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Jewish World Review Nov. 7, 2001 / 21 Mar-Cheshvan, 5762

Walter Williams

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Consumer Reports

Business and government -- ADAM SMITH, the father of modern economics, published "The Wealth of Nations" in 1776. His laissez faire economics played a significant role in the libertarian market philosophy surrounding the founding of our nation.

Leftist professors have taught generations of students that Adam Smith was an apologist for businessmen. I challenge anyone to read "The Wealth of Nations" and find one complimentary statement about businessmen. Smith wasn't anti-business; he understood human nature.

Run this question by anyone you know: Is deregulation pro-big business or is it pro-consumer? Five will get you 10 that the response will be: pro-big business. Let's look at it.

During the 1980s, a major U.S. textile manufacturer launched a "Buy American" campaign, maintaining that foreign manufacturers were driving U.S. textile companies out of business with cheaper imports. These businessmen descended on Washington demanding that Congress regulate textile imports through tariffs, quotas and other restrictions. This is hardly a story of businessmen advocating laissez faire policy; it's more akin to the mercantilism that Adam Smith protested.

Their arguments appeal to emotion but are otherwise vacuous. They claim that foreign manufacturers are running them out of business. That's balderdash. Have you seen a foreign manufacturer forcibly stopping an American manufacturer from doing business? If you did, the persons acting for the foreign manufacturer should be arrested and jailed.

You say, "Williams, we don't mean literally, but figuratively driving American companies out of business with cheap prices." I'm going to insist on being literal so we can get at the heart of the matter.

Say there's a foreign-made pair of jeans selling for $23 and an American made pair of jeans selling for $39. The American consumer has a clear choice. He can purchase the $23 pair or the $39 pair. Say most consumers prefer the $23 pair. The manufacturer of the $39 pair might go out of business. Had consumers chosen to buy the $39 pair, the outcome would be different.

Now comes the big question: If the American jean manufacturer goes out of business, who is directly responsible? Surely it's not the foreign jean manufacturer; he has no power to force consumers to do anything. The villain is the American consumer, who could have purchased the $39 pair of jeans but didn't. Thus, the challenge for American manufacturers, and their workers, is to find ways to protect themselves against not foreign manufacturers, but American consumers who prefer cheaper prices to higher prices. One way manufacturers can do that is to lobby Congress to use their powers to deny Americans, through tariffs and quotas, the choice to purchase $23 jeans.

I'd be remiss if I didn't identify another part of the problem. Congress imposes a huge regulatory burden on American businesses, such as environmental, health and safety regulations, tax compliance, and endless bureaucracy and litigation costs. While Congress has the power to impose these costs on U.S. businesses, it has no such jurisdiction in other countries. That puts American businesses at a cost disadvantage.

The bottom line is that consumers benefit from deregulation, open competition and choice. Many businessmen benefit from regulation, monopoly and restricted consumer choice. Most often, Congress comes down on the side of business and against consumers.

Some years ago, I was visiting a textile mill of one of the founders of "Buy American." I couldn't help but notice foreign-made textile machinery. When I queried my guide about the obvious contradiction, he replied, "We try to get the cheapest prices." I wasn't that surprised. Businessmen are enthusiastic supporters for a modified form of laissez faire: free markets in what they buy, and a monopoly in what they sell.

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