The Other Side Of Hanauer: A Plutocrat For Poverty

Tyler Durden's picture

Submitted by James E. Miller of Mises Canada,

In America, and to a certain extent in Canada, rich businessmen are seen as savvy at their craft. After building an empire of wealth, it’s hard to challenge a successful person’s view of market economies. Business owners have to make payroll and navigate through government regulations. They have firsthand experience with the ins and outs of making sure consumers are satisfied. Driven by profit, they have little need for onerous tax collectors and do-goody bureaucrats standing in the way. Therefore, when an affluent businessman speaks, his word is typically taken as the unvarnished truth.

Things are not always that straightforward however. Not every capitalist prefers capitalism. Not every entrepreneur wants a free market. Not every Ayn Rand-like figurehead wants the government to adhere to strict and limited principles.

That’s exactly the case in a recent Politico Magazine article penned by Seattle investor Nick Hanauer. Titled “The Pitchforks are Coming…For Us Plutocrats,” the piece is written exclusively to the “.01%ers” who aren’t too busy from their day job to read the webzine version of a political gossip hub. What I mean to imply is that the article isn’t written for men and women who have their hands full putting billions of dollars to work in the economy. It’s written as a self-assurance tract for progressives who want to justify their “eat the rich” hankerings.

Hanauer starts out by hammering on the favorite trope of all leftists: inequality. He points out that a few decades ago “the top 1 percent controlled about 8 percent of U.S. national income” while the “bottom 50 percent shared about 18 percent.” Now in 2014 he claims, “the top 1 percent share about 20 percent; the bottom 50 percent, just 12 percent.” With this kind of divergence in wealth ownership, it’s just a matter of time before the people on the bottom rise up and reclaim what’s theirs. Hanauer writes that it’s impossible for society to “sustain this kind of rising inequality.” Before long, “the pitchforks are going to come for” him and his fellow super rich.

Now there is certainly a case to make that much of the economic inequality we have is unjustified. When governments dictate large portions of the economy, much as they do now, it has the effect of cementing the politically-connected on top. Small businesses and entrepreneurs have a more difficult time breaking into the marketplace when big players can keep them out via state mandates. The big banks, auto companies, large department stores, and software companies with loads of patents all take advantage of the government’s legal use of force to suppress competition. Their profits go up as a function of not necessarily satisfying consumers, but by not having to innovate as much.

Hanauer addresses none of this. He goes into the great need for the wealthy to start working with the government to chisel down the difference between the haves and have-nots. One recommendation he makes is for the moneyed to adopt the approach “Franklin D. Roosevelt did during the Great Depression” in order to help the middle and lower class. The idea that FDR was a boon to the poor is, of course, fiction. Roosevelt’s capricious New Deal regulations did nothing to cure the Depression; rather they elongated the downturn for over a century. Not only that, but the fascist cartelization of the economy through the National Industrial Recovery Act restricted many small businesses from even getting off the ground. There was also the blatantly racist housing policies that purposefully created inner-city ghettos by diverting tax subsidies away from urban centers.

In true ignorant fashion, Hanauer addresses none of the unintended consequences of government economic regulation and goes right for a direct solution: forcefully raising wages. He isn’t alone in this crusade. Large companies like Wal-Mart and McDonald’s have already embraced raising the minimum wage for putatively humanitarian reasons. Hanauer is just going off of their lead, and advocating for the Henry Ford approach to selling cars. The myth goes that Ford paid his employees an exorbitant, unprecedented wage – $5 a day back in 1914 – so that they, too, could afford the cars coming off the assembly line. This wage policy decimated Ford’s competition. He could afford to pay wages his competitors could not. This boost in take-home pay attracted better talent, which in turn lead to more production, and thus more profit.

The business approach was not meant to last however. When the Depression set in, Ford attempted to pay his employees at least $7 an hour. Instead of increased orders, the number of cars purchased fell. Employees ended up accepting lower wages and fewer work hours. Ford blamed company owners who only emphasized “profit motive” over wages. His reasoning was nonsense; if simply paying your employees more ensured higher employment and purchasing power, his original solution would have worked. Instead, the opposite occurred. Once again, one of America’s premier capitalists had the rules of economics completely backwards.

As Henry Hazlitt wrote in Economics in One Lesson, the logic behind the “enough to buy back the product” practice is completely flawed. The promoters of the purchasing-power theory, such as Mr. Hanauer, can’t expect “the makers of cheap dresses should get enough to buy back cheap dresses and the makers of mink coats enough to buy back mink coats.” In modern terms, it can’t be enough for the baristas at Starbucks to make enough to buy a $2 cup of coffee. They have to want something more. The only way Ford’s train of thought works is for everyone to work in industries that produce expensive goods.

