LXXVI – What Is the Free Market, and Who Cares?

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If
we tried to manage our biological functions by the same logic we
insist upon for governing our social lives, each of us would be
dead within a matter of minutes. Our respiratory, circulatory, digestive,
intellectual, immune systems, and various other bodily activities
interact, spontaneously, to maintain our physical existence. What
if we were dumb enough to want to take this on as a conscious, regulatory
process, with our mind having to intentionally inhale and exhale,
pump blood, remove waste byproducts, digest food, and perform other
functions that are accomplished by a body unencumbered by intellectual
hubris? Such conscious decision-making would be an endless process,
without any breaks for sleep, pleasure, or any other act save trying
to stay alive. Anyone who tried to live in such a manner might survive
for three or four minutes, but I doubt if it would be much longer.

Though
all of us can see both the pointlessness and the danger of such
an undertaking, most of us fail to see the dysfunctional nature
of applying this same premise to our social conduct. We recognize
that our conscious mind would quickly destroy us if it endeavored
to override the spontaneous order that our heart and lungs exhibit
in supplying us with oxygen, but most of us still imagine that we
require the conscious direction of political regulators to make
our social lives function well.

Nowhere
is this confusion more evident than in our awareness — or lack thereof
— of how we provide for our economic needs. While experience may
be enough to demonstrate that our body's physical needs can best
be realized by respecting the spontaneous order of our biological
system, most of us fail to see how our material needs for goods
and services can be satisfied without the conscious direction of
some authority.

Considering
that we are innately self-interest motivated people who, at base,
define such interests in material terms; and further considering
that our material well-being is dependent upon an understanding
of economic systems, one would expect us to have a fierce insistence
on a clarity of thinking in such matters. Political systems, schools,
business organizations, and many intellectuals — each pursuing their
special interests – have helped condition us to think that our economic
well-being is dependent on the political supervision of the marketplace.
So inbred is this idea that, for most people, economic behavior
is the interplay of business and government forces, with the state
existing to protect the interests of consumers, workers, and other
so-called "little guys."

When
it comes to understanding the nature of economic systems, most of
us are like bumpkins at the state fair midway who have been swindled
out of our egg money by sharpies peddling tin watches as solid gold.
We have bought into a lot of unexamined nonsense about a system
whose workings are central to our living well. What we fail to understand
is that our inability to distinguish between market-driven
and politically-driven economic systems can be as detrimental
to our well-being as the failure to distinguish between the breathing
in of oxygen and chlorine gas.

Just
how far-reaching is the failure to make such distinctions was brought
home to me in a two-day period. My
previous article
— critical of the holy crusade many have launched
against Wal-Mart stores — evoked a great deal of unfocused, irrational
anger from people whose reactions unwittingly confirmed the very
point I was making. A few perceptive readers correctly pointed out
that many businesses make use of government coercion (e.g., powers
of eminent domain, government bond measures, free governmental services
for which others must pay, etc.), and that such practices are inconsistent
with a free market. I could not agree more and, perhaps, I too quickly
assumed that LRC readers would not have to be reminded of this distinction.

Some
accused Wal-Mart of making use of such political tools. I do not
know whether this accusation is true but, if it is, the company
is to be criticized for that, not for having the gall to
come into a community and daring to compete with established retailing
interests. It is the war on the marketplace – and upon an unrestricted
freedom of entry by competitors that disciplines the market — that
underlies the anti-Wal-Mart jihad. When I read newspaper articles
telling of distraught townsfolk descending upon city hall to demand
an end to the powers of eminent domain and political subsidies,
I will reconsider my critique of the Wal-Mart bashers.

The
best evidence for the productive superiority of the marketplace
is that it has provided a lot of foolish people with spare time
to condemn the very system that has created this luxury. Environmentalists,
socialists, labor unionists, animal rights advocates, and others
can always be counted upon to attack a self-interest-driven spontaneous
system that produces goods and services none of us could have accomplished
on our own. Our material well-being far exceeds that of our hunting-and-gathering
ancestors because we learned to freely cooperate and exchange
with one another. I do suspect that, along the way, there were some
primordial tribesmen of socialistic persuasion condemning those
who were more adept at picking beetles off trees or digging grub-worms
from the ground! The descendants of such pre-Luddites can be found
in city halls across America, urging state violence against Wal-Mart
and other businesses of which they disapprove.

In
the interest of historical accuracy, it must be noted that small,
independently-owned businesses have come and gone without any prodding
from chain stores. I recall a number of successful, family-owned
firms in the city in which I was raised that were sold, upon the
deaths of their founders, by the children (or grandchildren) who
were not interested in continuing their operation. The families
sold these businesses to larger chain operations in order to invest
in other endeavors. They were not forced out of business
by some imagined "predatory" practices!

