Two news items that will buzz throughout the week actually have greater long term implications and are intricately linked to one another.

> News Item: Jeff Bezos sees drones delivering parcels within five to ten years.
> News Item: Fast food workers prepare one-day strike, demanding $15 minimum wage.

Mankind has always dreamed of a utopian world of universal peace, prosperity, and leisure.

In the 1800s, the idea took off initially as a scheme pushed forward by Robert Owens who had an idea of a social system (socialism) in which everything was shared versus the individual system (capitalism). In Owens' system, the outcome of competition dictated class structure and lifestyles. This scheme seemed attractive as a thesis. It was put into practice through the creation of a factory village called New Lanark, which Owen presided over from 1800 to 1825.
 

It was considered a success as wages were increased, infant education was promoted and a wellness fund for the sick, injured, and aged was established. The village of 2,500 was organized into neighborhood divisions that elected representatives to handle disputes. Heralded as a model of how to treat workers with greater respect yet continue to prosper, New Lanark was owned by Owen. Owen oversaw the village with the kind of paternalistic silk fist Michael Bloomberg attempted to exercise over New York as mayor.

Owens moved on to America to establish several other villages of New Harmony, but none met with even the partial success of New Lanark, which serves as the World Heritage cultural center today. Still, the idea of wages that supersede those of free market principles has always been part of the promise of a utopian society as envisioned by enlightened thinkers that embrace and promote socialism.
 

These thinkers wanted to go a step farther than the Owen model, which still prescribed hard work. In fact, New Lanark policed against pilfering and slackness while discouraging illegitimacy. In other words, there was individual accountability. Over the course of the century and with the dawn of the Industrial Revolution, the stakes were high. As prosperity enhanced the lives of individuals even on the lower rungs of society, those at odds with the individual system had to come up with new promises to sell their utopia.

Paradise on Earth

Under socialism the people could have their homes in great grand and magnificent palace is built and placed on the fairest spots of our country and placed away by themselves clear from all works factories and all other establishments of this class where they would not be annoyed by the smoke and dirt which they cause in from thenceforward they would be surrounded by pure air in nature in all her glory and beauty.

Man! Oh man! In thy brutal selfish greed what art thou not doing by thy love of gain in thy unquenchable thirst for grab we are forced to live as brutes when we might live as gods. Our earth is made a hell when it might be a paradise and a heaven upon earth for every living being.

Think, you my reader, think, learn to read and understand, in the following pages I shall unfold a new system, in new life, and the ways and methods by which we may have a New and Happy land.

"A Prospectus of Socialism, or A Glimpse of the Coming Millennium"
William Thomson

Robert Owen called New Lanark the "happy village," and 70 years later William Thomson sweetened the pot with his promise of a new and happy land.
 

In real life, these systems have never worked, as the only thing evenly distributed has been misery. Nonetheless, as you read the words of past socialist dreamers used to promote their utopia, you can hear words and phrases currently spoken by President Obama and his political ideologues. They continue to romanticize the theory rather than to see the actual outcomes from New Lanark to North Korea. The so-called social system never worked because it allows for sloth, promotes indifference, and punishes excellence, which is soon squashed altogether.

Still, the movement toward $15.00 minimum wage is a step toward a utopia where all wages will be the same or not exist at all. For now, it would be a giant leap that tests just how frustrated Americans are with capitalism. Like arguments for all facets of the White House agenda, parts of the debate are cloaked in the veneer of capitalism but it's simply not the case. Doubling the minimum wage takes power from the free market and goes beyond redistribution of wealth to redistribution of accountability.

More from William Thomson:

Our system of values are ruled by circumstances and conditions which fix the value and rule the market. These circumstances and conditions are what political economists call supply and demand. They alone are of value and not the commodity or service to be sold. They alone rule prices or values and apart from them no person can tell what his possessions or service may be worth. Under such a system of values justice is impossible, because values of every description are changing daily and everything in connection with them is fleeting and uncertain. By such principles a man may be a prince today and tomorrow he may be a beggar.

It is clear the argument today is that the free market has no place in judging a person's worth in the workplace. That determination shouldn't be held hostage to corporation bottom lines or even to the will of shareholders and managers. The minimum wage hike demand is more than a desperate attempt at a money grab. It's a race against the clock of natural attrition. This is the kind of race that goes hand and hand with creative destruction. This is the other part of utopia born side by side with consumerism and American Exceptionalism.

