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Sunday, July 31, 2011

So much for the "invisible hand"
Posted by Jill | 6:13 AM
The idea of the "invisible hand" is that self-interest drives actors (in this case, corporations) to behavior that ultimately benefits society. The quasi-beneficent view of this is a corporation taking advantage of cheap labor to build a factory in a third-world country, but even those low wages are better than what the people there have now. Another example is Steve Jobs sitting in an office at Apple developing the iPhone (though whether that will ultimately benefit society in the long run remains to be seen). It's the basis of Thomas Friedman's "world is flat" theory, in which a New York Times columnist whose seven-figure income isn't at risk tells us that after companies run out of "race to the bottom" countries to which to outsource, everything will flatten out, even though it means that we peons who are not getting paid by the New York Times to write this crap will have to settle for a dramatically lower standard of income.

In the turmoil of the Washington budget battles, we have the airline industry, whose executives' motto is more Gordon Gekko than Adam Smith: Greed is Good. When faced with the opportunity of not having to pay federal taxes on airline tickets, are the airlines using it to build traffic and sell more seats smack in the middle of vacatin season -- the "factory in the poor country" model of benefitting society? Hardly. Instead they're raising base prices to make up the difference and pocketing the cash:
Several federal taxes on airline tickets expired over the weekend after Congress failed to pass legislation to keep the Federal Aviation Administration running at full speed.

Raising the fares allows the airlines to charge the consumer the same amount as before, while pocketing money previously collected for the government.

It could turn into a windfall for airlines if the stalemate in Congress drags on. The government estimates that the expiring taxes total $200 million a week. And with jet fuel prices much higher than last year, airlines can use the cash.

As of midday Monday, nearly all large U.S. airlines had raised prices, but fare watchers said Alaska Airlines, Hawaiian Airlines and Spirit Airlines had not. The CEO of Spirit, a small, low-fare outfit that accounts for less than 1 percent of the market, said the industry looked bad.

"The taxes that Spirit and all the other airlines collect don't belong to us," Ben Baldanza said. "It's the taxpayers' money. It was never Spirit's money. It would be a grab to take that money."

Mr. Baldanza, you'll never be accepted into the rich guys' club with an attitude like that.

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Blogger Grung_e_Gene said...
The proposal of any new law or regulation of commerce which comes from this order [As is speaking of "those who live by profit"], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it. Adam Smith Book1, Chpt 11.

Lower taxes on the Corporations and the Wealthy translate to bigger Cayman islands bank accounts not more jobs or cheaper prices...