It was an emergency. It was Sunday, two days before Christmas. She was in excruciating pain. My son took her to urgent/emergency room care. The urgent care doctors said she needed to have her gall bladder removed right away, because they were afraid infection was setting in. As a Type 1 brittle diabetic, she cannot handle this kind of disruption to her system. The Urgent Care doctor made arrangements for her to be seen at the nearest hospital and sent my son and her there immediately.
She did not have time to think about the network, nor had the insurance company provide her a list of network providers. The hospital accepted her insurance, which she believed meant they were ok. It wasn’t as if she had a choice. She did not have the option of getting it approved by her insurance in advance. She needed surgery now. Within a few hours, she was home, missing a gall bladder. She did not even spend the night at the hospital.
Days and weeks went by. She got the urgent care bills, that were paid for by the insurance, so she owed nothing. Emergency care covered. Certain other bills, covered. Then, a full month after her surgery, she got a bill from the hospital. The insurance company, Anthem, denied her claim. The person who denied her claim is not a doctor, does not realize that diabetics do not take surgery of any kind lightly. Amount due – $21,000. Payable immediately.
She doesn’t make that much money in a year. She is in school. She has monthly insulin costs. She has to take other medications to make her body accept the insulin. She has costs associated with making her pump work. She has to have regular doctor visits to check her numbers, to check her body, to check her pump. There are visits to her GP, to her diabetes doctor, to her eye doctor, and so on and so on. To cover all these costs, she would have to make $4,000 a month after taxes before buying a mouthful of food or paying a nickel for a place to live.
Anthem claimed the surgery was elective. As if she woke up two days before Christmas on a Sunday and decided, hey, I think I’ll get my gall bladder removed today. Except that serious diabetics don’t do elective surgery on a whim. They have to spend days ensuring their numbers are stable enough to have the kind of jolt to the system that surgery causes. And then, after the surgery is scheduled, they check again. If the numbers are off, the surgery is postponed until the numbers are acceptable.
She will have to appeal the denial. This will require more time and expense, and may even require a lawyer. She is working with the patient advocate at the hospital, but there are no guarantees. The last thing she needs is to be fighting this claim while she is going to school.
They say that diabetes is a manageable disease, and that is true. But that doesn’t mean management is easy or inexpensive. Diabetes doesn’t just mean you take a couple shots a day, management is expensive, in terms of both time and money. Time is expended to make regular trips to the doctor to get the body checked, to recalibrate pumps, to recalculate the right doses of insulin to keep the body under control. Money is expended in ways I never imagined before I had a diabetic in my home. The pump costs money (thankfully, because of ACA, it was paid for) to the tune of $44,000. Then there is the insulin. There are drugs needed to help the insulin. The pump requires new sensors every few months. There are copays to the doctor every visit (without ACA, those copays are really high). And the diabetic still has to carry insurance (without ACA, that insurance is really expensive).
The management of the disease does not mean that it is not taking a toll on the body. She needs to check on that body a few times a year. Currently she is taking shots in her eyes to keep diabetes from stealing her sight. Diabetes is also causing neuropathy in her feet. The constant ups and downs in her sugar levels has cost her her gall bladder and her pancreas. It impacts the functioning of the kidneys, to the point where it can shut down the kidneys and put the diabetic on dialysis(thus another expensive drug and a machine to keep the kidneys working). It also causes fits with her teeth, which then get infected and cause problems with her sugars, and becomes a vicious cycle. Yes, the disease is manageable, but it is a full time job that requires hours and dollars.
Here is the thing: she is a smart woman with a lot to offer our society. Keeping her healthy is difficult and expensive, but her contribution will be worth every penny. She is a prime example of why we need regular, complete medical care for every citizen – because the only untapped resource left in this world is the human potential. I talk about diabetes because that is what I know, but there are many diseases that are “manageable,” but require access to health care. And we can’t allow a lack of medical care to prevent us from tapping the human potential.
It seems to me that even the economists, who should have been all over this, have missed the boat about tax cuts for the wealthy and for wealthy corporations will not create more jobs. They have also missed why tax increases on the wealthy will not cost jobs. It is the Law of Diminishing Returns.
