On the Benefits of the Free Market:
A Conversation
by Paul Lytle
Jefferson tapped his chin thoughtfully, a sign to those of us who knew him well that we should get comfortable. He was predictable, Jefferson was, and it was a trait of which he was most proud. In law school, his unwavering temperament and utter logic had one time made a professor storm out of a lecture hall after losing an argument quite badly. Jefferson (whom we never call 'Jeff') merely paused a moment, and then assigned the class reading for the night. Somehow, he had also done it all without being smug or condescending.
"What exactly do you mean by that, Steven?" asked Jefferson, responding to a statement Steve had made a moment before.
Steve smirked and shook his head. "What? I only said that there was a time when blacks weren't allowed in certain restaurants and the government fixed the problem. Surely you can't disagree that the government did the right thing by forcing integration."
"I'm sure it was a wonderful piece of legislation, well drafted and all of that," Jefferson said as he retrieved his pipe from his end table drawer. If we hadn't known before, we knew then that we would be there for some time. "I simply can't see an advantage to it."
"No advantage?" demanded Steve. "You can't see an advantage to ending discrimination?"
"Oh, certainly that. I just wonder if it would not have been done in another manner. One less intrusive than having the government constantly making sure that honest businessmen are allowing everyone to eat."
"What do you mean?" I asked.
"Simple. Would you go to a restaurant that refused to serve blacks?"
"Probably not."
"You?"
Steve answered, "No."
"And certainly no black people would go, being barred from entry and such. Right there we have eliminated a good tenth of the possible customer base, not yet counting people like the three of us who would not go to such places on principle alone. It seems to me a great business opportunity."
"How so?"
"Say we had a town with one restaurant. That restaurant was refusing to serve blacks. Also are there several white people who are eating at home or grudgingly going to the restaurant simply because there is no other choice. What would you do?"
"I would open a restaurant which serves everyone," I said immediately.
"Of course you would. I would too. I would invite everyone to come and eat. I would have absolutely no competition in certain segments of the population, an utter monopoly. Then the local newspaper might even do a story about me — the great humanitarian who doesn't care about anyone's skin color. All else being equal — equal prices and equal quality of food — the first restaurant could only count on racist people as loyal clientele. I am guaranteed a tenth of the population, and at worst we would split the rest between us."
"And if there are very many racist people in the town?" asked Steve.
"Then let them eat there in peace. I certainly don't want to eat with racist people. They would make me uncomfortable when I eat, and they would be uncomfortable in a fully integrated society. I doubt that black people really want to have lunch with the Klan, just as I would prefer not to eat with the Black Panthers. How does it benefit anyone to force these groups together? Competition has solved the problem for us without the government's help, and with our solution, even racist people are happy. Everyone has a place to eat, everyone has good food in a comfortable environment, and we are making good money by simply tapping into a market that another man was too narrow-minded to touch."
"So you solve the world's problems with greed?" I laughed.
"Certainly. I perhaps would not say it in that way, but competition forces all parties to better themselves, and therefore it betters society. When people have the freedom to seek their own fortunes, everyone benefits."
"I'm not sure I agree with you," said Steve.
"You do, Steven," said Jefferson. "You simply do not know it yet. Give me a problem which we in modern society face."
"Unemployment."
"Too easy. The racist restaurant employs five people in the town. We open our own. The three of us are now employed. Do we wait the tables ourselves?"
"No," I said. "We hire people."
"Perhaps five more jobs. And if we are a success? What will you do with your money, Steven?"
"Go to Disneyland!"
Jefferson laughed at that, and then said, "Good. You spend your money on entertainment. How very selfish. But say a hundred people, having the very success we are having, also go to Disneyland."
"They will have to hire more people," I said. "Otherwise the lines will become too long, and people will go to Six Flags instead."
"And those new employees will each spend his money on something else, causing a need for employees elsewhere. What will you do, Paul?"
"Invest it," I said.
"I can always count on you to be sensible. Will you build another restaurant, or put it in the market?"
"Both."
"Well, we build another restaurant and have to hire five more people. We become more successful and create a chain, employing hundreds. If you put the money in the market, the same thing happens, but in another company. If enough people invest in Disney, they are able to hire more people for Disneyland, or hire more filmmakers to produce more movies."
"But if you earn more money," said Steve, "then someone else must lose it."
"Nonsense. The economy is not a pie of which we each must take from another to get something for ourselves." He puffed on his pipe and said, "One dollar can become a hundred overnight. You earn it and buy a soft drink at a corner store. That corner store uses it to pay an employee. One dollar is now three. You earned it, then the store earned it, and then the employee, a dollar for each one. You all got a piece of pie without taking from someone else. But that only works if it is done without interference. What would have happened to that dollar in the modern day?"
"It would have been taxed," I said.
"Twenty cents are grinded up by the bureaucracy, coming out two years later as a radio advertisement to thoroughly cook meat or some such nonsense. Now you cannot afford the soft drink. The store cannot afford to keep the employee, and he is fired. One dollar, in this case, has become nothing."
"But that twenty cents does not disappear," said Steve.
"No, you are quite correct," said Jefferson. "Say it is used for welfare. Well, our store employee is now without a job, so he could certainly use the money, but it is still only twenty cents, and he would have otherwise had a dollar. Besides which, before he was earning the money. Others benefited from his labor, and the economy grew. Now he produces nothing, neither a service nor a product. You see, government services are said to help the poor, but they do not."
