Peter Schiff More Government Equals Fewer Jobs

By Peter Schiff
February 5, 2010

With today’s unexpected decline in December payrolls, the cry for more job-related stimulus will grow even louder. But the sad truth is that any new stimulus or jobs bills will ultimately swell the ranks of the unemployed, thereby raising calls for an even bigger federal effort. If we are not careful, government regulations, subsidies, and spending, all designed to fight unemployment, could push the labor market into a death spiral.

Regulation acts like a tax on job creation. By subjecting employers to all sorts of extra expenses when they hire people, regulations increase the cost of employment far beyond the wages employers actually pay their workers. In fact, some regulations are specifically tied to the number of workers employed. This provides some employers with a strong incentive to stay small and not hire.

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Tags: jobs

Business At The Very Bottom Of The Income Ladder

By Alex Blumberg

Adam and Chana are flying home from Haiti right now. They’ve been sending us regular dispatches — compelling, heartbreaking and fascinating. Yesterday, they hung out at a tent city in Petionville. There they spied a woman with a huge tub on her head. It was filled with chicken necks, which she was selling for a few pennies apiece. Her name is Yvrose, and she runs what turned out to be a very elaborate small business. Here’s Adam:

We got lots of tape of her business stuff, and it’s way more complicated than I remember now. [She had a] sophisticated understanding of interest rates, rotating capital, credit, etc. She has to maintain long-term relationships with lots of different market players. She did say she has a notebook she keeps all her business in and that she was very lucky that, while her house collapsed in the earthquake, she did find her notebook in the rubble.

Adam writes:

Yvrose is a very small-time wholesaler, normally. Every two weeks she takes a bus to the Dominican Republic border and buys a bunch of produce and small products. She borrows around $500 or $1000 from a microcredit bank, which she has to pay back with 12% interest in 8 months. So, what is that– 18% annualized, or so. She brings the products back to Port-au-Prince and lends them out to various small shop owners and people who sell stuff on the street. She gives them two weeks to sell everything and then comes back to pick up the money. Her goal is to turn over that same $1000 loan 16 times in the 8 month term

The earthquake has been a big hit to Yvrose’s business. She’d used the loan money to buy inventory, a lot of which has been destroyed. Now she has to scramble to pay the loan back. All this points to the fragility of doing business so near the poverty level:

Any significant shock would destroy her fragile financial world. Sure, this earthquake was a particularly huge shock. But let’s say she was sick for a month or had a broken leg or got robbed on her way to or from the DR or one of her kids needed surgery. Her lifestyle is based on constantly turning over a few hundred bucks and squeezing tiny bits of
profit out of it. But it’s so easy to imagine her losing that base capital and, along with it, everything.

It gives you a sense of how hard it is to break out of poverty here. For
her to actually accumulate wealth she has to be really smart, really ambitious, and she has to have nothing bad ever happen in her entire working life– 30, 40, 50 years without any health shocks or burglars or anything. That’s nearly impossible.

Chana and Adam should be back in New York this afternoon. They’ll be on the podcast this Friday, and they’re working on a bunch of stories for the radio.

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Tags: Global Poverty

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Hayek vs. Keynes Rap Anthem

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Tags: Hayek vs. Keynes

Corruption, Culpability and Short-Termism

” People are increasingly collectively horrified at the extent of the fraud and corruption that lies at the heart of our financial and broader governance structures. They seem surprised, as if this were something new, when in it has actually been growing in tandem with our credit hyper-expansion for decades. Corruption in complex systems never goes away, it merely waxes and wanes, and goes through phases where it is more or less visible.”

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