While normally applied to factors of production, the law of diminishing returns extends to any goods or services, or anything one has acquired in life. Its definition is:
A classic economic concept that states that as more investment in an area is made, overall return on that investment increases at a declining rate, assuming that all variables remain fixed. To continue to make an investment after a certain point (which varies from context to context) is to receive a decreasing return on that input.
What does that have to do with taxes on corporations an the wealthy and its relationship to jobs? Here are a few illustrations.Illustration 1: When somebody is really hungry and has no food in the house, if he gets $10.00, he will go out and spend it all on food. After he has eaten, if he gets another $10.00, he is not as hungry, so he may only spend half of it on food. After that, getting another 10 spot may only cause him to spend $2.00 on food, and once he is full, he won’t spend any more of it on food. This is the law of diminishing returns. The first meal is a necessity, the second is a luxury, soon you need no more and trying to eat more stops being a good, it becomes a bad. You may get so stuffed that the sight of food is unappealing. Or think of zucchini. If your plant yields two zucchini, you may eat them. If it gives you 10, you may eat 8 and give two away. After 25, you may pay people to take them.
Illustration 2: Think of employees. If you have work for twice as many people as you have and can sell as much product as twice as many employees can produce, if you get some increased income or decreased expenditure, you will hire more employees. You will do so as long as the next person hired produces more than he costs. However, as soon as you have enough employees to meet demand, you stop hiring. In fact, if you hire more, they will get in each other’s way and will not benefit the company.
The wealthy and the corporations currently have their needs met, and most of their wants. They really don’t have anything compelling to spend money on. You could decrease their taxes to zero (and have in many cases), and they won’t buy more nor will they hire more. The money will sit around, lacking anything to spend it on. This is especially true for corporations in today’s economy. With people too strapped for cash to be spending freely, demand is suppressed. Making more product will not produce a return because nobody will buy it. It stops being a good and starts being a bad because you have spend money to store the excess. No well run corporation will do that.
However, if you were to tax the wealthy and the corporations, you could use that money on projects the country needs (think bridges, airports, schools). That would create jobs. At first, the new jobholders would spend on clearing debt and the necessities they have been without. That is a good thing, it gets money circulating again. Then they can start buying other things. That would stimulate demand. More demand would mean more products would be sold. More sold products means more profits for the corporations, but this time there would be a need for more employees. Who would allow the corporations to make more profits.
It is amazing that the corporations would fight the idea of ensuring people were employed so they could buy their goods. It is what the Marshall plan after WWII was all about – ensuring Europeans had income so they could buy American goods and services. It was what the labor movement has always been about – ensuring healthy laborers had income and time to enjoy it so the economy could thrive. (This also benefits employers because healthy, fed and happy employees are more productive.)
When the Republicans talk about how tax cuts for the rich creates jobs, we need to remind them of the most basic of Economic tautologies, the Law of Diminishing Returns.
I have read a lot of articles about how the new tax bill will impact people in this country and our economy. But I have read none that include the multiplier effect. That is probably the scariest aspect of the new tax bill and we had better understand it. I ran the model of the multiplier effect on this tax bill, but I only had old data, when our income inequality was not nearly as great as it is today. Even those old data indicated that the tax bill will constrict our economy by at least 15%, but with today’s income inequality numbers, the model probably understates the constriction. It won’t be just bad, it will tank our economy.
In order to understand the multiplier effect, you first need to understand the marginal propensity to consume vs. the marginal propensity to save, which I explained in a diary some time ago, here. The multiplier is the increase of money that arises from any injection into the economy.
Many models use a single marginal propensity to consume (hereafter MPC) for the aggregate economy. However, that is not accurate. The MPC is different at different levels of income. It is easy to understand why. People who are at the bottom of the economy are deciding among necessities. When they receive extra funds, they have necessities that they have had to do without, and they spend the entire amount of extra funds they get. People at higher income levels have been doing without niceties but not without necessities might save a little and spend the rest. People at the top income levels are already buying everything they want to buy, and will probably not buy more just because they get more. So while the MPC of the person at the bottom (and probably lower middle) will have an MPC of 1, people at the top will have an MPC of 0, and those in the upper middle somewhere in between. The multiplier will be around 5 when the MPC is 1, and around 0 when the MPC is 0.
