Freedom and Foreign Investment
Large International Corporations Are Not So Horrible After All
DECEMBER 01, 1999 by JAMES MADISON
Filed Under : Division of Labor, Capitalism, Central Planning, Free Markets, Entrepreneurship, Competition
James Madison is a systems analyst at an insurance company in Hartford, Connecticut.
This year, as the Czech people celebrate the tenth anniversary of the end of communism, the capital city of Prague serves as a shining example of what happens when the free market displaces economic planning.
Each morning on the Charles Bridge in the center of the city, more than a dozen vendors wheel out their carts and set up their tiny mobile shops under the 30 statues of saints that line either side of the historic bridge. Along the narrow cobblestone streets extending in all directions from either end of the bridge there are shops with doors wide open and merchants smiling at passersby. Salespeople stand on busy street comers handing out leaflets announcing all the plays, shows, and attractions that are available throughout the city. Tourists abound, always ready to exchange their currency for any number of these goods and services.
Freedom has not only sparked the creativity and ingenuity of the local entrepreneurs, inspiring them to grab their own little comer of the market, but it has brought investments from large foreign corporations as well. Among the more noticeable of these is McDonald’s. Prague is home to several McDonald’s restaurants including one in Wenceslas Square. The square was the site of the Velvet Revolution that started on November 17, 1989, and led to the resignation of the communist government on December 3. The revolution was dubbed “Velvet” because of its “soft” nature no one was killed.
The McDonald’s Argument
The presence of McDonald’s excited me because I have for years used the global proliferation of McDonald’s as my premier tool for debating socialists, statists, and others with a general fear of capitalism. I have always known my McDonald’s argument was sound, but my visit to Prague provided the opportunity to verify it firsthand.
I start my McDonald’s argument by getting my freedom-fearing friends to agree that McDonald’s is the perfect example of capitalism run amok. It is, I argue facetiously, a huge American corporation that crowds out the mom-and-pop restaurants by offering low-quality products and paying low wages. Horrible! They quickly agree.
But wait. Morn and pop are doing fine, as are all the dozens of other restaurant owners in Prague. Less than 200 yards from the Wenceslas McDonald’s is a hot-dog stand that sold me the greasiest and best-tasting kielbasa dog I have ever had. Less than 50 yards away is another stand where I bought a chocolate-covered cherry ice-cream bar that puts the McDonald’s sundae to shame.
Throughout the city, food of every form and fashion can be found. From my favorite greasy hot-dog stand in Wenceslas Square, to my love Linda’s favorite restaurant–a French place named U Malíru where the cheapest bottle of champagne was nearly $100–it is quite clear that McDonald’s is not about to monopolize the food market.
As for quality, the concern of my statist friends falls into two categories: taste and health. Taste is clearly a matter of personal choice. The people standing in line for their Big Macs each time we walked by certainly didn’t seem to think that they were being taken advantage of.
As for health, McDonald’s doesn’t seem much worse than the other options. Judging by the pork with cream gravy and dumplings I’ve had at U Kamenného mostu on the east bank of the Vltava river, the cheesecake and espresso I had at the newly renovated Kavfárna Obecní dum, and the occasional kielbasa dog I had when we were on the run, a Big Mac and fries are hardly worse than the fare offered by the small-scale, domestic entrepreneurs.
If McDonald’s is not flooding the market and the food is not all that bad, then surely there is no excuse for low wages. But what would the employees of McDonald’s do if the Czech government outlawed the chain in an attempt to save the employees from their supposedly wretched lot?
Perhaps the displaced employees could open stands on the Charles Bridge. While selling crafts on such a beautiful and historic bridge certainly seems better than making hamburgers on an assembly line, it requires a level of artistic skill that the majority of citizens do not possess. Perhaps they could open one of those cute little shops on the winding cobblestone streets. Being a small business owner is surely desirable, but running a successful business can be difficult and, again, most people do not have the skill to undertake such a venture.
Although it would be wonderful if we could produce an abundant supply of high-paying jobs by simply outlawing all jobs deemed inadequate, the economic reality is that for these workers at this point in their lives, this is their best opportunity.
So if the competition is not destroyed, customers are not deceived, and employees are not worse off, where is the evil? At this point, my friends are mute. Their silence now provides the opportunity to turn the discussion in the opposite direction and show that, rather than causing harm, McDonald’s (or any large corporation with high division of labor) actually provides a tremendous benefit to competitors, customers, and employees.
Competitors benefit because a McDonald’s employee will not stay there forever. After a few years of ordering cheeseburger wrappers and counting money at night, he will learn the basics of inventory and bookkeeping. Seeing his skills, the competition will hire him away; or he will start his own restaurant and compete against his former employer.
Customers benefit not only in the immediate sense of being served today, but even more so because the McDonald’s employee who asks, “Would you like fries with that?” several thousand times will in time learn to read and anticipate the reaction of customers; when he lands the job at U Malíru, he will be able to know when to offer the $200 bottle of champagne and when to suggest the $100 bottle.
Employees benefit because they receive increased pay and higher job security by having acquired the skills that are desired by employers and enjoyed by customers. Were it not for the large amount of easily obtained employment offered by large, labor-divided companies, such workers would have a much harder time finding opportunities to develop valuable skills.
Indeed, it would seem that large international corporations are not so horrible after all. They integrate peacefully with the economy of the countries in which they operate and benefit an array of people in a variety of ways. I have always known this, but after visiting Prague, I am more confident in this belief than ever.