Ep. 130 Contra Robert Reich

19 March 2018     |     Tom Woods     |     18

Today we branch out a bit and take on one of Robert Reich’s popular (but obviously simplistic) videos about what’s gone wrong with the economy. Why, we once had strong labor unions, education, and health care, and then big money corrupted politics and we don’t have any of these things, and that’s where our problems come from. We’re further told that the financial crisis was caused by banks “gambling,” and by fraud. (He never asks why the banks should suddenly have started gambling at a particular moment, as opposed to 50 years ago; there certainly was no “deregulation” that artificially encouraged “gambling,” contrary to popular belief.)

Video Discussed

Contra Columns (and Video)

Government Data on Education Spending over Time
“‘Outsourcing’ Makes Us Richer,” by Bob Murphy
No Need for a Carbon Tax in Any Tax Reform Plan,” by Bob Murphy
The Truth About Robert Reich

Tom Woods Show Episode Mentioned

Ep. 1094 The Case Against Education (Bryan Caplan)

The Contra Cruise!

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  • Matthew Day

    This episode satisfies my need to destroy Reich.

    • Bob_Robert

      Indeed. Reich showed up on my FB feed shared by one of the few Progressive friends who haven’t been completely alienated by my posts.

      …if they see my posts at all, of course.

  • CH

    I actually did say “The Big Short” while driving. Nice job, Tom!

  • http://2vnews.com 2VNews

    Collusion between the federal government and banks with the Federal Reserve, FDIC, FHA, HUD, Freddie Mac, Fannie Mae, Community Reinvestment Act and more is what led to the financial crisis.

    When government gets in bed with big business we get: ratings agencies rubber stamping investments, regulators looking the other way, banks giving liar loans, the government bailing out banks and taxpayers paying for everything.

    Abolish the Fed, FDIC, FHA, HUD, Freddie Mac and Fannie Mae. Repeal the Community Reinvestment Act.

  • http://2vnews.com 2VNews

    Blame big government (government education system, excessive regulation, excessive taxation, excessive spending, minimum wage laws), drug war and Federal Reserve for hoarding off-shore, outsourcing, corporate inversions and the problems of American workers; not innovation, not technology, not immigration, not globalization, not foreign currency manipulation, not foreign subsidies, not journalists, not trade imbalances, not the media, not the rich, not statues and monuments, not capitalism.

  • Eric

    RE Unions: I’d be totally in favor of unions if they actually performed their duty, which should be to get me the best deal for my labor. I’m sure Tom has an agent who gets him speaking gigs. His agent gets a percentage of his speaking fee, so it is in the agent’s best interest to get Tom the best deal.

    Now look at collective bargaining. The union claims they’re trying to get the best deal for employees. But that doesn’t necessarily mean individual employees. Going back to Tom’s agent for a minute, let’s say the agent handles several speakers. Tom might get $3000 for a speech, so at 10% commission the agent get $300. Not bad. But now let’s say the agent bundles a bunch of clients together in a package deal, let’s say 5 speakers for $10,000. Now the agent gets $1,000. Maybe Tom, being a headliner, still gets his $3000 (minus the $1000, so actually $9K), so that means the other 4 speakers will need to divide up the remaining $6000. Or maybe Tom will take a smaller fee because he’s just such a swell guy and wants to give his coworkers a break (yea, right). The employer probably won’t really care how that $10,000 is divided up either. So someone is probably going to get screwed. And if Tom has something that makes him more valuable he’ll demand more of that pie -especially if he’s in good with the agent.

    The other big problem is that it doesn’t take long for the union to figure out that it is far more lucrative to add employees than it is to get more money for any individual. If they negotiate a 5% increase over the old contract they get an incremental increase just like the employee, which might be 5% of a dollar an hour. But if they can add another employee they get 5% of another $20,000/yr salary. So it is in their best interest to get as many people as possible in the union, even if it means individual employees make less money.

    I used to be a supervisor in a union shop that went through decertification. The one thing that really rang home the point was the slide that showed the difference in wages between the union shops and the non-union shops, for the reasons I point out above. Turns out you’re probably pretty good at negotiating your pay even if you don’t know it. But I also know that having a real talent agent, like actors and CEOs have access to, would help fix some of the income disparity in this country.

    • Dustin R

      I think unions are OK as long as they’re private and you have a chance to opt-out. Public unions are unethical IMO.

    • Bob_Robert

      Something like the International Brotherhood of Electrical Workers is how I think of free-market unions.

      While there may be sketchy crap at some level, their real work is creating a guild where apprenticeship means something, where an electrician who earns “Journeyman” status can be relied upon to know what they’re doing, and a member in good standing has services and resources when they need them.

  • Dustin R

    Reich looks like he’s about ready to do a Depends commercial

  • madscientist

    Could you make an episode on the ideas of “sovereign money”? In switzerland they will even have a referendum on whether to reform their monetary system according to those ideas in June. They call it “Vollgeld” – literally “full money”.
    https://www.vollgeld-initiative.ch/english/

    It seems that they want to outlaw credit creation by commercial banks, but they are definitely not austrians, because they still believe in a central bank.