So how does the multiplier work? Let’s say Ben (not his real name) is in the lower bracket. He has been putting off buying clothes and shoes for his kids and repairing the car in order to pay the rent. He gets $1000. As soon as he gets it, he goes and repairs the car for $800, and gets his kids the shoes and clothes they need, costing him $200. The repair shop has also been in tight financial circumstances, so they spend $500 on equipment maintenance and $300 on paint. The shoes and clothing store hires another person. The equipment maintenance company spends some on tools, etc. etc. etc. By the time the $1000 is circulated, it has generated $5000 worth of goods and services. As you can calculate, this is 5 times the initial cash infusion, thus the multiplier of 5.
Tom is in the next bracket. He has his basic bills paid, but has been wanting a new coat. He gets $1000, saves $200, and buys his coat for $800. The coat dealer saves a bit and spends a bit. It circulates to generate $4000 in goods and services for the $1000 injected into the economy, thus multiplier of 4.
Pete is in the top bracket. He has been buying all he wants, and has a lot stashed away. He simply adds that $1000 to what he already has. The injection of $1000 into the economy yields nothing in goods or services, thus a multiplier of 0.
This tax bill proposes to TAKE money from the bottom most extensively, and give it to the top. As a result, we will run into the negative multiplier. How does this work?
If we take $1000 from Ben, he will have to make even harder choices and do without more things. This will mean he has to somehow figure out how to not spend $1000 that he would have been spending. When he doesn’t spend, the places where he would have spent receive less income. They have to cut costs. They can either cut their purchases or their staffs. The reduced purchases and staff lead to other companies having to cut back. In the mean time, Pete is receiving more money, but he is not spending it. So no other companies have a reason to hire or buy more, Pete is doing nothing to increase demand. The economy constricts. The irony is, the large corporations and wealthy who are getting the most benefit from this income redistribution will also suffer. When people can’t buy goods and services, the wealthy have no place to generate income.
Using really old numbers, I calculated a multiplier of -15. It could be worse, depending on when and if the downward spiral is stopped. Unfortunately, there does not seem to be an equilibrium where it will stabilize. We did not see an equilibrium in the Great Depression, because of the New Deal efforts by FDR, and the world war. Had those not happened, who knows how far it would have gone?
I invite any economists who may read this to do their own calculations, hopefully on newer data. Do you find the same result? I don’t know how anyone could support this farce.
This is my next installation in my economic series about the coming Corporate Feudalism and how we avoid it.
I was raised in a Christian family, more specifically, a Methodist family. (I’m Catholic now, but was Methodist then.) In our church, while the adults attended services, the children attended Sunday school. In Sunday school, we would be told the stories in the Bible and talk about how those stories applied to our lives today. One of those stories was of David and Goliath.
I’m sure most of you are familiar with that story. Back in the days when Saul was king of the Israelites, a great Philistine army came to their borders. The Philistine general sent word to Saul that instead of the two armies fighting each other, each side could send out a champion to do battle, and if the Philistine champion won, the Philistine army would take over the land of the Israelites, and the Israelites would become their slaves. If the Philistine lost, the Philistine army would become the Israeli subjects. Then they brought forth Goliath. He was a huge man, and he had been supplied by the Philistines with the best weapons and armor that could be forged at that time. He struck fear into the hearts of those in the Israelite army. For 40 days, Goliath came out in the morning and at night shouting this challenge. For 40 days and nights, the Israelite army quivered in their tents and did not send anybody out to meet the challenge. Finally, one day, David (who wasn’t in the army, he stayed home tending sheep) was visiting his brothers in the army and taking them food. Goliath came out and bellowed his challenge. When nobody stepped forth, David said, “I can take him,” and volunteered. He picked up five smooth stones from a nearby stream and used his sling to hurl a stone at Goliath. The stone hit Goliath in the head, and Goliath died. David won, and the rest is history. Or a morality tale. I have no interest in arguing which.
So then the Sunday school teacher began to talk about how this story was applicable in our lives. She said, “You see? David was just a boy, not very big, not trained to be a soldier. But he was able to kill Goliath. If you have faith, and if God is with you, even you can beat the big bullies you come up against. You can beat the bad guys.” And so it seems, that whenever anybody goes up against a big corporation and wins, or goes up against a big anything and wins, we recall the story of David and Goliath.
