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Biden and Wages

Biden, Salario, Estados Unidos,

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Trump’s nightmare is finally over. I will not repeat here what I have quoted from so many prominent Republican Party members regarding their ignorance of American values, or of respect for the fundamental institutions originally pointed out by the Founding Fathers.

As an example, I will only transcribe what was said in a recently published interview of his first Secretary of State -Rex Tillerson, formerly CEO of the third largest company in the world by revenue- when asked by the Mexican Foreign Relations what it has been like to work with Trump in foreign relations. The withering response was “His understanding of global events, his understanding of global history, his understanding of U.S. history is really limited. It’s very hard to have conversations with someone who doesn’t even understand the reason why we’re having these conversations about these issues.”

His allegations of voter fraud time and again were rejected in every judicial instance from the moment Joe Biden‘s win was duly certified by all fifty states.

As we have also pointed out before, common denominator of these episodes starring Trump refer to the major inconsistency of playing democracy and pretending to adapt to its rules, except when one loses an election it is time to ignore it and encourage outrages of of various types and magnitude. This is the reason why many of his previous campaign financiers have withdrawn their support and banks and platforms have closed his accounts.

It is important to re-emphasize that in his administration Trump increased public spending, fiscal deficit and indebtedness sky high. It is true that he reduced some taxes, but the former is much more important than the latter, as I have stated on other occasions the reduction in taxes reminds me of when the Spanish conquistadors gave colored mirrors to the Indians to be able to more easily impose the slave institutions of the mita and the yanaconazgo.

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It is not at all a surprise that the Democratic Party intends to inflate the Leviathan even more. I have written many times that to avoid being machine-gunned, it is not a matter of getting knifed, when referring to the Biden administration’s prospects after Donald Trump’s administration. We, supporters of a free society, must continue the difficult task of explaining the advantages of reciprocal respect and the protection that follows of the rights of individuals, as established by the Founding Fathers mentioned before,

In this sense, in order to refer to the regrettable decline of those principles that made America great, I published my book Estados Unidos contra Estados Unidos, whose original edition was published by the publishing house Fondo de Cultura Económica.

In any case, in this article I would like to focus attention on the first measure announced by the current American government: the establishment of a new minimum wage, a policy that has failed so many times in so many different places. If raising incomes were a voluntary matter, we would have to make everyone rich once and for all, but unfortunately things don’t work like that.

Wages and incomes in real terms are the exclusive consequence of capitalization rates, i.e., the amount of investment that logistically supports labor to increase its output. This is the central reason why some countries are rich and others poor. It is not a matter of goodwill or natural resources (the African continent has the greatest natural wealth, while Japan is a shell where only 20% is habitable).

Among many others, as Nobel Prize winners in economics Milton Friedman, Friedrich Hayek, Gary Becker, James Buchanan, Ronald Coase, George Stigler and Vernon Smith have pointed out time and again, minimum wages, that is to say, incomes higher than those set by the aforementioned capitalization rates, inexorably lead to unemployment, especially harming those who most need to work.

There are other statist measures contemplated by the recently inaugurated administration, but, as I have said, in these lines I will limit myself to the minimum wage, since it especially harms the most vulnerable. It is a basic rule of economics that maximum prices invariably lead to artificial shortages, while minimum prices -in this case, the minimum wage- cause artificial surpluses.

Anyway, it is pertinent to recognize that it was good that Joe Biden invited Guaidó’s ambassador to the handover, that he complained about the unprecedented arrest of Alexei Navalny and that he incorporated eleven million undocumented people. Also conciliatory his inaugural message.

But back to the minimum wage, there is no magic, on a broader level Margaret Thatcher summed it up this way: “Let us never forget this fundamental truth: the state is not a source of resources, what it has is from the work of the people. If the state spends more it can only do so by taking people’s savings or by imposing more taxes.”

Alberto Benegas Lynch (h)