21 November 2022
The Black Death provides a particularly vivid picture of the effect on wage rates of a sudden and significant drop in the labour supply. By 1348 the Black Death had reached England. The effect on the labour supply was so swift and severe that Edward III issued the Statute of Labourers Acts of 1349 and 1351 which set maximum wage rates based on the average for the period 1325-1331. The statutes were a complete failure. From 1348 to 1377 successive waves of the Black Death slashed the population from 4.8 million to about 2.9 million1. The result was an increase in the ratio of land and capital to labour resulting in real wages rising by about 50 per cent2. Writing in 1375 John Gower, a country gentleman, lamented:
Labor is now at so high a price that he who will order his business aright, must pay five or six shillings now for what cost two in former times…the poor and small folk…demand to be better fed than their masters3
Henry Knighton, a canon of Leicester, wrote in 1388 that
the elation of the inferior people in dress and accoutrements in these days, so that one person cannot be discerned from another in splendour of dress or belongings, neither poor from rich nor servant from master4.
In the same year canons in Normandy complained the demand for labour had increased to the point that they
who did not demand more than six servants would have been paid at the beginning of the century5.
In 1356 the managers of the Florentine mint reported that the workers
at the mint do not want to work except when it suits them. And if one remonstrates with them, they reply with vulgar and arrogant curse words say they only want to work when it is convenient to them and provided there are increases in salary6.
This brief foray into medieval economic history was necessary to bring home the indisputable fact that the ratio of labour to capital is of vital importance, an importance that is generally ignored. Therefore, we find that large changes in the labour supply relative to the capital structure have significant effects on wage rates. It is also true, as stated previously, that productivity7 can for a time conceal the negative effects of a heavy immigration inflow.
In my last article [https://gerardjackson.com/the-globalists-policy-of-open-borders-would-be-catastrophic-for-the-workers-2/] I used Paul Samuelson’s highly simplified model, presented in the form of a table, that illustrated why wage rates would fall once the labour force exceeded the point where wages are at a maximum8. It followed from this that a policy of unrestricted immigration would drive down wage rates and hence the standard of living. Samuelson presented the same idea in the form of a curve9, as shown below. The left side of the curve is where real wages are rising because the ratio of labour to capital is high. The right side of the curve shows what happens once population growth exceeds the growth of capital accumulation. This is where productivity declines with each increase in the labour force. Therefore, as Samuelson put it:
The limitation of any grade of labor relative to all other productive factors can be expected to raise its wage rate10.
He concluded that all things being equal an increase in the labour supply, meaning a rise in the ratio of labour to capital, will drive down wages. Of course, proponents of open borders
will correctly point out that all things do not remain equal. However, these are the same people who choose to ignore the self-evident fact that a flood of unrestricted labour would quickly cause the rapid growth in the population to exceed the per capita growth of capital accumulation that defines economic growth.
Despite these facts we have the likes of Professor Sinclair Davidson11 peddling the economic fallacy that immigrants should be welcomed on the grounds that they not only increase the demand for goods and services but they also increase the supply of goods and services. Davidson assumes that at the very least immigration will not drive down wages because “International trade and immigration are not substitutes, they are compliments12.” In other words, there is no fundamental difference between trading across borders with foreigners or trading with them as immigrants. This is a fallacious argument produced by a failure to distinguish between the direct services of labour and the products of labour. On this issue Nassau Senior13 made two points. He correctly notes that
it is the common error of supposing that the general rate of wages can be reduced by the import of foreign commodities. In fact, the opening of a new market is precisely analogous to the introduction of a new machine, except that it is a machine which it costs nothing to construct or keep up. If the foreign commodity be not consumed by the labouring population, its introduction leaves the general rate of wages unaffected; if it be used by them, their wages are raised as estimated in that commodity.
The vast majority of economists would be in full agreement with this statement. However, in another part of his book he gives a simple example of immigrant labour forcing down wage rates. In the first case trade took part place tween individuals in different goods who freely exchanged the products of their labour services. In the second case immigrant labour drove down the wage rates of native labour by directly competing with its services. These economic facts reveal as nonsense Professor Davidson’s assertion that a “ restriction on immigration is a restriction on economic prosperity”14. Nevertheless, the proponents of open borders adamantly refuse to admit that theirs is an outrageous anti-growth policy that would drive poverty to historic levels.
In 2017 1,470 economists signed an open letter15 on immigration that was addressed to leaders of Congress and to the president. To all intents, the signatories were calling for open borders while overlooking the fact that open borders means no borders. The signatories were big enough to admit that there would be costs for some groups of American workers, meaning most of them. On the other hand, they assured the recipients of their letter, without providing a shred of evidence, that the benefits of mass immigration would outweigh the costs, costs that they themselves did not expect to bear.
The letter was organised by the New American Economy, a group founded by the multi-billionaire Michael R. Bloomberg that acts as a front for other multi-billionaire business interests16 such as Marriot Hotels, Disney and Murdoch’s News Corp. The shameless aim of these business interests is to use mass immigration as a tool to drive down wage rates, which is nothing less than a direct attack on the standard of living of the masses. Were these 1,470 economists aware of these facts or did they choose to ignore them because they don’t give a damn about the little people?
