ANNALS OF THE ECONOMY : MY FRIEND WALTER MICHALIK ASKED ME A QUESTION …

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^ Walt Michalik of Roslindale : a question that went right to the heart of economic matters

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Last night, at Hyde Park Main Streets’s tribute to City Councillor Rob Consalvo — retiring after 12 years service — I ran into an old friend, Walt Michalik, who lives in Roslindale and supported me the one time that I put aside political work for others to become a candidate myself. That was 1986. I had known Walt, and, very early on, as I visited “people of influence” in my “Rozzie” neighborhood seeking support, before I actually made a decision to run, I knocked on his door. (He was, in fact, my first such visit.) Walt was a Democratic activist. He knew that I was a Republican. So he asked me : “what is your opinion of the prevailing wage law ?”

For those who don’t know, the Prevailing Wage law, also known as the Pacheco Law, requires that on all State-funded contracts, the contractor pay his workers, whether they are union members or not, the same hourly amount that prevails in union-labor contracts. It wasn’t a law that I had thought much about and wasn’t something that I had planned to base my candidacy upon. So I didn’t answer Walter right away. But I knew a lot of ironworkers well, and I knew that they spent their big paychecks and thus brought a lot of prosperity to a lot of businesses. So an answer came to me :

“You know what, Walter ? I don’t see how taking money out of the pockets of workers helps the economy.”

Walter shook my hand, a handshake of solidarity.

Well, that was then. A generation has passed; and the answer that I came up with that afternoon opened the door for me to understanding how a democratic economy works — and should work ; it begins with the customer.

1.The less customers a business has, the less it prospers.

2.The less that a person earns (or receives by way of public assistance if that he needs), the less of a customer he can be.

3.An economic policy that impedes worthwhile money from accruing to most people defeats itself.  This axiom is one big reason why I support the welcoming immigration policy that until the past 90 years or so was America’s boon. Every immigrant is a potential customer and this grows the economy. This same axiom is why I support Massachusetts’s impending minimum wage hike. The more that workers earn, the more they can spend.

Quite frankly, the above is my ENTIRE economic policy. All else is commentary and implementation.

One hears the political Right talk about businesses being “job creators.” But businesses CANNOT create ANY jobs unless there are customers for its products or services. The more customers, the more jobs. Angel investors for start-up businesses want to know, first of all, who and how large will be the “market” — i.e., the customers — for that start-up’s offerings. No “angel investor” I have ever presented to requires the business plan to pay workers so little that they need public assistance to make ends met. Just the opposite ; angel investors want the start-up’s workers paid enough that they will stay, not leave, and thus (1) see the venture through to success and (2) avoid the huge costs, in money and time, of hiring and training replacements. I also know no “angel” investor who doesn’t want a start-up’s workers to not have paid sick time. Angel investors know that life is hard enough; a start-up shouldn’t make things harder for its workers than they already are.

Just who, then, does the political right speak for as it pursues “job creator” corporate tax breaks and opposes both workers’ wage hikes and the social safety net ? It doesn’t speak for workers, obviously, and it doesn’t speak for venture capitalists or the management of smart businesses. So who then ?

Speculators figure prominently among those who push this destructive agenda. Stock market funds often push publicly owned companies to cut back everything and anything in search of maximum immediate buy and sell gains. For the sake of purely paper windfalls these money poolers would trouble every other interest in our society. Unhappily, these money pools have drawn to them more and more money that, instead of investing in economic innovation, which bears vast risk and takes long time to accrue, seek sharp-fingered quickie hits; arbitrage — the most economically useless item in the entire money picture.

Even the money-lender has his place in an economy. Yes, he seeks interest on his money and does no work to earn it other than to have it to lend. But the money lender knows that if the borrower doesn’t prosper, he won’t get paid back. Yes, the lender may, if not paid back, claim the borrower’s assets as security; but no money lender wants those assets; he wants his interest and he wants his principal repaid.

For the stock trader, however — the arbitrageur — it;s just the opposoite,. He DOEs wnat that asset. He buys it at current value and dumps it at whatever higher value he can squeeze out of it by whatever means and as soon as possible, even if it means destroying the business and laying off its workers. This is what Bain Capital did, famously, during Mitt Romney’s partnership there and was a major reason why his candidacy for senator in 1994 earned the enmity of a majority of voters.

Not all stock buyers and hedge funders pursue a strategy of profit by desruction. Many investors buy in or the long term — and the huge success of a long term investment, wisely chosen, says all that needs be said : look at Warren Buffett, who has become a multi- billionaire by buying and holding, forever it seems, well chosen businesses whose management he supports and whose growth — in the classic economic manner I have outlined — he encourages. But for every dollar invested with the Warren Buffett sort of investor, 1000 dollars are invested these days with swift destroyers.

It is difficult to conceive legislation that will curb the economics of profit through destruction, that will not also limit the free movement of capital to positive purposes. But we are not helpless as a society to limit the impact of arbitrage money. We can impose a strong societal disapproval upon those who would profit by hurting all who stand in profit’s way. We can continue to angel-fund innovation businesses and support their entrepreneurs — and approve them socially too, social approval being one of a society’s strongest ways of policing good works and bads. At the same time, we can make it quite clear that he who would take money out of the pockets of workers lies beyond the pale of approval.

You don’t have to be a Wal-mart. You can be a Costco. It is an outrage that we allow low-wage employers to leave their staff no choice but to need taxpayer dollars in order to make ends meet. It’s also a no-growth policy, maybe even a recession policy. It is stupid. And immoral.

So how do we fight this stupidity ? Simple. It really does start with the question that Walt Michalik asked of me on a February afternoon 27 years ago.

—- Michael Freedberg / Here and Sphere

 

Author: hereandsphere

Here and Sphere is an online journal of news, opinion, reviews, advice, & bits n' pieces of everything else - from HERE to SPHERE...... Co-founded by Michael Freedberg, a long-time Boston Phoenix journalist, and Heather Cornell, a South Coast Massachusetts columnist and editor.

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