Wednesday, January 31, 2007

The Corporations and the Communists

A couple of weeks ago, Russ Roberts interviewed Bruce Yandle who founded the regulation story of "the bootlegger and the Baptist." This actual alliance is forged from some good intentioned legistation: no selling the vile alcohol on Sundays (the moral high ground that Baptists take). But bootleggers like the law, too. They don't mind breaking the rules so they step up to meet the demand for drink and the law keeps competition out (and prices high). Both groups hate each other, but one has the ethical argument people will support and the other has the money to spread the word. The lawmaker becomes the go-between.

The story of the bootlegger and the Baptist illustrates that regulation has two parts: an ethical center and an economic justification. Knowing this, it is not surpising that in 2005, Wal-Mart called for a hike in the minimum wage. They strangely cited their desire for helping working class families. Strange because they don't need Congress's permission to pay their own employees more.

The bootlegger and the Baptist illustrate Wal-Mart's devious plan. Big businesses know they can afford higher wages while small mom-and-pop stores can't. Thus corporations can pick the pocket of the American people while cloaking themselves in the Baptist's morals. And the Baptists are fooled every time.

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