Consumer Sovereignty and Efficient Retailers

In a recent article, Tracy Saboe described his run-in as a Wal-Mart check-out clerk with a welfare bum – a college student on food stamps – followed by a dressing down by his supervisor. His supervisor warned him that it was not his role to give libertarian lectures to customers. His supervisor was correct. He quit, which was also correct.

The free market is a magnificent social institution. It rests on one fundamental principle: the legal immunity of owners from negative sanctions by the civil government in the use of their property, except in cases of. . . . (Here, the debates begin.) A corollary follows: the right of contract.

As a sovereign owner, the would-be buyer makes a bid for another person’s property. He offers to give up something of his in order to gain something of the other person’s. The recipient of the bid retains the legal authority to refuse the offer.

Because money is the most marketable commodity, the owner of money (conventionally called the buyer) has the upper hand. He can buy almost anything with money. There are a myriad of sellers of goods and services anxious to relieve him of his money. This is because they own less marketable commodities to offer in exchange. So, we speak of consumer sovereignty, another way of saying "money talks."

Consumers want to buy on their terms. Sellers want to sell on their terms. But consumers, possessing money, have the stronger position. So, sellers of items with less marketability are rewarded by sellers of money when they to sell on terms that please sellers of money. Among these terms is this: "Keep your negative opinions of how I got this money to yourself."

THE ASSUMPTION OF LEGALITY

When a seller of money buys an item, the seller of the item is supposed to assume that the seller of money is a lawful owner of that money. If this were not the case, then the police could arrest the recipient of stolen money as a recipient of stolen goods. The retailer will be treated as an accomplice in a crime.

I am not exaggerating the threat. This is now being done to non-profit organizations in the United States. I used to contribute to a Christian missionary organization. At one point, it had accepted a large donation from a person who was later convicted of embezzling. The victims sued all of the ministries that had received his money. A court convicted them. The director of the missionary agency was ordered to repay the money out of its funds. The organization had already sent the money to missionaries. It had to declare bankruptcy. The director soon suffered a stroke and died.

Don’t kid yourself. If victims of crime can use the courts to deliver a cheaper way to get their hands on stolen money, by going after innocent recipients of that money, then sellers of goods and services will face another risk factor. The trial lawyers will find other hosts for their parasitic activities. Then the State will follow their lead. Another plague of locusts with badges will descend on businessmen.

So, unless there is extremely good evidence that the retail recipient of money knew that it had been obtained illegally, there should be no question judicially that the recipient is innocent. The law should recognize the fact that information costs are high for the retail recipient. The courts must not convict retail establishments for not somehow having identified the money as having been stolen.

But if this is true, then the consumer has a perfect right to stop shopping at any establishment that implies that he, as a seller of money, has done anything wrong. This includes food stamp recipients.

Mr. Saboe, as a legal agent of Wal-Mart, told a customer that the customer was in receipt of stolen goods. The customer was using food stamps. The problem is, this accusation, while no doubt true morally, was not true legally. The courts uphold the State’s legislation, not morality. The legally sovereign voters, not the courts, have the responsibility in a democracy to see to it that the moral law is consistent with legislation. In our day, there is a widening gulf between the law of God and the legislation of the State.

The American consumer, in his legal capacity as sovereign voter, elects politicians who promise to act as the agents of the voter in the voter’s quest to get his hands into his neighbor’s wallet. The primary moral problem is not the food stamp user. The primary moral problem is this: voters have decided that food stamps are a valid way to help the poor, especially the otherwise poverty-stricken agribusinesses that benefit most from the program.

LET THE RETAILER BEWARE

The retailer faces a sovereign consumer – sovereign because he possesses the most marketable commodity: money. Food stamps are fiduciary instruments. They can be converted into money at such low transaction costs that they constitute money for Wal-Mart. Wal-Mart, like most other food stores, has decided to treat food stamps as money.

The moment that an employee accepts a position as Wal-Mart’s legal agent, this employee becomes subordinate to Wal-Mart’s rules. One of the rules is this: "The customer is always right." Wal-Mart has made this an unbreakable rule in order to secure its dominant position in the market. It offers money-back guarantees, no questions asked.

