Producers vs. Consumers

Governments of most European nations, and now rapidly increasingly our own, have a strong tendency to protect producers rather than consumers. Their argument is that producers are consumers. Thus if our producers do well, they consume more, and ultimately all are benefitted.

This is the concept that has resulted in the government policies that include protectionism, stimulus, corporate regulations, union support laws, pay regulations like minimum wage, and many other policies. These policies are meant to give benefits to workers, those who produce our products. If the workers get paid more, they will spend more, thus other industries are benefitted.

But what’s rarely noted is that by given added benefits to the producers, we take those benefits from the consumers. Consumers would benefit from buying cheaper tires from China. But that hurts the local producers, so we pass laws to protect the local workers at the expense of the consumer. Union members are given great pay and benefits. But as a result, their services cost much more to the consumer. We give entry level workers a pay raise when we raise the minimum wage, but this results in either fewer workers or higher prices. The consumer again pays the bill.

So what’s the big deal? Producers are consumers and vice versa. What does it matter which one side we protect?

The reason is that actual wealth is in what is consumed, not produced. This was a concept originally presented by Adam Smith, the mind from which the founders based their economic policies. We typically measure our wealth by what we produce. But it’s a fallacious measurement. If I were to produce a million cars that break down within days, nobody will buy them. So what wealth have I produced? Sure, I created the product, but it’s of no value to the consumer. If I baked a cow pie pie, who would buy it? What’s the value of it? Nobody would eat it, so my work was for nothing, and the product is worthless. This is why it is what is consumed that measures actual wealth.

Now with this conclusion, we realize that it is the consumer that we must protect, not the producer. If the producer is not producing a product that consumers wish to consume, they are creating a worthless product. What good is it to protect that worthless product and continue to produce it? Saving worthless jobs only continues to drain wealth from society. Why would it be good policy to force pay producers more for their work, thus causing the price to increase? The consumers must either pay more for that product, thus retaining less to spend elsewhere, or they will choose not to purchase the product anymore. What good does it do to create protectionist policies in order to artificially make products not held in high value more valuable? If we could only block out the sun, we would create and save so many candlemaking jobs (http://bastiat.org/en/petition.html)!

It’s that people are willing to pay for a product that gives it value. It is consumers to decide what society wants and needs. It is consumers who drive the need for useful invention (as opposed to invention for the sake of invention… of what value is a doohickey that does nothing useful?). It is consumers who create the wealth of the world.

Stop protecting the producers. You're hurting the real wealth producers, the consumers!