It is not the job of a company to provide benefits for society or health care or sick days or anything else. It’s the job of a company to make a profit for its owners and in the process of doing so, it will create things like jobs, taxes, health care for workers, value for its customers, and other such things that are beneficial to society.
And I agree with him 100%. I’ll go even further. Wal-Mart is not “bad” because it pays low wages or skimps on providing health care. If they did that, Target could charge lower prices and customer might go to Target instead. They’re just doing their job, as WE, the people, through our government, define it through our laws.
So whose job IS it to provide for higher wages and health care? It is OUR job – the people – through OUR laws and regulations. WE are the ones who have dropped the ball on higher wages and health care. WE tell companies what to do – or the system doesn’t work. If WE, through our government, require ALL companies to pay higher wages and provide health care that levels the playing field for Wal-Mart’s competition with Target.
Here is where I differ with Hawkins. Hawkins writes,
…the government shouldn’t get involved with things like what sort of health care a company is providing, sick days, or the minimum wage…
This is the standard Libertarian view – keep the people (government) out of the decisions. But I say that is exactly where the people, through our government SHOULD get involved! We need to keep that playing field level. Companies MUST work to provide the highest profits. Therefore WE must set a playing field that provides the greatest benefit to US from this system. WE must level that playing field on which the companies compete. We MUST tell them to pay higher wages or the system doesn’t benefit us. WE have fallen down on the job, not the companies, by not doing OUR part, through our government, which is to set the minimum wages and benefits at a level that is high enough. And that is why wealth is concentrating at the top and the rest of us are working longer hours for fewer benefits.
Hawkins writes that people can always quit and get a better job elsewhere. But there is a problem with that approach, and we have seen the problem play itself out over and over throughout history. There are more people in the world than jobs, so without our intervention wages would necessarily sink to the lowest level to sustain the necessary employees – and the rest starve. Of course, in a consumer economy the companies would be drying up long before that because the consumers won’t have money to spend. We have learned from history that if we, acting through our government, “stay out of it,” it is a formula for worldwide poverty – a race to the bottom. Historically it is the periods of greatest involvement that have been the periods of greatest economic growth. This is because in a consumer economy policies that provide greater disposable income to the consumers grow the economy. Duh!
The system that Hawkins admires is ENTIRELY a creation of government – of us. We defined what a corporation IS. We give the owners limited liability so they can take risks without losing everything. (Imagine if buying a share of stock meant that you could become a defendant in a lawsuit.) We set up the infrastructure of the internet, and the roads, etc. upon which the companies conduct commerce… And now we need to give ourselves a raise and health care, and maybe longer vacations and shorter workweeks.
I’ve just finished a very interesting book, Capitalism 3.0, A Guide To Reclaiming The Commons, by Peter Barnes. The book talks about ways we can restructure our laws and rules of ownership to cover who should pay for polluting and other harmful things — costs that our current system ignores and even encourages. The change is based on our realizing that we all own certain things in common.
Here’s a quick way to understand the ideas in this book:
Suppose you live next door to a sawmill operation. The owner makes lots of money, but aa waste product, sawdust, is building up on his lot. This big pile of sawdust is getting bigger and bigger, and it’s getting to the point that he’s going to have to shut down his profitable operation if he can’t find some place to dump some sawdust. So one day he comes to you and asks if he can dump some sawdust in your back yard. You answer, “If you give me $25,000 a year, each year you can dump 5 truckloads, but no more, in my yard.” You are $25,000 richer, you limited the sawdust to a level you could tolerate, and the sawmill can continue to operate and make money.
This happened because you “own” that property and have the “right” to refuse to let others make money by dumping their waste in it – or to negotiate for some of the resulting profits. This sounds so basic – but there is a reason I put quotes around the words “own” and “right.” The concepts of ownership and rights only exist because they are granted to us by law, and laws are nothing more than creations of government. It didn’t used to be that way, that regular people could “own” things and have “property rights,” but people thought it would be a good idea, and made it happen. And in America it is set up that we can do things like that because, guess what, WE’re the government. (It says that in our Constitution.) More on this later.
Bay Area housing prices are finally falling, declining last month for the first time in more than four years.
This means that every buyer desparately trying to “get into something” before prices go up even further is going to take a new look around. It means that every seller holding out for that offer “over asking” is going to realize they need to get out.
Even more, it means that all the speculators will understand the party is over, and it’s time to bail. And, finally, the landlords with “negative cash flow” but thinking they’re making up for it with appreciation have to face it that they’re really just losing money. Not to mention all the people who are “over their heads” with mortgage payments they can’t keep up with.
We are at the endgame for housing. Until recently, our national motto has been “in real estate we trust.” Just last week, the Census Bureau reported that median home prices after inflation rose 32 percent from 2000 to 2005. In some places, the gains were huge: 127 percent in San Diego, 110 percent in Los Angeles and 79 percent in New York. But real estate—which has acted as a national piggy bank, with homeowners borrowing and spending against rising house prices—no longer looks so trustworthy. On this, more than falling oil prices or a record Dow, hangs the economy’s immediate fate.