I got to thinking about that story a while back (I don’t know why, I just do things like that sometimes). Today, there is a Philistine army looking to enslave us. It is corporate America. They have an army of Goliaths, in the form of managers. The armor they have given their Goliaths is the power of the corporation. The weapons include, “company policy,” and “it’s the going pay scale,” and “nobody else expects …,” and “if you don’t like it, we can always find somebody else,” and “team player.” Those words have as much bite to them as the sharpest Philistine sword, and they beat employees into submission even more quickly. You have to be quite a David to stand up to that.
And here’s where something about that story began to bother me. Suddenly it dawned on me. The passage in the Bible doesn’t say how big the army was, but in context you can gather that the army was tens of thousands. On top of that army, there were the non-soldiers of Israel, who, like David, were doing normal things. David was tending sheep. Others were also tending flocks, or raising crops, or building houses or whatever people did. So in all of Israel were more than tens of thousands of people. Yet, in all of those tens of thousands, there was only one David. Only one. The odds of that one in tens of thousands being any particular person were really small. Sunday school teachers were talking to the children as if each of them could be that one in tens of thousands. But in reality, there was a higher probability of any one of them becoming a professional NFL player than being that one David. Applying that to today, the chances of any employee being able to stand up to the Goliaths sent out by the Corporate Philistines is really, really tiny. The Corporations set forth their terms, and the employees surrender. Another thing. Saul had chartered David to represent the Israelites. Whatever David gained was gained for and on behalf of all the kingdom. If a single employee does somehow manage to be a David, he is not chartered to represent anybody but himself. Anything he is able to wrest from the local Goliath is only for himself.
Something else occurred to me. There was only one David, but behind him was an Israelite army of tens of thousands. That is a part I have never heard anybody talk about. Recall that every day, for 40 days, Goliath came forth in the morning and at night to bellow his challenge. 40 days. The Philistine Army sat idle for 40 stupid days. Armies aren’t meant to sit in a camp waiting to attack for 40 days. Why didn’t they just attack? Because in front of them was an army of tens of thousands. While the Israelite army was not full of Davids, it was made up of tens of thousands of trained, competent soldiers. Those tens of thousands were standing in solidarity, defending their freedom, defending their families, their land, their homes, their futures. They did not have to be Davids to be good soldiers. They were prepared to put up a good fight. Even if the Philistines were able to defeat that army of tens of thousands, many would die, and many more would be badly injured. And they could lose. For some reason, this feared army that had rolled over other kingdoms en route to Israel did not really want to fight this battle. So they sent their Goliath out in the belief that their Goliath could defeat anybody the Israelites could bring forward. If there had been no Israelite army, there would have been no David. Rather, without that army, the Philistines would have simply run over the kingdom killing anybody who got in their way. That would have included David. Standing alone, the people were helpless.
It is no different when the employee faces the corporate Goliath. If he stands alone, he has no chance. The corporation has all the advantages. It is only when employees band together into an army and stand in solidarity that the power is leveled. Because the union army will be standing in solidarity, defending their freedom, their families, their homes, their futures. When they form a union, join the union, and stand with the union, they are on a common footing with the corporations. It is then that the union can find and charter a David to go to battle on behalf of all the members. And what happened when David killed Goliath? “When the Philistines saw that their hero was dead, they turned and ran. Then the men of Israel and Judah surged forward with a shout and pursued the Philistines to the entrance of Gath and to the gates of Ekron. Their dead were strewn along the Shaaraim road to Gath and Ekron.” While we don’t expect the union army to kill all the corporatists, we can expect the corporations to back off. Back in the day, before Ronnie the Destroyer broke the air traffic control union and his party began to dissemble unions, unions had won for their members (and for many who weren’t in the unions) pensions, paid vacation, health care coverage, competitive salaries and safer work environments. As unions have been dismantled, all those benefits have either been eliminated or cut back drastically. We need unions to help get them back. Because we can’t do it individually. There was only one David. And even he didn’t stand alone. The Israelite army made David possible.
My next piece will be about how we help our unions regain influence and what unions need to do.
The Republicans are racing to enact AHCA under cloud of secrecy and distraction provided by the Russia investigation. They are intent on their mission and won’t be denied. But why the hurry, why the secrecy, why the subterfuge and why the cruelty?
The AHCA and other upcoming bills tell us the agenda of the Republican party. If we analyze what they are doing, we can connect the dots as to why, and where they want to take our country. I can’t comment on the Senate version of AHCA because nobody has seen it. But I can comment on the House version. We can be confident that, while the Senate version may have some differences, the effect will be similar. The House and Senate are both controlled by Republicans, and those in charge share an agenda. Thus, while there may be differences around the edges, the substance will be intact.
