NCPA - National Center for Policy Analysis

Put Consumers First

October 28, 1997

The 18th-century economist Adam Smith said "consumption is the sole end and purpose of all production." This simple truth is often overlooked by politicians and the media in debates on free trade, taxes and antitrust enforcement.

For instance, free trade helps the economy by putting consumers first:

  • If America imports inexpensive Italian shoes many U.S. shoemakers may lose their jobs, but 260 million Americans get a great bargain for a pair of shoes.
  • With the money they save, consumers buy products and start businesses in higher-value industries like computer software -- where American producers have a clear advantage.

Antitrust laws ignore consumer benefits. The Clinton administration's million-dollar-a-day fine against Microsoft, aimed at curbing the competitive tactics of the likes of Bill Gates and Intel, overlooks the fact that consumers are getting a great Internet browser for free and are enjoying more and more computer power for less and less money.

Economists point to Germany to illustrate the consequences of putting the demands of producers and unions ahead of consumers.

  • Germany's 11.7 percent unemployment is a structural problem and not a temporary downturn in business cycle, says former economics minister Otto Graf Lambsdorff.
  • Wage agreements set by the big labor unions and forced on small businesses tend to stymie competition that would drive down prices and benefit German consumers.
  • Germany's medieval guild system further dampens competition by making it impossible for new businesses to enter a market without the certification of businesses already in it.
  • The most blatant example of producer-first mentality is Germany's nationwide limit on operating hours, put in place with the support of the producers and unions.
  • The restrictions on hours of operation was liberalized in 1996 -- by 90 minutes. The law now requires businesses to close at 8 p.m. Monday through Friday and at 4 p.m. on Saturday.


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