The Industrial Revolution Part III
 

When Amazon founder, Jeff Bezos, told 60 Minutes during an interview he expects drones to one day deliver parcels, jaws dropped. Yet, it would be the logical conclusion to the evolutionary pace of drones and the demands of a spoiled consumer.

In fact, this would be the logical step in a long line of steps that involved man and air-travel.

Icarus reminded man of the hazards.

Da Vinci reminded man of his own brilliance.

The Montgolfier brothers showed man piercing the sky was possible.

Ferdinand Zecca put it on film to inspire man to cut through the skies with ease.


One day drones will deliver parcels that will be retrieved by the house robot that was built on an in-home 3D printer from a kit zapped directly into embedded computer chips in our brains. How will worth be valued then? How many minimum wage jobs will still exist? Those robots will need to be maintained and fixed and improvements will never stop. The same will happen with drones and 3D printers. There will be jobs, well-paying jobs for those with skills.

For me, the current push to reward and encourage mediocrity is a travesty. It's not how you show real love and concern. It may clear the conscience of the rich or shift political power to a certain group of people or party but rewarding the actions that led to a person only able to work minimum wage is lying to those very people. It is excusing them for not changing aspects of life that landed them a disadvantaged position or exacerbated them being born there.

The so-called economic justice being preached says taking from others is fine if you have less. This system of redistribution destroys the only real vehicle to long term prosperity and comfort. William Thomson was right about one thing...you can be a prince today and beggar tomorrow in this system we call capitalism. By the same token, you can be a beggar today and a prince tomorrow with the right work ethic and determination. You can certainly become a building block for your children to reach even higher. Supply and demand works and as innovation evolves to its own state of utopia the debate over minimum wage will be moot.

The rabble rousers scare the masses the way tales of Icarus scared man from the notion of flying. It is true there is an innate worth to all mankind that is precious and unique. When some are told to fight for higher minimum wages rather than fostering those innate gifts with the imagination of Da Vinci and daring of Montgolfier brothers they are being lead down the wrong path. The end of that road isn't a new and happy place but one of continued misery and dependence.

I'm sharing an honest glimpse of the coming millennium.

Today's Session

The market looks tired and uninspired, which isn't the same as panicky but still a state that leaves it vulnerable. Each day is greeted by the brilliant observation that a crash could happen, not today, but sometime in the future. The geniuses behind such an astute observation were not around pounding the table to buy at the bottom. Be that as it may, the market needs to pull back from time to time. I'm not worried about the Fed, and in fact, I will be thrilled when tapering begins even if it initially means Wall Street throws a tantrum.

On that note economic data is better but nowhere near great. Yesterday, the Institute for Supply Management (ISM) released its Purchasing Managers' index (PMI), which clocked in at 57.3 percent for November, increasing from the 56.4 percent reported for October and landing above the 55.5 percent consensus estimate, reaching the highest level since April 2011 when it reached 59.4 percent. The result was surprising given that the last data from the Chicago PMI index released last Wednesday declined to 63.0 in November from 65.9 in October, although it did land better than the forecasted 60.6 percent. This discrepancy could be hinting the recent uptrend in overall ISM could pull back.

 

 

 

 

 

 

 

 

 

There could be an increase in volatility, which I think is fine as I'm looking to shake out weaker hands. The VIX reading is moving higher although it's a million miles away from levels that indicate a crash

 

 

Comments

They just don't get it. The higher the wage translates to a higher consumer price which does absolutely nothing but raise prices and ultimately puts small business and it's creativity out of business Steve Freidlin on 12/3/2013 10:47:35 AM

Charles: great commentary, as always. On your point about "how frustrated Americans are with capitalism", I don't think we are. Rather, as a nation, we are experiencing the fruits of "creeping socialisam" ( (are you old enough to remember that phrase?), that is, since the Great Depression, and with increasing frenzy, we have been given things by the government (with no credit to those who produce and therefore fund the gov't) and, as all addicts, demanding more. To the recipients, there is no such thing as enough. SS, Medicare, food stamps, welfare, school lunches, Obama phones, etc. ad infinitum. Americans are not frustrated with capitalism. Far too few experience it. They're frustrated with not enough socialism. But of course, they should be very careful what they wish for. They may just get it. Tim Irving on 12/3/2013 10:59:04 AM