We can derive from the CBO score that the House AHCA benefits those of privilege and the healthy young, while gravely harming the aged, the disabled, and the poor. The question we ask is why? Why are they protecting those in least need of protection and savaging those in greatest need of protection? What is the end game?
As I wrote in a post earlier (read it here), we are racing toward corporate feudalism. Based on their priorities and allegiances, it is obvious that this is the goal of the Republican establishment. They have a protected class, and the purpose of the rest of society is to serve, pamper and enrich the protected ones. The protected class consists of corporations and the wealthy. To complete corporate feudalism, they must have control of all factors of production, that is, the means of creating wealth. A read of the House version of AHCA and the CBO scoring of it shows that they are doing all they can to accomplish that. It also reveals a sinister undercurrent in the Republican Establishment thinking: Those who are not able to serve, pamper and enrich the pampered ones have a duty to die. I will say it again, those who do not fit the purpose of the elite have a duty to die. But, as I will explain later, they must die in the most horrible ways, and only after any wealth they may have been able to generate is returned to the corporations.
Let’s take a look at who is primarily targeted by the House AHCA. It is the elderly, the disabled, those with preexisting conditions, the poor and the sick. Why are they the targets? These are the people who contribute nothing or little to the corporate bottom line. These are the people Republicans have been calling the “takers.” Not the corporations making billions in profits while collecting millions in tax dollars. The “takers” are the people who continue to live while not enriching the protected. Based on the content of bills being pushed by the Republicans, it is clear Republicans believe these “takers” have a duty to die and stop using resources.
Those who are not targeted, the young and healthy at their peak of production, are covered by AHCA as long as they stay healthy. They bring in far more profit than they cost to cover. The protected class needs them to do the work. The young and healthy are the most valuable factors of production, and they are worth the investment to maintain. But the bill has some huge gotchas in it for them. If they have preexisting conditions, that will be out of pocket, and at a higher rate than the actual cost to treat those conditions. (For example, there is no way it costs $2000 a month to make and distribute insulin to a diabetic. But that is what they are going charge the diabetic. Same with a number of other drugs. The pharmaceuticals are having a heyday with life saving drugs.) The portion of the bill that allows lifetime caps on coverage for the employed is a way to exact maximum profit from workers and discard them when they are no longer profitable. It also discourages workers from accessing their coverage in order to have it available in time of great need.
Women and children are targeted in this bill. We should note that with this bill plus their other policies and practices, women are to be nothing beyond toys and incubators. There is to be no sex education (hence Betsy), no birth control (hence targeting planned parenthood and other Republican sponsored bills both in congress and in the states), no prenatal coverage (now, isn’t that crazy if you want a healthy baby?), no maternity coverage, no neonatal protection, and once the child is born, no public assistance (they are working on dumping WIC and severely restrict even food stamps), no assistance with child care. But if you don’t manage to raise the child the way they think the child should be raised, you can be fined, charged, arrested and even imprisoned. This only makes sense in a corporate feudal framework where women and children are little more than livestock. We should notice from their behavior that in their minds, the place of women in their society is the serving, pampering and enriching via sex. Going beyond reproduction, Republicans are pushing policies that would have children not from the protected class educated in institutions that push a religion that supports their caste system and restricts knowledge to those things that will make those children grow up to be little more than capital (financial assets, like machinery). Once their value is fully depreciated, they revert to being “takers.”
The “takers” have a duty to die. But if you look at the rest of the administration, you find that it is more than a duty to die. AG Sessions has spoken out against both medical marijuana and death with dignity laws. Why would he oppose those? The reason is evil in the rawest sense. Marijuana has been shown to relieve pain and other symptoms of disease and is relatively inexpensive. It has been shown to offer comfort for cancer patients, especially in their final stages. It has been shown to offer some help for dementia patients. Why not encourage its use? And why, when a person has been diagnosed with a terminal illness, not allow them to pass on peacefully and painlessly at a time of their choosing? I can only come up with one rationale for these things. People using medical marijuana are not using expensive pharmaceuticals. People who choose to die peacefully and at the time of their choosing wind up not using the pain killers or living in nursing homes. In other words, Republicans want to ensure that as you are suffering and dying, you will first cough up any assets you have managed to acquire in your life to corporate interests before you go. You have a duty to die, and to die broke and in agony. To serve the protected class.
