What is it that ultimately protects us as consumers? It's many producers competing with each other for our patronage. What in the world motivates, say, a grocery store manager to have sales, introduce new products and services and search for other ways to please us and make us loyal customers? The easy answer is that the manager seeks greater profits but he has no power to force us to shop at his store. The way he earns greater profits is to lure us into his store. The way to do that is to serve our wants better than his competitor down the street.
The owner's life and that of his employees would be much easier if he could get "level playing field" laws passed such as: all grocers had to charge the same prices and all grocers had to sell the same items and provide identical customer services. That way competition would be reduced. Right now your grocer knows, as well as his employees, that if he charges $20 a pound for steak and $5 for a dozen of eggs, you'd take your business elsewhere. That would result in less business, less employment, along with lower profits and wages. But if the manager and his employees were successful at getting the enactment of a law mandating equal grocery store prices, it would be a different story.
The identical principles of competition apply to government but we call it federalism. Federalism means there is a central government with strictly enumerated and limited powers. With federalism, most political decision-making occurs at state and local levels of government. There is jurisdictional variety and citizens, along with their assets and talents, have the power to leave an undesirable political jurisdiction and move to one more to their liking. This is precisely what the Framers had in mind when they wrote Article IV, Section 4 of our Constitution: "The United States shall guarantee to every State in this Union a Republican Form of Government."
As long as there is competition among jurisdictions, state and local governments must bear the cost of their mistakes. For example, in the 1940s and 50s, with government help, New England textile workers were successful in negotiating wages that exceeded their productivity. Textile manufacturers started moving to the South where wages were lower. In 1954, when John Kennedy was the U.S. Senator from Massachusetts, he pushed for higher federal minimum wage laws as a means to discourage the southward movement of textile manufacturers. By raising labor costs in the South, through minimum wage laws, he was hoping to impede manufacturers from "voting with their feet" just as you might do if your grocery was charging $20 a pound for steak.
There's an international counterpart to this strategy. It was seen in the violent Seattle, Washington demonstrations against the World Trade Organization (WTO), and the pretenses of concern about low worker wages and poor working conditions in poor countries. Workers in those countries aren't as regulated and while EPA and OSHA can impose costly and often foolish regulations on American companies, they have no such power in other countries. That means American companies must bear costs that are not borne by companies in poorer nations. The WTO demonstrations represent U.S. union members, companies and their sympathizers trying to export costly regulations to other countries. Like in our grocery example, they're calling for a "level playing field" but what they're really after is centralized global economic regulation that creates fewer options for American consumers and businesses as well as foreign workers and foreign businesses.
We should always demand competition, whether it's in the market or in the political arena. Competition promotes the interests of the ordinary person. It's not a perfect guarantor of liberty, but it makes liberty far more probable than monopoly.
Walter E. Williams
July 31, 2000
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