After
my Wal-Mart article appeared, I received an e-mail from an independent
retailer in the rural Midwest. He and his wife own and operate two
women's clothing stores, and rank in the top three percent in the
nation in annual sales for their line of retailing. They have done
this even in the presence of a Wal-Mart Supercenter, whose five
year existence, he informs me, has not led to the closure of a single
pharmacy, grocery, or small retailing business in that town. According
to this man, stores have closed in nearby towns, even in the absence
of Wal-Mart. Such closings have always been part of the history
of retailing for reasons unrelated to the presence of chain-stores.
Wal-Mart and other chains have also closed down in various communities.
As a board member of his state's retailers association, this merchant
has publicly chided his colleagues who seek to punish Wal-Mart through
legislative means. "Wal-Mart is a great company," he told
his fellow retailers, and "I'm willing to earn my living by
competing with it, not by whining or crying foul." There is
hope for the future of American commerce and industry if attitudes
such as this can become more prominent.

News
stories abound with evidence of the economic self-interest motivations
of the Wal-Mart attacks. A Washington Post article (June
15, 2004) informs us that a supermarket chain and the union that
represents its grocery employees, have been able to get an ordinance
introduced that would ban Wal-Mart stores in Montgomery County,
Maryland. The measure has been carefully crafted to apply to Wal-Mart
— a non-union chain – while leaving other chains untouched.

A
spokesman for Safeway stated that, while his firm was not lobbying
for this ordinance, "we are supportive of the concept."
This man's thinking reflects the short-term perspective that attends
so much economic policy in our world. Perhaps he was simply unaware
that, had Congress passed the federal "death sentence"
tax bill of 1938 — which, as I wrote in my previous article was
one of the efforts of that generation to destroy chain stores —
Safeway (with earnings of just over $4.2 million that year) would
have paid a federal tax of just under $58.6 million. That Safeway
could be "supportive of the concept" of using the very
state power of destruction that its competitors were prepared to
use against it in 1938 is remarkable, even for shortsighted businessmen!

The
lower prices Wal-Mart is able to profitably charge for its merchandise
troubles its less efficient competitors. So, too, are labor unions
threatened by the lower wages for which Wal-Mart employees are willing
to work. As a result, the unions have carried their anti-competitive
campaign to Chicago's city hall, hoping to obtain — by legislative
fiat — what they cannot obtain in a free market. The unions take
up the usual whine that cutting labor costs, purchasing goods from
foreign countries, or moving manufacturing operations overseas,
have grave antisocial implications.

One
anti-Wal-Mart alderman proclaimed the need for "standards that
benefit everyone," a sentiment arising from the desire of most
business and labor union interests to standardize — and, thus, help
cartelize — the conditions under which business is to be conducted.
In a free market, customers — not legislators — define "standards,"
and they do so by their willingness to purchase (or not purchase)
the goods and services of sellers. A vibrant, energized economy
is characterized by variation, not standardization.

If
I desire to purchase a widget, but a local manufacturer insists
on charging me $10 for it, am I — or is American society — harmed
by my being able to purchase a widget from a foreign manufacturer
for $5? "Oh, but the American widget workers who insist on
being paid $25 an hour might lose their jobs!," the whine continues.
In the words of Danny DeVito in one of my favorite films, Other
People's Money
, "who cares?" If someone has overpriced
their product or services in comparison with what others are willing
to charge, why should the rest of us be compelled, by force of law,
to give up the lower-priced source?

Does
the aforementioned alderman use the logic of the unions in purchasing
gasoline for his car? Does he drive around looking for the highest-priced
station from which to fill up his tank, lest he be perceived as
lowering wage "standards" in the community? Or might he
prefer that the automobile had not been invented in the first place,
considering how much harm was done to buggy manufacturers and horse
ranchers — as well as to their employees — by marketplace creativity
and competition?

Are
those who lament the decline of higher-priced goods and labor unaware
that, when I save $5 on the purchase of a foreign-made widget, I
now have an additional $5 to spend on something else; that
the increased resources available as a result of lower prices opens
up demand opportunities for other businesses to develop? Do these
people not understand that the competition they condemn is what
provides lower prices for consumers, thus reducing their costs of
living?

There
are broad social consequences associated with the political gerrymandering
of the marketplace to serve the interests of those who have lost
either the will or the capacity to compete. A spokesman for the
United Food and Commercial Workers union stated that "Walmartization
of America has a broader impact than just retail workers."
So does the collectivization of America. As historians have
made abundantly clear, enforced standardization has been one of
the major causes of the collapse of previous civilizations.