[. . .] Construction workers, real estate agents and mortgage bankers will lose jobs. Consumer spending (computers, cars, vacations) will also suffer, as the borrowing and buying against rising real-estate values subsides. Indeed, the end of the cheap credit that fed the boom means that many borrowers will face higher monthly payments.
Housing prices, slumping after a five-year boom, are projected to decline in more than 100 of the nation’s metropolitan areas…
… The … firm projects that the median sales price for an existing home will decline in 2007 by 3.6%, which would be the first nationwide decline for an entire year in home prices since the Great Depression of the 1930s. [emphasis added]
This forecast is widely reported, which means that it will be seen by buyers and sellers, and will cause them to adjust their expectations.
Along those lines, a warning to UK investors: US housing market ‘in danger zone’,
British investors who own property in the United States should take a long-term view on the market and focus on maximising rental income as the US teeters on the brink of a housing market price reversal, says Assetz.
… Stuart Law, managing director of Assetz, said: “The U.S. is definitely in the danger zone but we are not currently certain how severe the downturn will be. Holiday home buyers who are getting regular use out of their property are unlikely to be affected in the long term, but investors who were hoping to sell their property on quickly are no longer set to gain and are likely to face losses if they sell now.
Think UK investors will be showing up to pick up some of that excess inventory and bail us out? Me, neither.
General Motors Corp., Toyota Motor Corp. and Ford Motor Co., the world’s three largest automakers, are discovering that a housing slump can do what record fuel prices couldn’t: cripple demand for pickup trucks.
From 1995-2005, sales of full-size pickups surged 46 percent as home builders bought them for work-related projects and consumers followed suit.
But sales are down 14 percent this year, hurt by a housing slowdown that caused existing-home prices to drop for the first time in 11 years last month.
The long-predicted correction in U.S. housing prices has apparently begun.
The median selling price fell for the first time in 11 years last month, on an annual basis, pushed lower by the largest glut of unsold homes since 1993, and some economists fear the worst may lie ahead.
The price fall comes amid concerns that the U.S. housing slump could quickly spread to other areas of the economy as consumers react to the falling value of their nest eggs. In recent years, homeowners have used the equity built up in their homes to finance their lifestyles. A U.S. downturn now could also spill over into dependent economies, including Canada’s.
Here it comes. After this news buyers will start demanding price reductions. This can only accellerate — this bubble could “unwind” very rapidly. Where IS the bottom? Just remember what happened when the stock market bubble popped. Existing-home prices fall for 1st time in 11 years,
Median sales prices of existing homes fell from year-ago levels in August for the first time in 11 years and just the sixth time in the past 38 years, the National Association of Realtors said Monday.
Sales of existing homes fell 0.5% in August to a seasonally adjusted annual rate of 6.30 million, the industry group said.
And the ripple effects are beginning to spread with mortgage companies and realtors starting to lay off employees:
Merrill Lynch economist David Rosenberg calls it “the House of Horrors.”
He’s referring to his fear that a plunging housing market could turn even uglier, taking the breath out of the economy and the stock market.
… He was fretting about foreclosures nationwide surging 53 percent year-on-year in August. He was pointing out that while many adjustable-rate mortgages have yet to move upward, already the Homeownership Preservation Foundation is receiving a record number of calls from borrowers seeking help.
Whether the housing downturn will still allow a so-called soft landing for the economy or yank the shopping instinct out of the American consumer remains to be seen.
Real estate experts expect to see slowing sales and price gains and increased inventory, but nothing resembling a bursting bubble, when the Northwest Multiple Listing Service releases its August numbers today.
Here’s the kind of headline that is starting to reach home buyers: House hunters’ tip: Prices may fall, a first in 13 years. This news that people should expect falling prices is only starting to sink in out there. Changing people’s expectations is a slow process. But when it does sink in — that is when we will start seeing real drops in prices. Right now we’re still in a housing bubble and buyers think they are seeing “bargains” while sellers are holding out with unrealistic expectations. Once it really sinks in that prices are falling – and falling fast – the buyers will start expecting ever lower prices, and the sellers will either take their homes off the market or dump them before prices fall further.
Prices will likely revert to the mean. This June chart from The Economist — “The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops” — shows where prices were in relation to the mean (100 on the chart) back in 2005, and shows what happened when Japan’s smaller bubble popped.
From the Economist story,
Japan provides a nasty warning of what can happen when boom turns to bust. Japanese property prices have dropped for 14 years in a row, by 40% from their peak in 1991. [emphasis added]
Calculated Risk: Housing: Difference a Year Makes, has a great chart of year-to-year changes in the housing market. Keep in mind that the real news of a downturn in housing is only recently hitting the press in a way that will penetrate to average people. These numbers are what is causing that news – and NOT from people reacting to that news. Things will really start happening when people start reacting, and start understanding that their house will be worth less next year, and start thinking about taking a profit – or just getting out – now.
Recent data quantify housing cooldown (year-over-year changes).
Builders’ sentiment down 52.2%
New-home sales down 21.6%
Purchase-mortgage applications down 20.9%
Building permits down 20.8%