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The 22 Franc Minimum Wage

Monday, May 19th, 2014

Fox News’s Bill O’Reilly and 2012 Republican presidential candidate Mitt Romney agree with America’s progressives: raising the minimum wage is common sense.

The Swiss had a chance to prove their solidarity with that notion yesterday, when they voted on whether to establish a minimum wage in the country, a rather high one of 4000 francs per month (something close to 22 francs per hour). They voted the proposal down.

Overwhelmingly. By over 76 percent.Frederic Bastiat's classic essay, What Is Seen and What Is Unseen

Unlike in America, this minimum wage would have affected a huge hunk of the population. One out of ten Swiss workers earns less than the proposed minimum. In America, only about a single percentage of workers earns close to the national minimum.

This matters, as Frédéric Bastiat clearly explained, because price regulations can have two effects: a loss of production, or none at all — “either hurtful or superfluous.” No effect, when the price floor (as in a minimum wage) is set lower than the level most prices are already at (or, for which workers already work). But when the price floor gets set higher, goods go off the market — with too-high wage minimums, workers with low productivity cease to get hired.

Swiss voters could scarcely afford to risk the jobs of ten percent of the workforce.

In America, raising the minimum wage is usually a matter of sacrificing a few people (whom voters mostly don’t know — Bastiat’s “unseen”) while rejoicing in the higher wages of those workers retained (the “seen”).

In Switzerland, the government declared the down vote a victory for common sense.

Which it was.

This is Common Sense. I’m Paul Jacob.

On the Road in South America, Part One

Wednesday, November 14th, 2012

This week Paul Jacob is traveling down south — way down south. Here he reports from the Lima, Peru, airport, explaining what he’s up to:

If all goes according to plan, he’ll report a few more times while in South America, and after.

You can view this video in HD, here.

Alfred Nobel Rolls Over

Tuesday, October 16th, 2012

The Nobel Committee, having whetted its appetite for absurdity with a long string of goofy Peace Prize Awards, especially but not limited to the 2009 award for Barack Obama (who had done nothing but get elected to earn it), went all the way by giving the 2012 award to the European Union.

Barack Obama went on to become a “war president,” even regularly picking targets for assassination by drone. So, could Europe continue the trend and head straight towards war?

Maybe. Last year, former French Prime Minister Alain Juppe warned that the unions debt crisis could lead to “the explosion of the European Union itself,” and warned of growing nationalism. And violent unrest.

Dire warnings from former heads of state are one thing. Actual military movements are another. And Switzerland seems to be preparing for the worst:

The Swiss defense ministry told CNBC that it doesn’t rule out having to deploy troops in the coming years.

“It’s not excluded that the consequences of the financial crisis in Switzerland can lead to protests and violence,” a spokesperson told CNBC.com. “The army must be ready when the police in such cases requests for subsidiary help.”

Talk about financial contagion!

Cooler heads may prevail, of course. Matthew Feeney, writing at reason.com, notes that the “most obvious argument against the possibility of war is that there are no likely candidates for the part of aggressor.” And Europe hasn’t exactly been engaging in a massive military build-up, unlike before the two world wars.

Alas, that doesn’t preclude massive rioting and uprisings.

Sovereign financial bankruptcy usually follows war, rather than preceding it. I guess that provides something like hope.

This is Common Sense. Im Paul Jacob.

French Rolls

Thursday, July 5th, 2012

Jim Dixon, Kingsley Amis’s infamous Lucky Jim, put the logic of wealth redistribution in everyday terms: “If one man’s got ten buns and another’s got two, and a bun has got to be given up by one of them, then surely you take it from the man with ten buns.” Remarkably simple, leaving out, as it does,

  1. the making of buns;
  2. the effect of expropriating buns now on future bun production;
  3. trade in buns and
  4. consequent changes in ratios of bun ownership, sans expropriation;
  5. what effect the nabbing of buns has on the demand to take more buns in the future; and
  6. the necessity of taking buns in the first place (which Lucky Jim’s interlocutors noted).

Think about it longer than a minute, and it’s easy to see that the “soak-the-rich” plan quickly runs into trouble, one bit of difficulty neatly stated in the old adage often attributed to Margaret Thatcher: “The problem with socialism is that eventually you run out of other people’s money.”

Sometimes you even run out of other people. As France may show next.