Mr. Saboe violated the terms of his implied contract repeatedly. He did not fully understand either the free market or civil law. He did not understand the fundamental principle of sales: "The customer is sovereign." From the moment Wal-Mart accepted food stamps as money, company policy defined a seller of food stamps as no different from a seller of money. From that moment on, the seller of food stamps was supposed to be treated as well as a seller of money. Mr. Saboe violated this principle.

EVERY EMPLOYEE IS A WHORE IN A HOUSE OF ILL REPUTE

The piano player in a house of ill repute may regard himself as better than the ladies who ply their trade, but he forgets the obvious: the patrons did not come to hear him play. When it comers to tickling, the ivories are not their primary interest.

The insidious fact of the welfare State is that as it spreads its stolen largess to the general public, it makes almost everyone the recipient of stolen goods. The welfare State is a perversion that seduces monetary virgins. It says, "Take the money from your customer. His money is as good as anyone else’s." Economically, the argument is correct. Consumers rarely pay businessmen to be ideologically pure. They pay him to deliver the goods. Profit-seeking businessmen do this with consummate efficiency.

As the welfare State extends into every nook and cranny of society, it corrupts everyone. "My percentage of the booty is justified. His percentage isn’t." We use Federal Reserve notes, deposit out money in FDIC-insured banks, mail our bills and checks through the U.S. Postal Service, and enjoy our subsidized electrical energy prices, at least until there is a huge black-out.

The teenager’s cry, "Everybody’s doing it," becomes ever-more true as the welfare State extends its subsidies. More people seek subsidies. "Everybody’s doing it." More food stores accept food stamps. "Everybody’s doing it."

The welfare State has built its moral and judicial foundations on the punch line of an old joke: "We have already established what you are. We’re only haggling over the price."

All of us, short of legal hermits on privately owned land, are involved in this haggling process.

THE CONTINUAL TRADE-OFF

As consumers, we should not expect sellers to honor any principles except the quest for profit and obedience to the law. To ask them to do anything else is to ask them to become moral arbitrators. It is to ask them to make "socially beneficial" decisions regarding how to spend their money, including whose money to receive. They are rarely highly efficient moral arbitrators. The buying public does not pay them to develop or implement these skills.

Conservatives get upset when the ecological fanatics pressure McDonald’s to get rid of biodegradable containers that are convenient for McDonald’s customers. But these same critics may pressure one or another retailer to stop donating to Planned Parenthood.

It is the task of sellers of money to choose their sellers of goods according to their standards. They must trade off efficiency with morality. Likewise, it is the task of sellers of products and services to do the same: trade off profit maximization with morality. Each participant in the transaction makes his own choice regarding the acceptable mix of efficiency and morality. Each person searches for co-participants who share his views.

CONCLUSION

Mr. Saboe has learned an elementary lesson: "To be in self-conscious receipt of stolen goods can be morally debilitating." He has at last quit his job at Wal-Mart. He should have quit much earlier: as soon as he realized that he could not remain silent – to other customers – regarding the moral infractions of food stamp users. He needed a lesson from his supervisor regarding the structure of economic cause and effect at Wal-Mart.

Similarly, when that piano player finally realizes the structure of economic cause and effect for his income stream, he should immediately start looking for another source of employment. The madam should not have to explain the economic birds and bees to him.

The problem is, Mr. Saboe may soon discover that every job he seeks is, to one degree or other, in bondage to the State’s well-oiled system. The welfare State is also the regulatory State. It seeks for itself what the free market grants to owners of money: economic sovereignty. Judicial sovereignty is not sufficient for the advocates and agents of the welfare State.

I once had a man ask me to take him in as a lifetime indentured servant. All I had to do, he said, was to handle all of the monetary transactions. He could no longer face the personal burden of moral perversion that he regarded as inescapable by using the fractional reserve banking system. I decided that I could not expect reliable lifetime economic services from a man whose moral sensibilities extended to every monetary transaction not conducted in gold or silver.

To change a system, you must be in the system unless you intend to wage war on the system from outside. This is always the moral and strategic dilemma of the reformer. It is an especially burdensome dilemma for the libertarian, who renounces the use of war.