Are Consumers Boobs?

Newsweek, April 2, 1962.

If you believe the books of Vance Packard and J. K. Galbraith and the speeches of Senators Kefauver and Douglas, the consumer is an ignoramus and a fool, unable to compare one product with another, swallowing every advertising claim, incompetent to spend his own money. The President’s 5,000-word message to Congress on March 15 (his fourteenth this year) implies that these assump­tions are correct. So he calls for scores of new federal controls, and an army of new bureaucrats to enforce them.

If these assumptions are true, the country would be in a bad way. For if the American people are too stupid to buy intelligently, how can they be expected to vote intelligently, or to know how to discriminate among the rival claims of politicians?

Yet the consumers may not be as helpless as Mr. Kennedy as­sumes. He says: "They are the only important group in the economy who are not effectively or­ganized, whose views are often not heard." They do not need to organize. Their views are heard every day in their purchases and failures to purchase. With every penny that he spends, the indi­vidual consumer is casting his vote for this product or against that. He does not need to sign petitions or march on picket lines. If he patronizes a product, the firm that makes it prospers and grows; if he stops buying a prod­uct, the firm that makes it goes out of business. The consumer is the boss. The producers must please him or die.

The great protection of the con­sumer is competition. It is true, as the President says, that ad­vertisers (like politicians) utilize "highly developed arts of persua­sion." But their advertising is competitive. When each of a score of firms in each line claims that its coffee, or its cigarette, or its car is the best, the consumer must compare. If a coffee, say, is not to a housewife’s liking, she buys only one can, and then tries an­other. She does not have to stick with one brand (as she does with one senator) for six years. If she feels cheated in quantity or qual­ity, she does not repeat her pur­chase.

Even the President’s message admits that: "The typical super­market before World War II stocked about 1,500 separate food items—an impressive figure by any standard. But today it carries over 6,000." This enormous range of choice was produced by free­dom and competition, not by gov­ernment restraints and bureau­crats.

Yet Mr. Kennedy’s solution for every problem seems to be more and more laws, more and more agencies, thousands of more bu­reaucrats, more and more govern­ment power, controls, and re­straints.

Space permits no adequate ex­amination of his many specific proposals. The First National City Bank of New York, in its March letter, has already explained what is wrong with schemes to force disclosure of the "truth" about in­terest rates. Mr. Kennedy wants manufacturers to be compelled to make a specified type of TV set. He wants federal bureaucrats to have power to forbid the sale, not merely of unsafe drugs, but of drugs that they decide are "in­effective" or "worthless." This would not only ruin firms, but pre­vent the very clinical experience by which the relative merits of new drugs must be tested. Is this "protecting" the consumer? And would the principle be extended to allow bureaucrats to forbid the sale of "ineffective" or "worth­less" paintings, newspapers, mag­azines, or books?

In spite of its length, there are a lot of things missing from the President’s message. Nothing is said about what the federal farm program does to raise prices against the food consumer; or how import quotas on oil, sugar, and textiles boost the prices he pays; or how excessive wage de­mands and featherbedding affect consumer prices and choice. Mr. Kennedy wants "more adequate protection for savings." But the gravest threat to savings has come from inflationary govern­ment spending.

The best way of protecting the consumer is not mentioned by the President. It is not to harass, threaten, hamstring, or intimidate the producer. It is to encourage the producer, by lower taxes and fewer restraints, to invest in new equipment, to expand, and so to reduce costs and prices and in­crease production.