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 corners 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. Mom 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 Kavárna 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.
Low Wages?
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.
At the time of the original publication, James Madison
was a systems analyst at an insurance company in Hartford,
Connecticut.
Reprinted with permission from The
Freeman, a publication of The Foundation for Economic Education, Inc.,
December 1999, Vol. 49, No. 12.
Yourname@libertyhaven.com
