Joe the Plumber and Adam Smith

Books by Wilson Jeremiah Moses

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Joe the Plumber and Adam Smith

By Wilson J. Moses

18 October 2008

This election is a continuation of the culture wars, and it is likely that cultural symbols may trump economic interests. On the cultural level, this plays out the Vietnam war all over again. That is one reason that Ayers has emerged as an icon. Previously the election of 2004 was about Vietnam, with John Kerry serving as an icon. McCain, also an icon, sees the Presidency as his opportunity to vindicate not only the Iraq war, but Vietnam, as well.

On the economic level, Republicans, see the election as a way of further destroying the Keynesian economic policies that predominated from Roosevelt through Truman, Eisenhower, Kennedy, and Johnson. People like Joe the Plumber foolishly believe that if they were not taxed, they could take their money and use it to invest on their own. It is obvious to everyone but themselves that they lack the capacity to do so. Indeed, most of us lack the capacity to do so, and it is this knowledge that distinguishes a working-class liberal from a working class conservative. The Sarah Palins lack all humility, and really do believe that they are as smart as Warren Buffett. They forget that a guy like McCain begins life with tremendous advantages, and proceeds thereafter, with access to information and institutions that they are unavailable to most of the working class. Far too many workers foolishly believe that they can succeed outside institutional structures supported by government and taxation.

Adam Smith, who is so frequently mischaracterized by Marxist historians, said in 1776:

It sometimes happens, indeed, that a single independent workman has stock sufficient both to purchase the materials of his work, and to maintain himself till it be completed. He is both master and workman, and enjoys the whole produce of his own labour, or the whole value which it adds to the materials upon which it is bestowed. It includes what are usually two distinct revenues, belonging to two distinct persons, the profits of stock, and the wages of labour.

Such cases, however, are not very frequent; and in every part of Europe twenty workmen serve under a master for one that is independent, and the wages of labour are everywhere understood to be, what they usually are, when the labourer is one person, and the owner of the stock which employs him another.

What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little, as possible. The former are disposed to combine in order to raise, the latter in order to lower, the wages of labour.

Joe the Plumber does not see the need to have a plumber's license, or a union card, or to pay his taxes. He earns $40,000 annually, and yet he identifies with people earning $250,000. This ordinary wage earner does not, and cannot understand what Adam Smith is talking about. His vision is too occluded by his abstract fears, his unrealizable American Dream, and his subliminal recognition of his inferiority to hereditary aristocrats like John McCain, who are stronger and smarter than himself. He is unaware of his interests and incapable of acting in accord with them. Adam Smith is often misrepresented as standing in opposition to Karl Marx. In fact Marx stood on the sturdy shoulders of Smith.

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Joe The Plumber's Ideal Mortgage

The goal of Secretary Paulson's program, regardless of how he gives away the money, is to maintain an unnatural price level in American housing. This leads to continuation of inflation in the housing market, and leaves Americans worse off than before. Paulson's plan if carried out successfully can only mean increased inflation, and Inflation is a tax.

Joe the Plumber, who earns $40,000 a year, cannot afford to own a $350,000 house with three baths and a three car garage, nor can he afford to purchase his employer's business. But the government persists in telling him that he can do so. In order for Joe to "own," such a house, it is necessary to manufacture a dream world. This involves a no-money-down, interest only, adjustable-rate mortgage at a teaser rate of 4%, which is ridiculous. Such mortgage rates inflate the price of real estate. Nobody should be able to get a mortgage unless they have 20% down payment. Interest on a 30 year mortgage should be 8%. Joe the plumber can perhaps afford such a mortgage on a home priced at $150,000 if his wife works and earns enough to bring their household income to $85,000. Anything else is folly.

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Responses

Guided by An Invisible Hand—Make no mistake: we are witnessing the biggest crisis since the Great Depression. . . . There are several reasons for my pessimism. The extreme credit crunch is a result of the banks having lost a lot of capital. And there is still uncertainty about the value of the toxic mortgages and other complex products on their balance sheets. The US economy has been fuelled by a consumption binge. With average savings at zero, many people borrowed to live beyond their means. When you cut off that credit you reduce consumption. This, in turn, will dampen the US economy, which helps keep the global economy growing. The American consumer has not only sustained the US economy, he has sustained the global economy. The richest country in the world has been living beyond its means and telling the rest of the world it should be thankful because America fuelled global economic growth. . . .

This crisis is a turning point, not only in the economy, but in our thinking about economics. Adam Smith, the father of modern economists, argued that the pursuit of self-interest (profit-making by competitive firms) would lead, as if by an invisible hand, to general well-being. But for over a quarter of a century, we have known that Smith's conclusions do not hold when there is imperfect information— and all markets, especially financial markets, are characterised by information imperfections. The reason the invisible hand often seems invisible is that it is not there. The pursuit of self-interest by Enron and WorldCom did not lead to societal well-being; and the pursuit of self-interest by those in the financial industry has brought our economy to the brink of the abyss. New Statesman

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Will an Obama Change Speed Up a New and Better Economic Model?