Socialists there have won the recent elections. They promise to reinstate the old, ugly wealth tax, as well as up the income tax on “the rich.” And so of course some of the richer French folks contemplate exile — at least as far as the welcoming cantons of Switzerland.

There are problems with this option, though. Under Sarkozy, the French government had instituted a whopping exit tax. But, if Mathieu van Berchem is to be believed, even this will prove “unlikely to stop any ‘exodus.’ There are often more reasons to leave than to stay, while the Socialist government could turn on the wealthy even more.”

If so, expect future French buns to have Swiss crosses stamped upon them.

This is Common Sense. I’m Paul Jacob.

Swiss Gun Control

Tuesday, February 15th, 2011

In mid-February, Swiss voters rejected stricter gun controls.

No one knows how many guns the Swiss own. There’s no national registration system, yet the Swiss do not suffer a high crime rate, like America does.

But the country does have the highest gun suicide rate in Europe.

The stranger issue, though — and in contrast to most countries around the world — is the number of semi-automatic rifles belonging to the army that soldiers and ex-soldiers store at home. It’s part of the Swiss defense plan. The army can quickly rise up in case of an attack.

The gun control proposal would have required solders’ firearms to be locked up in armories. This, it was argued, was to help reduce suicide rates . . . though a few high-profile shootings also gave impetus to the gun control measure. During the debate much was made of the country’s long history of firearm expertise and unique military heritage.

The measure was defeated in 20 of Switzerland’s 26 cantons, with over 56 percent of voters rejecting it, nationwide.

Does the Swiss system seem strange?

It’s certainly different.

Switzerland still uses conscripts, while the U.S. rightly recruits an all-volunteer military. But their method of decentralized governance, borrowed more than 150 years ago from us and today far more decentralized than ours, is wise not only for the firepower of national defense, but for more bang for the buck in all areas of government.

This is Common Sense. I’m Paul Jacob.

Dank der Direct Democracy

Wednesday, June 16th, 2010

For the last week, I’ve had the arduous duty of traveling across beautiful Switzerland, studying their very robust system of voter initiative and referendum. An important issue came up: is so-called “direct democracy” good or bad for business, for economic growth?

Years ago, a Swiss professor suggested that allowing voters a direct say “will ruin the Swiss economy.” (Sound familiar?) But a 2002 analysis by a Swiss business group, Economiesuisse, found that the facts showed otherwise.

Swiss cantons (states) with greater initiative and referendum rights had on average 15 percent greater GDP than those with lesser processes. Municipalities that required budgets to be approved by voter referendum spent 10 percent less per head. Also, public services cost noticeably less in cities and towns with voter initiative rights.

St. Gallen economist Gebhard Kirchgässer put it plainly, “In economic terms, everything is in favor of direct democracy — nothing against.”

But what about in America, where we hear so much about ballot initiatives “ruining” California?

Well, the recent American Legislative Exchange Council report “Rich States, Poor States” found a similar pattern. ALEC ranked all 50 states on a combined measure of their last ten years of economic performance and various factors of “economic outlook.” The top seven spots (and 12 of the top 15) were all held by states that enjoy voter initiative rights.

Ranked 46th, California was the only initiative state in the bottom five states. But even the Golden State’s low rank belongs to the legislature, not voters.

This is Common Sense. I’m Paul Jacob.

Wait a Minaret!

Monday, December 7th, 2009

In a national referendum, the Swiss just voted to ban the construction of any new minarets in the country.

Minarets are the onion-shaped crowned spires of Islamic mosques, from which Muslims are called to prayer five times each day.

At MarginalRevolution.com, economist Tyler Cowen’s first thought on the Swiss vote was, “Sooner or later an open referendum process will get even a very smart, well-educated country into trouble.”

Cowen doesn’t elaborate on what he means by “open.” But he does raise an important distinction between freedom and democracy.

I’m a huge fan of voter initiative and referendum, but a bigger fan of freedom of religion. Freedom for the individual must come first — no dictator has a right to deny it.

Nor does a revolutionary tribunal.

Neither does the Congress or a state legislature or city council. Or even a solid majority of voters in a referendum.

But Cowen misses something, too. The problem in Switzerland isn’t really their initiative and referendum. Legislators make mistakes, too . . . as do, of course, authoritarian regimes. We generally have far less to fear from government under such voter control.

In fact, though I deplore this vote, the ability of Swiss citizens to directly check the power of their government has helped make it one of the best places in the world to live. That is, one of the freest.

This is Common Sense. I’m Paul Jacob.