In a clever move of obfuscation, Hanauer cites the growth of small business payroll in Seattle and San Francisco – two progressive paradises with the highest minimum wages in the country – to back his claim that higher government-mandated wages boost job creation. What he either forgets or purposefully hides is the effect of large businesses like Microsoft,, Wells Fargo, Google, and Twitter that are all headquartered in both cities. These businesses aren’t paying their employees a wage slightly above the minimum threshold. They’re doling out big salaries because of their ability to produce cutting-edge products and please consumers. The rise in small businesses around these industry giants is a result of the latter’s success – not the other way around.

If Hanauer really wants to test out his theory, I propose this to him: shed your billions of dollars and give the money directly to your employees. Drain your bank accounts and give the proceeds to the spend-happy middle class. If consumer demand truly grows the economy, then the profits will come roaring back. There will be no time gap between having to adjust capital investment to make sure goods reach store shelves. There will be no inability to purchase raw materials or pay employees while waiting for the finished product to hit the market.

As any basic economics student will tell you, that’s all patent nonsense. There is not getting around the fact that if you raise the price of labor, you will get less of it. Demand curves always slope downward. The minimum wage is always a creator of unemployment, no matter how many entrepreneurs or business owners say otherwise. Hanauer is right that economic inequality can create resentment. But he doesn’t see the real culprit: a government that insists in meddling in the marketplace. His solutions don’t fix the problem; only exacerbate it.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Skateboarder's picture

I thought we already talked shit about Hanauer.

Here's a complimentary 'fuck you' anyway, Nicky boy.

knukles's picture

"Dead broke.  Will lie about Benghazi for cash"
    - H R Clinton

Beam Me Up Scotty's picture

Sure, just like Warren Buffet. Argue for higher taxes all the while disputing a billion dollars the government says he owes. And taking full advantage of loopholes .gov created for him to pay less taxes as a % of his income than people who make far less. Fuck them. Pay your employees more then, it's pretty simple. All the government does when it redistributes is take a big cut.

jbvtme's picture

way the fuck too many chumps go through life thinking making money is all there is

Anusocracy's picture

"What he either forgets or purposefully hides is the effect of large businesses like Microsoft,, Wells Fargo, Google, and Twitter that are all headquartered in both cities."

There are a number of cities that are in the catbird's seat because of finance or high tech - as Detroit was in the catbird's seat for car manufacturing 50 years ago.

cifo's picture

I thought it's Groundhog day.

Anusocracy's picture

For Detroit, whack-a-mole.

localsavage's picture

You don't get billions by being normal.  Normal people cash out and enjoy the money long before they reach a billion.  It takes a special kind of sociopath to keep it up when he could be in any number of countries banging the hottest young tail there is.

PeeramidIdeologies's picture

So what is your definition of a sociopath?

Anusocracy's picture

Here's mine.

A person who manipulates, controls, or uses other people as objects.

In other words, someone who doesn't think that another person is a person.

tolivian's picture

Let's simplfy: a politican or government bureaucrat. While perhaps not all, certainly covers most.

Anusocracy's picture

Definitely. Government is a playground for psychopaths.

SofaPapa's picture

What I remember about Hanauer's original article was that he pointed out that he wasn't the smartest guy in the room and didn't have inventions to his credit.  Instead, he said, he had a gift for seeing trends in the future and the confidence to invest in those trends.

What he didn't say is that there's a simple word for that activity: speculation.  It's a polite word for gambling, but it sounds more polite, because it's not gambling, it's "investing".  The reason Hanauer and his friends are so rich is that speculation is the activity that government policy has favored for the past thirty years.  Because he and his friends had money and connections to get into schemes early, they were first in line at the printed money spigot.  Thus the printed money multiplied for them.  But they contributed nothing (as he himself admits) except the seed money.  Money begat money, and nothing more.

All of which would be acceptable if they were to lose when their bets went south.  But that didn't happen.  From the 1990s on, Greespan, Bernanke, and now Yellen assured that if there were to be a serious housecleaning where the speculators would realize the losses they made when their "investments" failed, that housecleaning was / is prevented, at whatever cost was / is required.

A fundamental inequity such as this cannot be treated with upping the minimum wage.  It requires fire.  A major fire that burns everything.  That is why the pitchforks are coming out, Mr. Hanauer, and you are not going to be able to bribe the masses out of it when it comes.

ConfederateH's picture

"Money begat money, and nothing more."

let me fix that

"Money and corrupt connections begat money, and nothing more."

ronron's picture

o/t where the fuck is banzai?

wisefool's picture

I miss him too. I hope he is well. If so, it will be worth the wait when he gets back.

disabledvet's picture

Not the first of our disappearances in these here parts. "The list is long in the Blog of Death."