    I hope you read this!
    Thank you, your show is awesome!

    • martinbrock

      “Sovereign money” sounds like Lincoln’s greenbacks, not something I expect a libertarian to favor.

      As libertarians, we want private banks creating credit, and we want the banks’ credit to circulate as money insofar as free people choose to use it this way.

      Strictly speaking, a bank doesn’t create credit. The seller of a good creates credit and may outsource accounting for the credit to a bank. This outsourcing benefits the creditor, because he can pool default risk with the bank’s other customers and because the bank’s IOUs, pooling risk this way, circulate more readily as money than an individual buyer’s IOU.

      When the seller of a good on credit outsources the accounting to a bank and accepts the bank’s IOUs rather than IOUs directly from a buyer, the seller becomes a depositor in the bank. Banks don’t lend deposits. Loans create deposits. A free banking system would work this way, and the banking system in the United State (though not ideally free), before the Fed, did work this way.

      Would you rather have an opportunity to buy a house only if you could save the entire purchase price of the house before buying? A system limiting credit this way is not remotely free. It’s a throwback to feudalism.

  • martinbrock

    Your summary of “labor union” reflects an ideological bias that I don’t expect in a similar summary of “corporation” more generally. “Labor unions drive out scabs” is like “corporations drive out small business”. Maybe there’s some truth to it, but libertarians typically attribute this sort of union power (and other corporate power) to the state. Right libertarians (who revere “capitalists” and “capitalism”) more often reserve this attribution for labor unions and give other corporations a pass, but there’s nothing special about labor unions seeking state privilege.

    On the contrary, capitalists (as opposed to labor union leaders, who are also capitalists) led the way in rent seeking, according to Adam Smith as well as Karl Marx. Labor unions were johnny-come-latelies in the rent seeking business, and as Reich notes in this video, in the U.S. at least, their influence in the political process peaked in the mid-twentieth century and has declined markedly since. Anyone who believes that rent seeking generally declined in the same period is out of touch with reality. More conventional rent seeking (by more conventional capitalists) did not decline similarly. It continued unabated.

    • Tasos Obscure

      Right libertarianism is the only libertarianism unless you’re up for some mental gymnastics.

      The major problem is that labor unions are fundamentally restrictive in all aspects whereas companies do provide products for the market even if they have major structural advantages. People will try to make money out of it and make it efficient to squeeze more profits. Therefore the effects of unions are worse compared to big companies when gaining legal privileges.

      I would say though that much of the “reverence” for capitalists from libertarians comes from the fact that they are the ones keeping our economies from becoming USSR style shitholes.

      • martinbrock

        You may simply define libertarianism as “right”, but your gymnastics is historical.

        Labor unions are no more fundamentally restrictive than other corporations. A corporation is a collective bargaining agent for its shareholders as much as a labor union is a collective bargaining agent for its members.

        You confuse capitalists with entrepreneurs. Capitalists are the original rent seekers, according to classical liberals like Adam Smith, and they’re far more effective rent seekers than labor unions in the United State these days, as Tom acknowledges in this podcast.

        • Tasos Obscure

          Historical or not, unless you’re willing to consider inconsistent points of view valid then you cannot accept anything but “right libertarianism” to be libertarianism. Many people do, but nobody talks about these points of view since they are very ad hoc in nature, by definition most of us are in this category.

          As I said above, real companies are critical to our economic output and well being. If all labor unions seized to be tomorrow, very few things would change. Therefore companies can be tolerated much more.

          Also adam smith is rather irrelevant, economics has come a long way since then. You can even consider marx to be an “economist” from the same general school of thought as adam smith since marx was a ricardian.

          Also the original rent seekers must have been some cavemen in a bargain economy that realized that they needed to hone their bargaining skill. I don’t see why it’s such a big deal.

          • martinbrock

            I can label a consistent, libertarian point of view “left”, just as I can find inconsistencies in libertarian views labeled “right”.

            You aggregate all “companies” into a single union of productive contributors and then declare this aggregate essential to our well being. You don’t perform the same trick with “labor unions”. If your “companies” ceased to exist, but all of their factors of production continued doing what they do now, nothing would change either. If every member of a labor union ceased to exist, even with unions thoroughly diminished, the economic consequences would be profound.

            Economics has come a long way since Adam Smith, but he’s hardly irrelevant to the history of economics and of libertarianism. You can as easily dismiss any historical economist this way, but you don’t dismiss Menger similarly, because he’s on the team you label “relevant”.

            Since “rent seeking” describes all of the political privilege that unions seek, you do see why it’s a big deal. You only dismiss it this way when discussing “capitalists”.

  • Bob_Robert

    The “evil corporate raider” is also the underlying theme in “Pretty Woman”.

    However, in PW, the raiders use underhanded political means to _cause_ the firm they’re targeting to be undervalued, as if that is how hostile take-overs work every day.

  • Bob_Robert

    That Robert Murphy video shows 1.2K thumbs up, 1.2K thumbs down. Very interesting!