About Gilder's msg.

[David Farber <farber@central.cis.upenn.edu>]

Date: Fri, 14 Jul 95 14:58:43 EDT
From: wfs@image.mit.edu (William Schreiber)




George Gilder has made my day.  Being attacked by him today is nearly as
satisfying as it once was for people to get on Nixon's Enemies List.  I had
thought that Gilder knew who I was, since he once interviewed me for an
article on high-definition TV.  However, he seems to have me confused with
some leftist extremists.  I don't even know what a "commanding canard" is --
Capt. Donald Duck?


I am really a capitalist, and very much interested in helping to make American
capitalism once again the provider of a steadily improving standard of
living for all our citizens.  I was cofounder of two small companies that
were moderately successful, and am a participant in a third (Electronics for
Imaging, San Mateo, Calif) that is close to being the fastest-growing
company in the US.


For a much longer piece that expresses essentially the same sentiments as my
NYT letter, see the cover article "Wages" in Business Week of 17 July.
There are lots of numbers given, and they support my view of what is going
on, not Gilder's.  No doubt Gilder will not be convinced.  Business Week,
after all, is to the left of Forbes.


For those of you who did not see my letter, in which I presented no proposals
for solving today's economic problems, I append it to this message.  For a
sees the next message.


wfs/corres/gilder
The letter:
8 Ellery Square
Cambridge, Mass. 02138
24 June 1995


The New York Times
229 W. 43rd St.
NY 10036


To The Editor:


Bad News for Workers (editorial 6/24) will also prove bad news for
capital owners.  In today's pressure for higher productivity and
improved international competitiveness, reducing the number of
employees and their wages has become a widespread and socially
acceptable practice.  As a result, demand drops, inventories build up,
cutbacks increase, and we head into the classical spiral towards
depression.  While the effects can be staved off temporarily by
emphasizing overseas developing markets, domestic personal spending
still accounts for 2/3 of our economy.  It is not possible to take
money out of the pockets of comsumers without soon noticing the
effects at the cash register.


Today's managers have apparently forgotten the lesson taught by Henry
Ford, dean of American capitalism.  He discovered that by paying his
auto workers the then-princely sum of five dollars a day (to the
dismay of the rest of the auto industry) it became possible for them
to buy Ford cars.  High wages, in the end, produce high profits.  It
should be kept in mind that the recession that cost George Bush his
office was due to falling demand.  This resulted from the fact that
wages of American workers had been falling during most of the
Regan-Bush years.


Jobs today are harder to get, easier to lose, have lower security, and
pay less than they did twenty years ago.  None of the dramatic
productivity gains of this period have gone to workers.  Aside from
the purely economic consequences mentioned above, this represents a
repudiation of the American social contract.  This unwritten contract
has generally resulted in a steadily increasing standard of living and
an aura of optimism that has gone far to produce domestic tranquillity.
As money tightens at every level of government and at many
nongovernmental organizations such as schools, hospitals, and social
service agencies, we are seeing that the tranquillity, much valued by
our founding fathers, disappear as we start fighting over allocating
the remaining funds.


This problem can not and will not be solved by the free market.  On
the contrary, it has been produced by a form of free market in which
enterprise takes actions that produce that highset profits in the
short term.  Since that is what managers are now paid to do, we
ought not to be suprised by the results.  If we want some other result,
we shall have to open our eyes to other possibilities.


For a longer statement of what I really think, see the next msg.


Very truly yours,




William F. Schreiber
(Prof. of Elec. Eng., Emeritus, MIT, for ID only)