"I don't follow you."
"Why, it is simple, Steven. With us, you own a restaurant. We are comfortable, or even rich. But then comes a new tax that will help the poor. You now owe twenty thousand dollars more than you did last year. Do you just write out a check?"
"Well, I must."
Jefferson chuckled. "What I mean is, do you simply give up the money, or do you try to compensate for your loss from another area?"
"The second one."
"How?"
Steve furrowed his brow, then he said, "I can raise prices."
"Good. Now all of those working men who eat at our restaurant must pay more for food every week, thus negating any benefit the government was going to give them from your taxes. What else can you do?"
"I can fire someone and do more work myself."
"Ah, yes. Unemployment rises, hurting the poor a great deal more than welfare will have helped them. Which do you think the average poor man would want more — a job or a small welfare check?"
"A job."
"Of course. Multiply that through all the businesses in the country. When taxes are raised to help the poor, more people are let go from their jobs, creating more poor. But we are rather off the subject. What are other problems we face today?"
"Deportation of jobs?" I suggested.
"A sign of either a good economy or an overactive government."
"What?"
"Certainly. There once was an industry of men who would walk down the street waking people for work in the morning. This was called 'upknocking.' Where are they now?"
Steve and I looked at each other. I said, "We have alarm clocks now."
"The advancement of society left the industry behind. Some might think us cruel to buy an alarm clock rather than let someone come to wake us, but this does not identify a flaw in society, but a flaw in the man still wishing to do that job. He is forced to learn a new trade, to become more competitive. When the economy moves forward, it leaves certain jobs behind, or makes them not worthwhile to pursue. If we can all build computers, should we spend our time harvesting corn?"
"If we don't," Steve said, "how will we eat?"
"By letting people who cannot build computers to harvest it for us. They sell us the corn, and we sell them computers. It is not worth our time to harvest corn if we are the only ones on Earth who can build computers while everyone can harvest corn. Should we punish all the citizens by supporting one farmer who refuses to learn computers? Or should we all throw out our alarm clocks because one man wants to wake us up from the street rather than learning a new trade?"
"No, but what if everyone starts building computers?"
"Then I will learn farming," he said. "Computers will be sold for pennies, but I will be the only supplier of corn. My greed once again makes society better by providing corn to hungry men."
"But there was another option," I said.
"Yes, an overactive government. Say we are building computers, and I need some help. I hire a man who produces three dollars worth or hardware or something an hour. To be profitable, I would have to pay him less than three dollars an hour. To break even, I would have to pay him three dollars exactly. What happens if the government sets a minimum wage of five dollars?"
"Raise prices or fire him," I said.
"Those are options. I certainly cannot keep things the way they are. If I am losing two dollars an hour, I will go out of business. But what if I find a country without that minimum wage?"
"You can hire someone there and pay him three dollars an hour."
"The man wanted to work for three dollars an hour, and I wished to employ him for that wage, but the government would not allow me to do it. Therefore he is unemployed, and I have exported a job. Regulations can do the same thing. If the government regulates how I build computers, saying I must have a license and have a certain type of building, I may just go elsewhere. What other issues are there?"
"This is not really a current event," I said, "but connected. What about child labor laws and the forty-hour work week?"
"Silly, both of them."
"Even the child labor laws?" asked Steve.
"Steven, what would happen if a local company employed children and forced them to work in hazardous conditions?"
"I don't know."
"Well, first the press would do a big story, causing a great outrage against that company. Then another company would make the exact same product, but they would advertise that they do not exploit children, and so the outraged public would buy their product. The first company would be forced to change their ways or lose money. And if the press did not do that story, the competition certainly would. As for the forty hour work week, I am not sure why the government should care how much I wish to work and for how much. If I go into a job, and the employer tells me that I must work sixty hours a week with no overtime pay, I can either take the job if I am willing, or pass if I am not. If they can find no competent employee willing to work those hours, then they will have to change their policies or leave the position unfilled, which will mean a loss of money."
"But the problem of child labor existed once," I said.
"Of course," Jefferson said. "Problems will occur. There will be thousands of them. There will be men who believe that they can cheat the system. Sometimes it is government's fault. Steven, you praised the government so much for civil rights legislation, but it was also government causing much of the problem! Government regulation forced segregation on buses, not private business. By all means congratulate government on their efforts there, but remember that they were primarily forcing government to change, not citizens. My only point is that, with time, competition and time are what is needed to fix these problems, not regulations that punish everyone."
"So are you opposed to government completely?" asked Steven.
"Certainly not," said Jefferson. "There is a place for government. For example, to provide a court system and an army. There are many fine uses for a government. I only believe that if the private sector can do something better, why not let them?"
"Jefferson," I said, "you should publish this. You know that I have that magazine."
"Oh, yes," he said, puffing his pipe. "I have not, of course read it. Perhaps in a few years." Jefferson made a point of reading nothing, save the newspaper, that was not at least fifty years old. "By all means, publish what we have said if you wish. After all, none of it is original to me."
"It isn't?" asked Steve.
"No, certainly not. As long as people have traded products on the street has the Free Market been explored. So I say nothing new. But a good teacher is not one who tells his students that the sky is green. He would be original, of course, but not true. Good ideas are very rarely new."
With that, he snuffed out his pipe, and the discussion was over.
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