Capitalism is a Good Thing
Too many Kentuckians are unaware of this fact, but all benefit from it

On a recent visit to my neighborhood drug store, I witnessed a debate of far more importance than what we’ve seen in the political arena in recent years. My place in the checkout lane was directly behind an older gentleman who was paying for a prescription drug of some sort.

I’m not sure what the man’s ailment was or why he needed the prescription, but he seemed to be in a foul mood. After he finished his transaction, I prepared to step up to the cash register and pay for my purchase. But the man stayed at his place and began to shoot a barrage of questions to the cashier.

“This is a drug store, isn’t it? This company is supposed to care about people’s health, isn’t it?” he asked the cashier sternly, bending over the counter to look the kid in the eye from a distance of about six inches.

“Well, in a way,” the young man answered. “The job of this company is to gain stock value for its shareholders.”

Wow, I thought. This kid is sharp. But the guy in front of me ignored the answer altogether.

“This company sells prescriptions and is supposed to be concerned about people’s health! If that was true, your store wouldn’t sell THOSE.”

And with a dramatic sweep of his arm, the man pointed to the large display of cigarettes behind the cashier’s back. Before the young man could answer, the guy continued his tirade.

“You know why your company sells cigarettes, don’t you? It’s because they’re IN IT FOR THE MONEY!”
The guy straightened up and in a very self-righteous way marched out the front exit.

“Whew!” said the cashier to me as I stepped forward. “That guy sure doesn’t know retailing very well.” I agreed, made my purchase and went on my way.

The more I thought about this little incident, the more it bothered me. By the language and demeanor of the complaining customer, it was obvious that he was an educated man. But as far as economics were concerned, he was ignorant. The cashier had him beat hands down on the knowledge of how a free market works.

But the customer was right about one thing. The drug store is in business to make money. What’s wrong with that? The store wasn’t doing anything illegal in order to meet that goal. Obviously, he felt that the store needed to stop selling cigarettes. But let’s look at this picture a little more closely. The sale of cigarettes and other tobacco products earn a lot of revenue for many retailers.

Let’s say that this particular chain of drug stores stopped selling cigarettes and its profits plummet. The company, now creating less revenue, still needs to earn money for its stockholders. Its major choices are to trim staff, close its less-profitable stores or to raise the prices of its merchandise. If layoffs occur or stores close, people lose their jobs and it hurts the economy and disrupts lives of working Americans. If the prices of the drug store’s merchandise increase, the same gentleman I saw complaining might very well end up paying more for his prescription. Then he would have something new to complain about.

Taking things even further, let’s say that the complaining gentleman happens to be heavily vested in a retirement fund that owns a lot of shares of the drug store’s stock. If the drug store loses money, its stock value will decrease and his retirement will be less prosperous.

The complaining customer’s rationale and Puritanical attitude, if enforced on a large scale, could cost jobs, increase prices and decrease the amount of retirement funds paid to retirees. We’ve seen it happen. America’s brush with this kind of attitude was Prohibition, which, from 1919 through 1933, made illegal the manufacture and sale of alcoholic beverages to the general public.

Apart from Prohibition’s social consequences, it created substantial economic damage to a wide range of industries, ranging from grain farms and restaurants to breweries and distilleries. In Kentucky alone, Prohibition caused thousands of workers to lose their jobs and cost investors millions of dollars in an already-shaky economy.

Though they meant well, the sponsors of Prohibition lost sight of the economic big picture. The drug store patron I saw was guilty of this same sort of ignorance. What bothered me most was that the man apparently was educated. Even more troublesome is that we hear this same sort of rhetoric occasionally coming out of the mouths of certain politicians.

I am convinced that there are three little economic lessons that should be memorized by every grade school kid in America:

1. A company’s job is to make money for its owners and employees. This is a good thing. If you own a company or work for one, you can earn money. This also is a good thing.
2. Whether it’s a person or a company, competition makes them try to improve themselves. Where there is no competition, there is no reason to improve. We need competition everywhere so we can get better at everything. Competition is a good thing.
3. The best country is one that lets people decide what they want to do and then do their best at it. No one can decide what you do with your life but yourself. Freedom is a very, very good thing.

Yes, these laws are a bit simplistic. But if you throw in the Golden Rule, the third-grader that memorizes them will know a heck or a lot more about economics – and maybe even morality – than the cranky guy I saw at the drug store.

Claude Hammond is editorial director of The Lane Report.
editorial@lanereport.com

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