I am not sure what can be done about our trajectory. Now that the GOP is in control of two branches of government and is about to cement their control in the judiciary (not only in the Supreme Court, but in all the Federal courts as well), a course correction may not be possible. As of this summer, we may be officially a corporate feudal state.
In my last posting, I discussed the similarities between medieval feudalism in Europe and corporate feudalism that we are entering today. I also promised to identify what finally brought an end to medieval feudalism, and thus, the antidote to corporate feudalism today. I am not a historian, and I will not be going into a lot of historical analysis, dates or specifics. Instead, I am going to approach this topic through the eyes of an economist. I welcome real historians to contribute as they deem appropriate.
There is debate about the correct date of the end of the Roman Empire and start of the middle ages, however, most historians consider it to be either the sack of Rome on June 2, 455 CE, or September 4, 476 CE, on which date Odoacer deposed the last Roman Emperor Romulus Augustulus. However, Rome was also sacked on August 24, 410 CE, which was an important factor in the decline of the Roman empire. With the fall of the empire, much of the cosmopolitan element of the society disappeared. There was much less travel among communities, fewer people moved from one state to another, and society fell into isolated fiefdoms, with only the church as a somewhat uniting factor. From that time until the crusades, feudalism, as described in the previous post, prevailed.
In 1095, Pope Urban issued the Crusades, whose purpose was to recapture Jerusalem from the Muslims. According to Lisa Blades and Christopher Paik in their paper, “The Impact of Holy Land Crusades on State Formation: War Mobilization, Trade Integration and Political Development in Medieval Europe,” there were “four causal channels by which crusader mobilization strengthened nascent states. First, the departure of relatively large numbers of European elites for the Holy Land reduced the absolute number of elites who might serve as challengers to the king, increasing the stability of ruling monarchies. Second, crusade tithes were also among the first “per-head” taxes to be levied on European populations, creating precedent for later forms of centralized taxation and encouraging the development of representative institutions. Third, the large-scale sale of land by rural elites seeking to finance crusade expeditions undermined existing feudal institutional forms. Finally, the Crusades were a catalyst for the reintegration of Western Europe into global trade networks with implications for the rise of towns and urban governance structures. Using an original dataset of the geographic origins of elite crusaders, we find that areas with large numbers of Holy Land crusaders saw increased political stability, a higher probability of establishing parliamentary institutions, higher downstream levels of tax revenue and greater urbanization, even after controlling for a number of possible confounders.” Others have pointed out that large numbers of lords and nobles left for the Holy Land, many died while they were there, others were bankrupted. Their lands were escheated to the monarchs, thus increasing the power of the monarchy. Still others had their properties seized while they were away.
While the first three channels are interesting, they don’t seem to me to be the biggest influence on the changes that occurred. It is the last channel that I believe had the greatest impact. Let me explain.
I first revisit the factors of production:
Land (including all natural resources),
Labor (including all human resources),
Capital (including all man-made resources), and
Enterprise (which brings all the previous resources together for production).
While the result of the first and third channels did cause ownership of the land, the first factor of production, it did not really change that ownership in a way that was felt by the peasants working the land. It made no difference to that peasant whether the land was owned by a lord or a monarch, it was still not owned by him. The second factor could not really be felt by a peasant either, taxes were what they were, regardless of who they went to. Capital may have moved from lord to king, but the general population didn’t experience benefit or otherwise. However, the reintegration of Western Europe into the global trade networks was significant.
When most people think of the Crusades, they think of phalanx of knights riding off on steeds with grim faces. This picture is misleading. Those phalanx of knights had to be fed, clothed, and otherwise provisioned. It was an enormous mobilization of various trades required to keep the lords and their knights battle ready. Peasants were not often part of this mobilization, but the craftsmen were. There needed to be blacksmiths to tend to the horses, the swords, and so on. There had to be people to work on the wagons, to mend the harnesses, to make or mend clothing, and even to build structures to house the armies. There were vast amounts of food that had to be transported, and cooks to prepare that food.