The
holy war against Wal-Mart also embraces other interests. One brigade
to enlist in the cause is a group called the National Trust for
Historic Preservation, which is considering listing the entire state
of Vermont as an endangered place because of the presence of Wal-Mart
stores. "Vermont is uniquely a state of small towns, and many
of these downtowns would be decimated" by the arrival of Wal-Mart
stores, said the organization's president. Vermont would lose its
"special magic," he declared, a consequence of which would
be to discourage the tourist trade. I wonder if this same group
will lend its support to the current federal anti-obesity frenzy.
I can imagine how the presence of fat people in quaint New England
villages might detract from that "special magic!"

A
few of my e-mail responses exuded the ignorance that keeps political
systems alive. One reader – who must have inadvertently found my
article while surfing socialist websites — accused me of
being "narrow minded . . . to think that Wal-Mart should be
allowed to persist." He then asked, perhaps to evidence his
tolerant disposition, "what makes you think that you or
anyone else for that matter are entitled to a free market?"

Other
e-mail critics offered complaints amounting to nothing more than
statements of marketplace preferences. "Wal-Mart doesn't allow
magazines to have covers that show women scantily clad," complained
one, while another informed me that "Wal-Mart censors both
the artwork and lyrical content of the CD's they carry." From
a marketplace perspective, I wholly support the liberty of these
shoppers to withhold their patronage from stores that refuse to
cater to their tastes. This is the disciplinary mechanism of the
"free market" that I so "narrow-mindedly" advocate.
But the refusal of an individual or a business to publish, sell,
or purchase any product is no more an act of "censorship"
than is the refusal of the local Baptist church to allow me to take
over their Sunday pulpit an act of religious "suppression."
Coercive force, alone, sustains censorship, and it is the state
that enjoys a monopoly on the use of force. Such clear distinctions
of thought, however, are lost on many of these crusaders.

Other
readers informed me that they found Wal-Mart stores "dingy,
depressing and chaotic;" while another "would rather see
the profits of business stay in town. At the cost of a few bucks,
I'll do my shopping with local merchants." Echoing the same
sentiment was a man who told me how much he preferred going to a
smaller store where clerks had known him, on a first-name basis,
for many years. "I really miss my local hardware store,"
he wrote. "Give me a local store run by someone who cares,"
declared another.

Again,
I have no quarrel with any of these people making a free consumer
choice as to where they want to spend their money, even if that
means paying a higher price to satisfy what it is they value. It
may surprise many of those who were critical of my earlier article
to learn that my wife and I share many of these same preferences.
We are not frequent customers at chain stores; we go out
to eat a great deal, and it is almost always to small, privately-owned
restaurants. I, too, "miss my local hardware store" where
we shopped until, unfortunately, the owner died.

It
has long been a thesis of mine that large, corporate enterprises
are difficult to sustain in a truly free market system; that the
need for competitive resiliency provides advantages that are generally
unavailable to large, conservative, bureaucratized firms. My book,
In Restraint of Trade, dealt, in part, with the need of larger
corporations to obtain a structured and standardized competitive
environment that could only be provided through governmental regulation.
Political systems have been instruments of centralization and concentration;
the free market is a process for decentralization and diffusion.
There is nothing that major corporate interests would fear more
than broadening the "separation of church and state" concept
to the "separation of economy and state."

Wal-Mart
is neither the economic savior of middle-class America, nor a Charles
Dickens villain to be confronted with righteous indignation or town
ordinances. It is but one of the many expressions of marketplace
dynamics which, like liberty in general, will produce goods and
services that some desire and others detest. It should not be forgotten
that Wal-Mart began as one of those small town retailers who the
chain store bashers want to protect. Sam Walton did precisely what
every small businessman has the capacity to do, namely, use his
mind to create competitive alternatives that will attract customers.

One
reader, in fact, wrote of "several small business owners"
who have, in fact, awakened to the competitive challenge of Wal-Mart
"and are now thriving like never before." The growing
popularity of "farmers markets," along with independently
owned meat markets, demonstrates how small businesses — though they
may be at a disadvantage in matters of price — can effectively compete
with large supermarkets regarding personalized service and the quality
of their produce.

It
has always been the marketplace, not the restrictive and stifling
influence of governmental regulation, that has advanced mankind's
material well-being. To preserve our world in state-regulated airtight
containers — be they quaint villages or open countrysides — is to
consign mankind to the lifeless sterility of a museum. It has been
the liberty and spontaneity of people acting in furtherance of their
self-interests that provides the "special magic" whose
fruits we now enjoy in abundance and at low prices.

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