The survey question is whether increasing the minimum wage is a bad idea or a good idea. The one answer goes beyond that to make a separate proposition why it is a bad idea. "It is a bad idea that endangers capitalism, allows for sloth and promotes indifference." While I agree the minimum wage increase is a bad idea, I do not agree with giving a minimum wage alone all the attributes it gains when it is part of a socialist economic system. Raising the minimum wage within a capitalist system is nothing more than another factor within the capitalist system where every factor is held captive to the free market. We have a minimum wage law in this country, but not a minimum wage. The minimum wage law provides within its structure for massive numbers of the lowest paid jobs to be excluded. I have a son who delivers pizza - his employer is exempt from the minimum wage. For those who are not exempt under the law, the law of supply and demand provides for many paths around the law. Have you looked at the multitude of "home business" opprtunities flying across the internet. The majority are just ways to get menial assembly labor for less than minimum wage. Obamadontcare actually promotes more people into those less than minimum wage "sweat shop" jobs because it gives another incentive to use them - they are also excluded from employer provision of health coverage. And those jobs do worse than just pay less than a livable wage - they promote child labor as families must leverage that resource It is a bad idea that endangers capitalism, allows for sloth and promotes indifference. to try to make the "home business" successful. Raising the minimum wage is a bad idea which is obvious to anyone who has the grey cells to think it through. When a bureaucrat succeeds in forcing through such a law, he initially raises the standard of living for marginally productive employees who are at the bottom. But, the law also has three other immediate effects. 1. It makes the USA less competitive versus foreign competitors. This affects the balance of trade for goods (not services) and results in the longer term with more poverty throughout the country. 2. It changes the equation for financial success of all those employers who were paying low wages. Some of the businesses are not affected other than to move money from a greedy boss to his underpaid employees. But many more businesses are made less competitive versus others who use more competitive alternatives to human labor. Ergo, the use of drones becomes more competitive. Drones replace people, and with an increased minimum wage, the use of drones is made more competitive. So, this affects service jobs. Service jobs as well as manufacturing can be lost to overseas competition when service jobs are replaced by drones built in foreign factories. 3. The law puts more money into the hands of those with the least werewithal for handling money. They immediately go out and spend the extra money foolishly, saving nothing. (They already had bread on the table, so this does not impact starvation or malnutrition). They spend it on their lusts and the extra money has little impact on their long term standard of living. EXCEPT, the extra money flowing through the economy results in that great equalizer called inflation. When we double the minimum wage, we end up halving the value of the money through inflation. The end result of the increased minimum wage is a net INCREASE in the number and percentage of people who are BELOW the poverty level. Those who had higher wages through hard work find themselves at minimum wage where the cost of living has gone up much faster than their wages. Now they must look for more cokpetitive work to make ends meet. Poverty increases. The only entity to prosper out of the raise is the government, who gets a bigger cut of everyone's check because the tiered tax rates put everyone who still has a job at a highrr tax level. Of course, the deficit also increases because there are gads more people without jobs. And there is one more result: more of the economy goes into the underground black market. Here in the southwest, we are sensitive about illegal immigration. It is not because we don't like people of a different ethnicity. It is because we don't like competition for our jobs which does not play by the same rules. Much of the illegal immigrant economic system is underground. They ignore ALL the labor and business laws. They don't pay income taxes or collect sales taxes. They pay workers less than minimum wage, provide no health coverage, and pay no social security. They compete without supporting any of the costs of the infrastructure that are collected through the various taxes and fees. They operate without any regulations designed to protect the health and safety of the society. But, their employees do reap the benefits of that infrastructure, getting free medical services from the county hospitals and food stamps and education in public schools and sometimes even unemployment welfare payments. On the bottom line, increasing the minimum wage is not a bad idea because it fights against free enterprise. It is a bad idea because it works within the free market system to actually produce more of what it is sold to eliminate. A minimum wage law can only produce the desired results within a fascist socialist system, and a fascist socialist system always results in greater poverty (through allowing sloth and promoting indifference) right up until its inevitable collapse. Bob G on 12/3/2013 12:57:36 PM

Great column. I wish more complacent Americans would see the good in a capitalist society. BTW, what companies make those drones and 3D printers? My son learned to use one in his high school CAD class. He should probably learn more about them, to fix them, etc. and get a good job when he graduates. Nancy Alexander on 12/3/2013 1:04:54 PM

"My great concern is not whether you have failed, but whether you are content with your failure." ~ Abraham Lincoln Those who promote a minimum wage law as a solution to anything are bathing in a muddy pool of failure, and are so content with that failure that they are fighting hard for more. If they had the grey cells to analyze the facts, or the moral character to care, they would abandon such talk. Bob G on 12/3/2013 1:39:14 PM

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