Most of the craftsmen who traveled with the knights had never left their villages before. On the journey, they met and worked with people from other villages, from other countries, who spoke other languages. They were exposed to different ways to apply their crafts. The new people they encountered were not only fellow Europeans, they also associated with locals in the different places they went. This included Muslims. They developed friendships. Most important, as I see it, they encountered the Muslim Guilds. Originally begun in the 9th century as a way to control the quality and value of documents, the Muslim guilds had developed to control the quality and value of many other crafts. These guilds took various measures to protect their customers, and restrict access to techniques, materials, and markets. Through these guilds, the craftsmen were able to command a reasonable, preset price for their services and know they would not be undercut by a competitor. In other words, the guilds removed the control of the labor factor of production from the user (the lords, etc) to the provider (guild member).
The guilds did not return from the crusades fully developed. Being introduced (or, more truthfully, reintroduced, since they had been in existence during the Roman Empire) to a society that did not have them, they had to mature, through starts and stops. However, eventually, the mature guilds had some common characteristics in their charters: protection for the workers and protection for the consumers. The following is taken from the Medieval Guilds page of Medieval Life and Times:
Guilds in the Medieval times – Protection of Workers / Guild Members
The Guilds in Medieval times protected the workers, or the guild members as follows:
- Members of Medieval Guilds received protection from excessive taxes imposed by the lords and land owners
- Competition between members was regulated by fixed pricing policies – advertising and price cutting was banned
- Illicit trading by non Merchant Guild members was banned
- All members of guilds were obligated to retain all trade secrets
- The number of Guild masters and members of guilds were restricted to ensure there was sufficient business for each of the guilds
- Sickness Protection
- Protection for their members, goods and horses when traveling
- Help with funeral expenses. Orphans of members of guilds were also cared for
- Guilds funded the first non-religious schools of the Middle Ages
- Working conditions and hours of work were regulated
Guilds in the Medieval times – Protection for Consumers
The Guilds of the Medieval times in Medieval Times also protected the consumers. The spin-offs from the regulations of the guilds led to:
- Fair pricing policies – all prices were regulated by the guilds
- Quality of goods or workmanship. Goods and services were inspected and members of guilds were expected to undertake long apprenticeships.
A review of the mature guild charters reveals a strong similarity to today’s Labor Unions, in fact, they are the same thing by a different name. The first recorded registry of guilds is in 1170. Note that guilds funded the first non religious schools of the Middle Ages. This is important. The guilds felt it was their responsibility to ensure the education of their members and their children (ok, boys back then, for the most part). By establishing non religious schools, the guilds could teach students information that was outside that allowed by or pushed by the church.
Another factor of production was recovered for the guild members by the guilds. That is the factor called Enterprise. The guilds could, as a group, put together resources in a way that an individual could not. They could also provide a forum for sharing ideas that could lead to innovation. Innovation is a part of the factor called Enterprise. The sharing of ideas stimulated the minds of the guild members, and offered an incentive to innovate. We notice that the first castles built in the middle ages were essentially earth works, large earthen mounds. We begin to see stone castles emerging in the Norman castles in the 12th century, coincident with the emergence of guilds.
The playing field was greatly leveled with two of the four factors of production in the hands of the laborers.
Now I turn to discuss corporate feudalism. I begin by pointing out that the guilds, which broke medieval feudalism, were to all intents and purposes labor unions. The only difference is in the name, and many of our labor unions today call themselves guilds (i.e. screen actor’s guild). Labor unions are our antidote to corporate feudalism. We can trace the strengthening of workers rights with the rise of the Labor Unions. Unions got us child labor laws, paid vacation, company provided health care, the 40 hour work week, pensions, workplace safety and myriad other benefits.
We can also trace the weakening of workers rights over the past 35 years to the weakening of the labor unions. The pensions that our unions had won for us at great cost, have been largely lost since then. Health care and workplace safety are now at risk. Corporations are pushing to regain the labor factor of production by controlling the availability of jobs and removing the ability of individuals to defend themselves. Corporations are also pushing to regain the land factor. Notice their buying up of farmland and creating corporate farms. Notice their use of eminent domain to lay pipelines or create shopping centers and the like. They are using the financial system to make home ownership more difficult.
It is important for us to stand together with unions to restore their place in our financial system. An individual cannot stand up to the corporations alone. It is only through unity that we can reestablish the rights of the workers. In my next installment, I discuss the union movement in the U.S.