A visit to the New American Economy website immediately brought to mind Darrell Huff’s How to Lie with Statistics17, a lively and informative work on how statistics can be used to deceive the public. There is no doubt the author would have had a field day with this organisation’s gross abuse of figures. While the figures themselves are strictly accurate the manner in which they are used is grossly dishonest. One figure puts the total spending power of illegal aliens (they call them undocumented because they find the word illegal deeply offensive) in 2018 at $217.7 billion (1.1 per cent of GDP) while another puts their total income at $249.7 billion.
Then there is their dishonest approach to GDP. They estimate that without these illegal (there’s that awful word again) immigrants America’s GDP would drop by $1.6 trillion. Regardless of the accuracy of this figure what matters, as they well know, is per capita GDP, an important topic they studiously ignored. But Samuelson’s model tells us that if this $1.6 trillion was obtained by forcing per capita income down below what it would otherwise have been then the economy, and hence Americans, would benefit from its removal.
It is obvious that the magnitude of these figures is designed to deceive readers into thinking that the earnings and expenditures of illegal aliens make a significant contribution to economic growth. Ergo, not only would mass deportations depress the economy more illegal aliens will raise economic growth. But Samuelson’s and the optimum population curve clearly show that raising the ratio of labour to capital beyond the point where incomes are maximised means wages must fall if employment is to be maintained. It’s clear that the total earnings of illegal immigrants comes at the price of reversing economic growth.
That unrestricted immigration will first slow growth and then reverse it is a fact that must be continually stressed. This is the real economic cost of mass immigration. There are, of course, other very severe costs18 that proponents of this destructive policy choose to ignore if not actively suppress. The malevolent behaviour of the fabulously rich likes of Sir Evelyn, George Soros, Tim Cook, Jeff Bezos, Jack Dorsey and their ilk brings to mind the observation by Keynes that
dangerous human proclivities can be canalised into comparatively harmless channels by the existence of opportunities for money-making and private wealth, which, if they cannot be satisfied in this way, may find their outlet in cruelty, the reckless pursuit of personal power and authority, and other forms of self-aggrandisement. It is better that a man should tyrannise over his bank balance than over his fellow-citizens; and whilst the former is sometimes denounced as being but a means to the latter, sometimes at least it is an alternative19.
Unfortunately Keynes failed to foresee the emergence of a hubristic and malign class of -anti-growth multibillionaires who have arrogated to themselves the privilege of reshaping the world in accordance with their personal preferences. This new global order is to be achieved by corrupting the political system, viciously smearing those who resist their ambitions and bullying the mass of people into submission. This galère of self-anointed autarchs have absolute moral and intellectual contempt for the great mass of people and their God-given rights.
1M. W. Thomas, A Survey of English Economic History, Blackie and Son LTD, 1957, p. 41.
2Carlo M. Cipolla, Before the Industrial Revolution: European Society and Economy 1000-1700, W. W. Norton and Company, 1980, pp. 202-206.
Jean Gimpel, The Medieval Machine, Pimlico, 1993, pp. 111-12, 213-17.
3Gordon g. Coulton, Social life in Britain from the Conquest to the Reformation, University press, 1918, p. 353.
4John Hatcher, Plague, Population and the English Economy 1348-1350, The Economic History Society, 1977, p. 34.
5Fernand Braudel, The Structures of Everyday Life: Civilization and Capitalism, Phoenix Press Vol. I, 1981, p. 193.
7Productivity is frequently referred to in the media as economic growth. It is not. Productivity is produced by investment that produces a rise in the productivity of labour. This is why expenditure on so-called renewables is not investment: it is anti-investment because it wastes resources and increases the costs or production.
8Paul Samuelson’s, Economics, 10th, edition, 1976, p. 731.
9Ibid. p. 576
10ibid. quote 575
11Sinclair Davidson, Immigrants boost the economy and should be welcomed.
13Nassau W. Senior, An Outline of the Science of Political Economy, Augustus M. Kelley, New York 1965, p. 168.
14Immigrants boost the economy and should be welcomed.
16The letter was organized by the New American Economy advocacy group, which is a spinoff of the Project for a New American Economy. The board members include the heads of Disney, Marriott Hotels, and News Corp., which is the parent of Fox News, all of whom would gain from a greater inflow of legal or illegal welfare-aided immigrant consumers and cheaper employees.
17Darrell Huff, How to Lie with Statistics, Victor Gollancz, 1954. There is also W. J. Reichman, Use and Abuse of Statistics, Methuen, 1961.
18Amnesty Would Cost the Social Security and Medicare Trust Funds Hundreds of Billions of Dollars. These are just some of costs of mass immigration. On the other hand, it would give Democrats a massive majority that would see the end of the American Republic and its Constitution.
19John Maynard Keynes, The General Theory of Employment, Interest and Money, Macmillan, St Martin’s Press for the Royal Economic Society, 1973, p. 374.