Fast Food in a Freed Market Doesn’t Look Like This.

The Ayn Rand Institute continues it’s divorce from reality with its latest blog entry “The fast-food industry is not a burden” by Carl Svanberg. Apparently taking a que from fellow ARI associate Harry Binswanger, this author drops the context of the mixed economy and attempts to defend the fast food industry on free market grounds.

Svanberg claims that “The fast-food industry is not forcing anyone to accept the wages they offer. On the contrary, people accept these wages voluntarily.” This much is true, the fast food industry isn’t forcing anyone. But, to say that these positions are taken voluntarily is disingenuous, in light of the fact that the state has artificially inflated the labor supply by restricting the opportunities of workers with regulatory barriers to entry into self-employment and business start up and also driving up the cost of living. Because of the states interference into the market that creates a near endless supply of cheap labor, laborers are put in a disadvantageous position from which to negotiate pay and benefits.

The second reason this industry is able to continue with its business model is state handouts. Without welfare, food stamps, and medicaid, workers would not be able to afford to take these positions and employers would have to pay better wages and give better benefits to attract workers.

Rather than acknowledge the massive amount of state interference giving rise to the fast food industry’s business model, Svanberg defends the actions of the industry on purely free market terms, as if a free market exists today.

“The impression the minimum wage lobbyists want you to get is that the fast-food industry is forcing unjustifiably low-pay on to workers who are powerless to refuse. But the industry is not in any position to set wages arbitrarily. It has to compete for workers by offering wages that reflect the market value of their work. If a business offers people more than they are worth, it will lose money. If it offers people less than they are worth, they will work elsewhere. The cause of low pay in the fast food sector is not industry stinginess, but the fact that these are low-skill, low-experience jobs.”

Of course this would be true, if we lived in a free market. But the fact is that the business can pay workers less than they are worth, and they can not seek employment elsewhere, not because of any law restricting them to their job, but because of the regulatory environment favoring large firms that has created a surplus of workers.

Kevin Carson writes:

“Under capitalism — as opposed to a freed market — the state makes the means of production artificially scarce and expensive for workers, and raises the threshold of comfortable subsistence, so that workers are artificially dependent on wage labor.

The state enforces artificial property rights and artificial scarcities, like so-called “intellectual property” (the source of the $150 markup on Nike sneakers that cost $5 to produce) and absentee title to vacant and unimproved land. It organizes the economy into oligopoly cartels, with “sticky” prices (probably a 20% price markup in most industries) and enormously inefficient and high-overhead production methods. It enforces entry barriers to self-employment by inflating the capital outlays required for production, through such things as “safety” codes that criminalize the use of ordinary household capital goods and zoning laws that criminalize household microenterprises. It impedes comfortable subsistence by promoting real estate bubbles and criminalizing competition from vernacular building techniques.”

In true vulgar libertarian fashion, Svanberg then proposes the abolition of the welfare state, without a word about abolishing the state privilege that gives rise to such blatantly exploitative business models, as if the welfare recipients are leeches on society, but the businessmen taking advantage of workers with the assistance of the state are saints. As an advocate of freed markets, I, of course, would like to see the welfare state abolished, but not before the regulatory environment created by state intervention is dismantled, putting workers and employers on even footing.

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