All Commentary
Wednesday, June 27, 2012

Politicians’ Dreams

Several aspects of human behavior, besides a misunderstanding of reality, are critical to the survival of political scoundrels. Let’s look at a few.

Tariffs and import quotas raise sugar prices. Michael Wohlgenant and Vincent H. Smith, in their article “Bitter Sweet: How Big Sugar Robs You” (The American, February 2012), say sugar restrictions cost the economy an average of over $3 billion a year in higher food prices. That’s the cost side. Roughly 40,000 Americans in the sugar industry benefit from import restrictions because they raise sugar prices and deliver higher profits and wages. One might reasonably ask, “How is it possible for the few to impose huge costs on the 312 million of the rest of us?”

It is easily explained by a phenomenon economists refer to as concentrated large benefits versus dispersed small costs. It pays those in the sugar industry to raise millions to lobby Congress with campaign contributions in order to get them to vote for restrictions on foreign sugar. They receive billions of dollars in higher profits and wages. That’s the benefit side. The cost is the doubled price that 312 million American consumers pay for sugar, increasing annual food costs by about $9 per person. Members of Congress are at ease in imposing this cost because they know that few Americans are willing to bear the burden of trying to unseat a legislator whose actions cost their families $40 or $50 more a year in sugar costs. It’s cheaper just to pay the higher price.

Sugar tariffs and quotas produce effects beyond simply higher food prices. Chicago used to be America’s candy manufacturing capital. In 1970 Chicago’s candy manufacturers employed 15,000 workers. Now the number is 8,000 and falling. Brach’s employed about 2,300 people; now most of its jobs are in Mexico. Ferrara Pan Candy also moved much of its production to Mexico. Yes, wages are lower in Mexico, but wages aren’t the only factor in candy manufacturer flight from America. Sugar is a major cost, and in Mexico, the sugar cost is one-third to one-half what it is in the United States. After 90 years, Life Savers has moved to Canada. Canadian wages are comparable to ours, but Life Savers’ yearly sugar cost is $10 million lower.

Most Americans are decent and truly care about the welfare of their fellow man. Few things create as many opportunities for self-interested manipulators and political hustlers to exploit this sense of decency as wages earned by the poor. Gabe Zaldivar, in an article titled “Dallas Cowboys Reportedly Involved in Sweatshop Exploitation” (Bleacher Report, January 10, 2012), warns, “Before you put on your Dallas Cowboys hoodie and throw over a scarf emblazoned with the insignia ‘America’s Team,’ consider where it all came from. You may want to walk out the door cold.” The Dallas Cowboys purchase some of their sportswear from apparel factories in Phnom Penh, Cambodia, where women, such as Kol Malay, featured in the story, earn just $100 a month. With those earnings she can only afford to live in an apartment about the size of our typical bathroom. Zaldivar says that Nike and other clothing giants have come under fire in the past for manufacturing clothes under sweatshop conditions and “working environments that continue to egregiously violate human rights.”

I think that it almost goes without saying that Kol Malay would not work for $100 a month if she had a higher paying alternative. Would Kol Malay be better off if the Dallas Cowboys were forced to have their sportswear made in the United States rather than in Phnom Penh? I think she would be worse off. You ask, “Who would be better off if that were the case?” American workers. That might explain why American unions are the major supporters of mandated “living wages” paid by U.S. companies in Third World countries. It’s sheer lunacy to think that American unions are concerned about the welfare of people such as Kol Malay.

Income Inequality

The recent Occupy Wall Street movement demonstrates that Americans can be easily swayed by claims of inequality in income distribution. This helps explain the popularity of income redistribution and calls for the rich to give something back. Under some visions of how the world works this would make sense.

Suppose there was a gigantic pile of money meant to be shared equally among Americans. The reason some people have more money than others is that they got to the pile first and greedily took an unfair share. That being the case, justice requires that those who took their unfair share give something back, and if they won’t do so voluntarily, Congress should confiscate their ill-gotten gains and return them to their rightful owners.

Or perhaps income is distributed by a dealer of dollars. The reason some people have more dollars than others is that the dollar dealer is a racist, a sexist, a multinationalist, or a conservative. The only right thing to do for those dealt unfairly is to re-deal the dollars. If this isn’t done voluntarily, then Congress should send the IRS to confiscate the ill-gotten gains.

The sane among us recognize that in a free society, income is neither taken nor distributed; for the most part, it is earned by pleasing one’s fellow man. The greater one’s ability to do this, the greater one’s claim on what one’s fellow man produces. Those claims are represented by the number of dollars received from him.

Certificates of Achievement

Say I mow your lawn. For doing so, you pay me $20. I go to my grocer and demand, “Give me two pounds of steak and a six-pack of beer that my fellow man produced.” In effect, the grocer asks, “Williams, you’re asking your fellow man to serve you. Did you serve him?” I reply, “Yes.” The grocer says, “Prove it.” That’s when I pull out the $20 I earned from mowing my fellow man’s lawn. We can think of that $20 as “certificates of performance.” They stand as proof that I served my fellow man. It would be no different if I were an orthopedist with a large clientele, earning $500,000 a year by serving my fellow man. By the way, having mowed my fellow man’s lawn or set his fractured fibula, what else do I owe him or anyone else? What’s the case for being forced to give anything back? If one wishes to be charitable, that’s an entirely different matter.

Contrast the morality of the requirement of having to serve one’s fellow man in order to have a claim on what he produces with government, where in effect Congress says, “You don’t have to serve your fellow man in order to have a claim on what he produces. We’ll take what he produces and give it to you. Just vote for me.”

How we fall prey to charlatans and quacks is not complicated, but it still has to be explained.

  • Walter Williams served on the faculty of George Mason University in Fairfax, Virginia as John M. Olin Distinguished Professor of Economics since 1980. He was the author of more than 150 publications that have appeared in scholarly journals. Learn more about him here.