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The Consumer Is Boss

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The morning paper brings two pieces of news about Wal-Mart. The first tells of an effort by politicians and so-called community groups to pressure the retail chain to raise its wages. The second describes Wal-Mart’s plans to meet competition from Target and other stores by including products that appeal more to middle-income shoppers.

The details in both stories are interesting. But the larger context is lost in the particulars. Americans, and Westerners generally, cannot count economic history among their strong suits. They take the bountiful retail landscape for granted, as though it were a natural fixture. You need something? No problem. Get in the car; drive to the store; pick it off the shelf; pay the modest price; and return home. Piece of cake.

Buying wasn’t always so easy. In fact, it wasn’t always possible. It’s not just that there were times when the product variety was smaller, the quality lower, and the real price higher (measured by how long one had to work to earn the money). I am saying there were times when you and I — ordinary people without power or connections — didn’t matter to those who produced the goods. Surveying the long sweep of history, we find that the period in which manufacturers worked to satisfy not an elite, but ordinary people, has been incredibly short. But since that period includes the lifetime of every person walking around today, this fact is terribly unappreciated, if not unknown altogether.

It’s easy to find fault with how some people do business, and legitimate grievances (such as fraud) should be redressed. But we lose sight of the bigger picture at our peril. The key element of this picture is that until the still-defamed Industrial Revolution and the advent of market-oriented society, virtually all production was exclusively for the powerful. Ordinary people went through life with little in the way of clothing and household items. During the Middle Ages the clothes off the back of a plague victim commanded a price — people were that desperate for garments. Sanitation was nonexistent. Personal hygiene was unheard of. Famine was an ever-pending threat. Forget about medical care.

The Industrial Revolution, stimulated by personal liberty, secure property rights, the division of labor, and investment, was a sea change. For the first time, mass production at low prices was the path to high income. Ordinary people could afford more than one set of clothes and household conveniences. Personal hygiene came within reach. Labor-saving devices appeared. Advances in sanitation and medicine followed. In short order, retailers presented a cornucopia of goods increasingly accessible to the masses. It truly was, as the title of a book had it, the birth of a consumer society. Progress continues virtually unabated, disrupted only by government’s unique products: taxes, regulation, inflation, depression, and war.

Elitist authors who already have theirs, sneer at broadening consumerism and expanding choice, but no one is forced to partake of the cornucopia. Consumerism and freedom go hand in hand.

This perspective sheds light on the Wal-Mart wage controversy and similar subjects. Those unschooled in economics wonder why Wal-Mart doesn’t pay its workforce more. They fail to realize that the real bosses in a consumer society are not the nominal employers but the customers. Legally and morally, capitalists control their businesses by right. But existentially, they hold them only at the pleasure of the consumer. When they stop doing a better job than their competitors, they lose sales and, if they don’t shape up, they lose their businesses. The consumer trumps even Donald Trump. The consumer determines the height of wages. Defy him and he says, “You’re fired.” In a free market, no businessman, not Bill Gates, not the CEO of Wal-Mart, sleeps soundly.

While seeming to be humanitarian, forcing Wal-Mart to increase its costs harms consumers and is self-defeating because workers are consumers too. In the market, each of us makes demands of producers and each of us has demands made of him. The result is an unplanned, yet orderly, prosperous, and free society. The challenge is to keep the economically ignorant from gaining power and wrecking it.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.