William Pfaff has an interesting take on the work of 18th century economist
David Ricardo. Ricardo argues that in a true open market, wages will
tend to stabilize at subsistence level; any lower and workers will start
to die or riot, any higher and jobs will tend to relocate in search of
lower wages. Welcome to that brave new world.
The iron law of wages is also simple and logical. It says that wages
will tend to stabilize at or about subsistence level. That seemed inevitable
to Ricardo, since while workers are necessary, and so have to be kept
alive, they have no hope of any better treatment since they are infinitely
available, replaceable, and generally interchangeable.
Ricardo’s wage theory has seemed untrue. The supply of competent workers
in a given place is not unlimited; neither workers nor industry are perfectly
mobile, and labor demonstrated in the 19th and 20th centuries that it
could mobilize and defend itself. The iron law of wages would seem to
function only if the supply of labor is infinite and totally mobile.
Unfortunately that day, for practical purposes, has now arrived, thanks
from the International Herald Tribune