VANCOUVER ( BullionBullsCanada ) -- In Part 1, I briefly reviewed the approximately 400-year history of our current low-wage/high profit economic model. At the conclusion, I boldly predicted I could show the "great evils" of this economic model, while simultaneously claiming I could demonstrate -- empirically and theoretically -- that a high-wage economy leads to "maximum innovation, maximum efficiency, and maximum prosperity." Time to deliver.
The most obvious "evil" of a low-wage economy is an artificially low standard of living for the vast majority, so that a small minority can enjoy a much higher standard of living -- and build-up ever larger hoards of wealth, which damage the economy still further. The wealth which circulates in our economies is like the blood which circulates through our bodies. As these very wealthy parasites suck all the wealth out of our economies, the economies sicken and die, much like a person sickens and dies through losing too much blood. This is the primary dynamic which has doomed not just nations but even the greatest empires, throughout history. They did not succumb to external threats, but rather they disintegrated from within via the collapse of their economies, as the wealthy minority hollowed-out these empires, leading to their inevitable implosion. The other "great evil" of the low-wage/high profit economy is less obvious, but equally destructive, since it is the principal vehicle for extracting what little wealth is held by the little people -- i.e. the "common worker." A low-wage/high profit economy must lead to the evolution toward an economy filled with nothing but oligopolies and monopolies, based upon the basic principles of wealth allocation, risk assessment, and profit maximization. To begin with, a low-wage economy not only directly implies high profits but easy profits. It's a lot easier to make a profit off the back of a worker's labor if you pay that worker "minimum wage" than if you pay him enough to support a family. It also directly implies high profit margins. In a capitalist economy, where "free markets" and "competition" supposedly exist, such high margins should cause new entrants to enter the sector -- producing competition and thus leading to more moderate profit margins. However, high profits allow for the accumulation of large hoards of capital, while high profit margins give those companies already in a sector the ability to slash prices, choking off new entrants into the sector who lack both the reserves of capital and the "economies of scale" of their larger, established competitors.