And of course while all of us are targets The Commentariat strikes yet another fatal blow at the clap trap and gobbley-gook from above.

"In a world of deceit merely saying the word truth is punishable by death" not just the idea of truth...let alone that truth exists.

So all we are left is A Battlefield and the Fog of War. "If the separation between man and woman rises high enough we can simply eliminate desirability itself."

No one "wins" these things. Biologically and rhetorically speaking we are hard wired to think in these enter into matters where it is "we" that matter most. ("We" the rich. Or "we the poor." Or "we the blessed" or "we the announced."). But in the end it is "you"...all about you and only you...doing what you're told, being beaten, left by the roadside to die...without even your soul intact.

"To win we must accept that we are everywhere and always the loser" and proceed from there.

TeamDepends's picture

Better yet, give the billions to Obama.  He'll redistribute that wealth like the socialist champion he is.

Anusocracy's picture

Ten billion dollars, spent over two decades, would probably cure the most deadly of all diseases: aging.

tolivian's picture

As I was tooling around the freeways (ok, stopping and starting and cursing other crivers) I learned via radio that Californians are not "happy" with the distribution of wealth in state. If that doesn't scare you, you are beyond fear. Of course that assumes that you actually earn a living rather than suck a living out of the productive sector. CA probably leads the country in number of government workers.

Da Yooper's picture

Is this the same "Hanauer" who is pushing & backing $$$$$ gun control ?

fonzannoon's picture

This guy Hanover is a putz with the minimum wage. The discussion needs to move past raising minimum wage for bullshit service jobs and graduate to just sending everyone 3k a month. Everyone else is jumping on board



Beam Me Up Scotty's picture

Just send everyone a million. We could all be rich!!

tickhound's picture

You unknowingly highlight the catch 22.

This article is Clash of the Titans... Two fucking losers.

Gumbum's picture

"The minimum wage is always a creator of unemployment"

You can say that all the way down to the sweatshops in Bangladesh or even about the slaves who build the pyramids in Egypt. Doesn't make it right...

There is no good economic reason to why a small elite should hoard everything.

knukles's picture

Pyramids and Egyptians?*


*  "You didn't build that"
     - Khufu

Beam Me Up Scotty's picture

The minimum wage debate is a waste of time. Prices just get raised to compensate for the higher wages. You gain nothing. Only way out of a minimum wage lifestyle is to get a job that pays more than minimum. You might have to work a bit harder or think a bit harder though. Some people don't like to work or think though.

fonzannoon's picture

Scotty what if you could actually pull it off? What if you could get every adult 3k a month and balance it out so you don't have to hyperinflate. You think this country would ever be up for trying it? What if Canada goes for it and pulls it off?

PeeramidIdeologies's picture

How would that be possible? Everyone suddenly has a guaranteed check for life? Every good and service would have to be under such strict regulation that you wouldn't even notice the extra money. If you were allowed to spend the money it would be such a boom in commerce there would be no turning back. Free shit to the end of the world!.... Which doesn't sound that bad to be honest... Let's do it!

putaipan's picture

walmart wage - less. than 10$/hr. costco - 20$ /hr. you do the math.

anyway- regardless of this guy's agenda ....fuck you! and all that think like this too.

this guy, and pickety, are getting milage 'cause somebody likes their message, but i'll take michael huson and wash.'sblog for my analysis of the problems of 'ineaquality' not some neo-austrian who feeds at the trough of 'austerity'

tickhound's picture

Egyptians as to the Pyramids:

No, we didn't build that...


Anusocracy's picture

"There is no good economic reason to why a small elite should hoard everything."

Sure there is. Government creates the operational framework for the economy and the elites run the government.

Of course, the elites, being the magnanimous beings that they are, create a system where the wealth can trickle down to the lower and middle classes.

tolivian's picture

If you think the porblems in Bangaldesh and Egypt are due to a few fat cat businessmen paying low wages while chuckling at their employees, then  you understand virtually nothing about how the world works. The "rich" in these countries are government officials pocketing the goods while stifling indiviudal freedom or effort or entrepeneurialship that would change the picture. Much like many of the rich here whose good fortune is due to governmentn helping them by eliminating competition, stilfing innovation with mindless regulations, and just generally being a typical thuggish incompetent brual government.

Here in good ole CA they just raised the minium wage to $9 largely supported by big companies. Let's push those pesky little competitive bastards out of business. 

In'N Out, a fast food hamburger franchise out here that is a cut or 2 above Macs. just raised the prices on combo meals and other items $1 the day the minimum wage went up.

Doesn't sound like much unless you couldn't afford it before. 