Joe the Plumber is indeed an American type—white working class male Republicans. They are morphed descendants of those Jim Crow racists of 1968. It wouldn't matter what Obama was able to do for them, even if Obama offered them zero taxes on his wages these Republican loyalists (guys and dolls) would still be against Obama and the likes of Obama—that “foreign” element in “White American” politics.

He and his compatriots are ideologues and hypocrites—e.g., against Social Security; though they will happily draw their SS when 65 and complain that it is not sufficient. Race plays no small part in their political psychology. Because they are not able to afford that $350,000 house or afford that plumbing business, Joe and his type fault minorities, immigrants, and foreigners in general for not being fully part of the white elite, just as the patty rollers and the mountain folk blamed black slaves rather than slave owners for their class conditions.

They are a sad and unhappy lot—anti-liberal, anti-democratic, anti-black, anti-rational, and anti-their-own-good. At bottom this type wants to retain and enhance white skin privileges. They are the base of these white-appealing-American ideologues, including MSNBC commentator Pat Buchanan. They are seen as more American than say a Jeremiah Wright.

The Republican Party has become today's Dixiecrats (North, South, Midwest, and Southwest) and they are using this election as a testing ground to put forth more vigorous ideological statements and actions. A reorganization of the RP after November is a national necessity. Will they decide however to fixate on a far right religious (cultural) agenda? In that they, including the more moderate Republicans, have made Sarah Palin their heroine, the prospects seems unlikely. The RP has become unmanageable. They lack the necessary leadership.

Much of the necessary changes in the RP, may they rest in peace, depends on the more intellectual and as David Brooks says the “coastal” Republicans. That too will depend on how crushing the DP win will be in November. The Republicans fear the outcome of the 2008 election will be a landslide. They fear it like the plague and so rather than creating a better product they are now bringing out every kind of racial fear tactic used since 1980.

The other problem connected with their right wing cultural offensive is that the Wall Street culture has not changed. McCain and the Wall Street Republicans are indeed “elitists.” Their trickle down economy theory—decreasing corporate taxes and taxes on the very wealthy—is an elitist one, that is, top down from the few to the pyramidal base.

The great problem with this pyramid scheme, as all pyramid schemes, is that the trickling does not get down far enough on the pyramid, say, to a Joe the Plumber, which has partially been caused by the global trade agreements and overproduction. That has decreased income nationally and shifted wealth more and more upward.

Doubtless the Republicans have had a persuasive opaque populous racist response to convince their very white religious base that all is well with fundamentalist capitalism . . . .

Too many living beyond their means resist the spread of wealth farther downward to the base. They foolish think they each have a chance of becoming a millionaire. We can see that the present economic crisis has cracked that opaqueness and allowed some light and fresh air to come in.

Class suppression and penal methods to resolve the criminality of poverty are not working for the overall economy. Will the present window of opportunity and vision be cemented and the American people return to the old cave they have been in for more than two decades?

The verdict is still out. We have no idea what will be the full material impact of this economic crisis and we have no idea how long it will last. Moreover, we are still in the dark about what can be achieved by an Obama presidency. We all remain on the edges of our seats and we want the change promised to be speeded up—Rudy

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What went wrong in the capitalist casino?—Trade union rights are now more restricted than they were in 1906, wages have been held down and people have been advised to borrow and spend as an alternative—which explains why the stock market has fallen and locked more and more people into debt, which is a subtle form of slavery itself.

This is why so many people are frightened and frightened people can sometimes be persuaded to seek an answer by identifying an enemy who can be made a scapegoat for failure - as Hitler did when he blamed the Jews, the Communists and the trade unions for the mass unemployment in Germany and set up a fascist dictatorship which led to the Holocaust and war.

Hitler dealt with the unemployed by giving them jobs in the arms factories and the armed forces which led to the Second World War and the massive human cost it caused. ZMAG

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The Real Plumbers of Ohio—But what’s really happening to the plumbers of Ohio, and to working Americans in general?

First of all, they aren’t making a lot of money. You may recall that in one of the early Democratic debates Charles Gibson of ABC suggested that $200,000 a year was a middle-class income. Tell that to Ohio plumbers: according to the May 2007 occupational earnings report from the Bureau of Labor Statistics, the average annual income of “plumbers, pipefitters and steamfitters” in Ohio was $47,930.

Second, their real incomes have stagnated or fallen, even in supposedly good years. The Bush administration assured us that the economy was booming in 2007 — but the average Ohio plumber’s income in that 2007 report was only 15.5 percent higher than in the 2000 report, not enough to keep up with the 17.7 percent rise in consumer prices in the Midwest. As Ohio plumbers went, so went the nation: median household income, adjusted for inflation, was lower in 2007 than it had been in 2000.

Third, Ohio plumbers have been having growing trouble getting health insurance, especially if, like many craftsmen, they work for small firms. According to the Kaiser Family Foundation, in 2007 only 45 percent of companies with fewer than 10 employees offered health benefits, down from 57 percent in 2000. . . . I don’t want to suggest that everyone would be better off under the Obama tax plan. Joe the plumber would almost certainly be better off, but Richie the hedge fund manager would take a serious hit.

But that’s the point. Whatever today’s G.O.P. is, it isn’t the party of working Americans. NYTimes

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posted 18 October 2008