If there were any question that mainstream economists will end up in the same circle of hell as Wall Street’s wizards, today’s “Breaking Views” column in the New York Times should dispel any lingering doubts. In the column, in which the Times repurposes the “independent financial commentary and analysis” that appears on the breakingviews.com Web site, former equity analyst Edward Haddas and former international merchant banker Martin Hutchinson opine that American workers are overpaid when compared to workers in other lands. The authors don’t specify which lands – American auto workers are actually paid less than their German counterparts, even though Germany exports its cars while we import ours. That Americans make less than their counterparts in China, Vietnam and Bangladesh is obvious. That American wages should fall to meet those nations’ level is a more problematic assessment.
What evidence do the authors provide that American workers are overpaid? The rise in unemployment! “The recession shows that many workers are paid more than they’re worth,” the authors note. This, of course, was the argument of pre-Keynesian economists who believed that the solution for the Great Depression was to cut wages and lay off workers (“Liquidate men,” in the words of Herbert Hoover’s Treasury secretary, Andrew Mellon). But the effect of Mellonomics was to reduce purchasing power to the point that fully one-fourth of American workers were jobless. Only by employing millions of Americans in programs like the WPA was the Roosevelt administration able to break the cycle of declining income, declining purchases, declining production and, again, declining income.
In the real world, median American household income actually went down during the years between the recessions of 2000 and 2008, precisely because virtually all income was going to profits and investment income rather than wages. Still, if the fearless economists of breakingviews.com are concerned about uncompetitively high wages, why don’t they volunteer to take a pay cut themselves? How much are breakingviews.com and the Times (the latter through its content-sharing agreement) paying for opinions they could get from any historically illiterate 17-year-old in the sway of Ayn Rand?
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