsors as front men. You almost always when you have bad programs have an unholy coalition of the do-gooders on the one hand and the special interests on the other. The minimum wage law is as clear a case as you could want. The special interests are, of course, the trade unions, the monopolistic craft trade unions in particular. The do-gooders believe that by passing a law saying that nobody shall get less than $2 an hour or $2.50 an hour, or whatever the minimum wage is, you are helping poor people who need the money. You are doing nothing of the kind. What you are doing is to assure that people whose skills are not sufficient to justify that kind of a wage will be unemployed. It is no accident that the teenage unemployment rate – the unemployment rate among teenagers in this country -- is over twice as high as the overall unemployment rate. It's no accident that that was not always the case until the 1950's when the minimum wage rate was raised very drastically, very quickly. Teenage unemployment was higher than ordinary unemployment because, of course, teenagers are the ones who are just coming into the labor market -- they're searching and finding jobs, and it's understandable that on the average they would be unemployed more. But it was nothing like the extraordinary level it has now reached -- it's close to 20%."

We cannot read the motives of politicians and they will always try to sell their motives as pure. So, we should lean towards judging by the results achieved in the actual application of policies and in an overall economic system. Looking at India, we see politicians that said they wanted self-sufficiency or to help the poor. These policies failed and created insurmountable bureaucracy was created that slowed economic growth and kept almost everyone poor. They saw planning as the way to do this, but they failed miserably and they are to blame. Even if we assume their motives were on the whole good, which I doubt, their actions resulted in the unnecessary poverty for millions of people. Planning crowded out the real benefactors of mankind. India did not need another 5-year plan or subsidies for low productivity domestic industries. They needed a Bill Gates, a Rockefeller, a Larry Ellison, but these types of people were crowded out and the entrepreneurial, profit-seeking spirit was strangled and replaced with rent seeking, over planning, and a system that kept India in the past for so long.

1 comment:

Unknown said...

Couldn't you also argue that the costs of raising the minimum wage potentially decrease the total number of employed people? If the minimum wage is raised by $0.25, then McDonalds has to pay $0.25 more per worker, so in turn they cut hours and shifts, hire less workers, or get rid of some.

I've also heard someone argue that the biggest group that benefits from minimum wage increases are teenagers because, as you mentioned, they are usually employed in low-wage jobs. They said the primary benefiters were not mothers and fathers trying to raise a family on minimum wage, although there are some of those too.