MLM combines the worst aspects of capitalism and peudoscience

A few days ago I visited my sister, who has unfortunately bought into a bunch of these scams, and was intrigued by her cleaning supplies, and not in a good way. In her bathroom, Thieves brand hand soap. In the kitchen, Thieves brand household cleaner. Then today I noticed in my kitchen, Thieves brand hand soap, which I assume my grandmother bought from her because as the title of this post may have tipped you on, Thieves is one of those multi level marketing schemes that is robbing the poor and desperate in this country while they gladly get out their checkbooks for them. It must absolutely thrill the Thieves company how many people sign up despite the name being largely accurate.

Anyway, I did a quick google and found out that the Thieves name supposedly comes from a concoction of lemon and eucalyptus and some other cheap ingredients that a gang of thieves used to protect themselves from bubonic plague and it also prevents all flu and cold. This raises so many questions, but I'm going to point out two. First, as Monty Python fans should know to ask: where did they get eucalyptus oil. Eucalyptus only grows in Australia, which was an unknown continent to Europe at the time. Did it migrate? Was it carried by dodo birds? Secondly, if this has been known to prevent all flu and cold for 400+ years, why are we just hearing about it now? So I'm not even going to look at whether the stuff works because I don't have time to test all the stupid claims made by MLM companies about how 1/5 lemon to 4/5 eucalyptus does nothing extraordinary but 1/3 lemon to 2/3 eucalyptus cures every disease on earth and brings world peace and allows you to survive a nuclear blast or whatever the hell they claim. There is peer review and the FDA for a reason.

But really, the bulk of this article isn't even about the stupid, stupid claims made by MLM. It's about how multi level marketing is such a good illustration of what's wrong with capitalism, especially unfettered capitalism or libertarianism (the US version, anyway). So first why don't we ask: with such stupid claims, why aren't more MLM companies sued for fraud? And the basic answer is that the companies themselves don't make these claims directly. They list vague effects such as "Protandim may help with any of these 50 conditions", or "Thieves oil is good for the flu". Or they have spokesmen give anecdotes like "I was 270 lbs but then I took Herbalife and lost 350 lbs, turned into an antimatter bomb, and blew up the planet!", "These drinks I got through AmWay turned me back from a newt!", or "At my wake, a friend poured some TrueScience in my mouth and I came back to life!". Then the representatives take the vague and the anecdotes and a huge dose of the placebo effect and start making claims that would get the companies in trouble if the representatives were employees rather than independent contractors.

Now, let's unpack that one. Just what does it mean that the people actually doing the selling are independent contractors and not employees? Well for one thing, it means they don't have to be guaranteed a minimum wage, which is insane. Used car salesmen are guaranteed minimum wage, meaning that there are now two big differences between used car sales and MLM sales: used car sales more reliably puts food on the table, and used car sales is more honest (Have you ever been sold a car shaped sugar pill at a dealership? I didn't think so). In fact, a great deal of MLM representatives lose money doing it. They work 80+ hours a week, they come to you so you don't even have to leave the house, and all so they can lose money. They must really like you. And yet, the competition continues to get even fiercer as more people keep signing up. In the 1980's everyone knew that AmWay was something only fools would follow and yet now it's bigger than ever (just like a certain presidential candidate).

In fact, as you may be able to guess, the people at the top of these MLM companies are doing very well. This point seems so obvious that I'm not going to spend much time researching it. I'll look up just one of these companies, let's say the Thieves oil dudes, and see what I find. brb. Looks like they had sales of over a billion dollars last year(link), and I found an interesting article about how Gary Young got his doctorate from a diploma mill and some other stuff (link). So with a billion in sales they claim that 92% of their distributors rank under star class or whatever, and star class makes on average $73 a month, implying the 92% below them make even less (link).

And why is there such a disparity? I hinted at this in the title. It's because the workers do not have any control over how the fruits of their labor are distributed. The capitalists in charge of MLM, such as Gary Young, have full control over that and have decided, all too predictably, to give the proceeds to themselves while giving out just enough to prevent a mass desertion or revolt. They are free to sell snake oil and lies to both the distributors and the customers and this is exactly what unfettered capitalism looks like.

So what we need to do is put an end to the MLM malarkey. In the short term, require that independent contractors get all the benefits of employees. This means minimum wage or better guaranteed, not having them pay the company for products they sell, the company being liable for any fraudulent claims they make, and the required benefits if they work more than 32 hours per week or whatever it is.

Long term, we need to democratize the enterprise, that is, we need to promote coops through subsidies, regulation, and media. If every worker gets a vote in how the proceeds are used, how many would you expect to put up with this idiocy? I hope not many.

Will a rise in minimum wage lead to massive inflation or job loss?

When I talk to my friends about the need to increase the minimum wage, the main arguments I hear (other than "I don't want to talk about politics") is that raising the minimum wage to $15/hr will lead to massive inflation, and that a higher minimum wage will lead to less jobs available. These are common misconceptions, and at the surface level they make sense, but deeper analysis shows they aren't true.

The basic argument for a higher minimum wage causing inflation is that when minimum wages rise, other wages rise as well. Companies lose so much in paying their employees that they have to raise prices and fire employees to remain profitable, and as the prices of gas and materials go up, the prices of goods and services using those go up, with everything balancing out in the end.

There are a few flaws with this argument, however. Firstly, while anyone making less than the new minimum gets their wages raised, wages don't usually go up very quickly for those making more than the new minimum already. In particular, wages of CEO's, shareholders, and other executives don't go up immediately in response to minimum wage laws. So the immediate effect on the cost of labor goes mostly to businesses that rely on documented low-wage workers, such as restaurants and retail. The restaurants may raise their prices a bit and the retailers may try to do the same work with less people, but the effect isn't huge. The oil industry tends to have higher paid workers, and the agricultural industry tends to use undocumented workers, so the cost of food doesn't rise quickly as a result.

With more people able to afford goods and services, the economy grows. If current businesses are unwilling or unable to keep up with demand, new businesses come in. This is why unemployment doesn't see a huge uptick after minimum wage increases. Because all the rhetoric given about large corporations being "job-creators" is backwards. Businesses respond to demand, one way or another. Consumers are the real job-creators, because they are the ones actually paying for the result of the labor being done. Also, as people build up wealth, they are more likely to start their own businesses, and to negotiate for better wages. This does then lead to inflation, but it is inflation due to growth, which is good in the short term.

However, this is only a temporary fix, since growth can't continue forever. What we really need is a guaranteed basic income and a shortened work week so that we can have a society that moves toward opportunity equality while shrinking to or maintaining a sustainable economy. But that's a topic for another post.