What’s So
8th April 2015
Don Boudreaux, a Real Economist, debunks a few common economic myths.
Josh Billings famously quipped, “The trouble ain’t what people don’t know; it’s what they know that ain’t so.” He was correct, especially as this keen observation applies to history.
Everyone knows, for example, that minimum-wage legislation is meant to help the working poor. A study of history, however, shows that this just ain’t so.
What is so is that the Fair Labor Standards Act of 1938 — the legislation that created the national minimum wage in America — was designed to protect the higher wages of Northern textile workers, and the profits of Northern mill owners, from the intensifying competition unleashed by Southern textile mills in the Carolinas and Georgia.
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Another historical myth is that Southern slavery harmed only the blacks who were enslaved. There’s no doubt that those who suffered most grievously from slavery were the slaves themselves. But slavery also inflicted great economic harm on non-slave-owning whites in the South.
Most obviously, slavery artificially reduced the supply of workers available to work in whatever factories and businesses might have been established by non-slave-owning whites. Therefore, these whites — who outnumbered slave-owning whites, even in the South — suffered reduced opportunities to launch their own businesses. In the South, chattel slavery stymied the single greatest force for widespread and sustained economic growth: market-directed entrepreneurship.