Great idea this minimu wage increase that appeals to you soft headed liberals. It's the same principal as the economic "seen & unseen" discussed elsewhere today. Some few will get higher wages for

awhile but jobs will be lost as they won't hire replacements, not because the Scrooge business owners are twirling their mustaches and chortling as they count their filthy lucre behind the closed doors. No fewer

will be hiiered because the business will fail if it doesn't make a profit. So let's see, putting a caompny of of business because to the very concept of "profit" is evil. Profits be damned. Let's put everyone out

of work rather than just trim a job here or there, because we don't want anyone to make a profit. 

Most likely, the hamburgr flippers will be raplced with computers and robots. Some local grocery stores have almost eliminated cashiers - often over the protests of union thugs. I remember walking through a few of those picket lines wondering what the hell they expected when the last contract forced wages for your basic dullard way too high to justify with any reasonable business model. 

Thanks for all the touchy feely liberal garbage, Bet you feel so much better about yourself. You and your fellow statists are pushing the low skilled, low information, low educated guys and gals right to the 

sidewalk and/or gutter while patting yourself on the back congratulating cretins like Hanauar. Thanks for the feeling so good about yourself without understanding the harm you are doing to the very people you are pretend to be so desirous of "helping." Moron. Try talking to someone who actually has a business and must meet payrolls, pay taxes and put up with bureaucrats so dumb they shouldn't be let out on their own. 

Barry Freed's picture

Better he spent his billions on millions of pitchforks, torches, and anonymous masks if he wants real change.

what's that smell's picture

if my cat doesn't bury her hanauer, it stinks up the house.

bury the hanauer.

Shizzmoney's picture

Large companies like Wal-Mart and McDonald’s have already embraced raising the minimum wage for putatively humanitarian reasons

No they haven't.  It's a lie and a scam and its lol you believe it

Notsobadwlad's picture

I get tired of the "so called" self-made billionaires, who are in fact nothing of the sort. They were born with a silver spoon in their mouth and daddy through his connections and loyalty to the power got them into the position to be anything at all.

I really had never heard of Hanauer ... a jewish scion who never had to do any real work in his life. I have heard of Bill Gates, Warren Buffet and Mark Zuckerberg... all similar stories. They are what they are, because they were made through connections, not created by them, but those who managed them... a shall we call it "a select and cohesive group".

The American dream is as much a fraud as the American government.

pathetic looser's picture

not trying to argue with you just wondering what kind support zuckerberg had. i thought he did it (ethically or not)  all himself. could you let me know?  

knukles's picture

I'd suggest not naming a girl Swallow

billwilson's picture

More Mises drivel..  Bring on the pitchforks.

JR's picture

The rich, trying to tell the truth about inequality such as found in Hanauer’s mainstream media piece, need our encouragement to step forward. But James Miller touches on the core truth and it is not only government meddling that is the problem; it is the cartel of oligarchs that control the government. They have shut off the air supply for America’s economic future.

It’s now clear; no economic incentives are available to Americans in this central bank shoot-off.

The Fed strategy -  a mixture of Keynes’ philosophy and John Dillinger’s bravado - is to force all assets into the blind canyon of high frequency snipers who stand on the ridge line shooting the helpless and hapless savers, homeowners, college students, and small investors and businessmen.

The people’s only play here is to constantly try to hide their assets from the rustlers, moving and running from place to place as the central bankers hunt them down and attack, much like Stalin’s Red Army running rods through the walls of the peasant shacks looking for hidden food.

Anusocracy's picture

A while ago, America reached a fork in the road. One way was labeled 'Freedom and Prosperity', the other was labeled 'Detroit'.

America chose 'Detroit'.

Ned Zeppelin's picture

JR you are a good writer

exomike's picture

 A guillotine for Mr. Miller.

Miffed Microbiologist's picture

This is about as stupid as when Starbucks sold these " Job Bracelets". For 5 bucks you bought this cheesy bracelet to help create jobs. Plus you then could show all your friends how much you cared by wearing the damn thing and inspiring idiot others to do the same. Probably the same people have a " Coexist" bump sticker on their car.


knukles's picture

Coexist bumper stickers!

God, people in California* are so fucked up.  I know a lady who has one on her Prius.  She speaks about love, diversity, local agriculture, inclusiveness and all the "right words" but listen to her rail on about Republicans or Christians...

I asked her why she didn't have a Volt.

* The vanguard of all America, leadership in thinking and trends.  The fuckers on the East Coast are no better, BTW.  They just ride in limos instead of electric hybrid eagle killing propeller dependent machines

Anusocracy's picture

Naturally, her diversity doesn't include people with different mindsets.

Like anarchists.