The Free Market
Capitalism and the Burger Wars
The Free Market 15, no. 7 (July 1997)
If you love bad news, devote your life to studying government. You'll learn about the colossal waste of NASA, the diseases spread by the school-lunch program, the lies of the FBI, the corruption subsidized by foreign aid, and the debauchery of the military base.
So where can we turn for good news? To private enterprise, of course, where efficiency, hard work, and creativity still count for something. In markets, the old ideals of public service still survive, with people working hard to bring us great products and services at prices we can pay, and without waste. Here the average guy is sovereign, and people fall over each other to put excellence first.
The glories of private enterprise are most evident in the marvels we take for granted. For example, free enterprise created the marvelous, if much derided, institution of fast food. If there were a bureau of hamburger production, they'd be as scarce as budget cuts. As it is, citizens of every social and economic standing have daily access—in minutes—to a balanced meal denied to kings only two centuries ago.
This is no small feat, but one of many millions of miracles of the marketplace. The great challenge of economies from the earliest times was to get all people, not just the rich, access to food. Otherwise, a large and growing population could not be sustained. Only the advent of capitalism, particularly in America, made this possible, and fast food has played a key role in our times in making it so.
Anthropologists note that throughout human history, one key sign of prosperous times is the wide consumption of beef (which requires far more land and other resources than crops). It's no surprise that America distinguished itself in world history for being the first society in which beef was available to one and all, no matter how poor, especially through the hamburger.
And what a glorious thing the hamburger is. It combines meat, grains, cheese, and vegetables into a simple, delicious package for quick and enjoyable consumption. It seems so easy, yet the efficient production of the hamburger, in all its details, is of infinite complexity. Only the coordinative powers of a market economy could possibly produce it.
Without the freedom of contract and capital accumulation, the right of private property, stock markets, and the price system, there would be no way to bring together the thousands of production processes needed to make a hamburger, from farming, ranching, and the manufacturing of thousands of individual capital goods from branding irons to refrigerators.
This is why the fast-food burger is rightly seen as a symbol of freedom around the world, and why the citizens of former socialist countries crave it more than any other American export. Living under communism, beef was for only the super rich and well connected. A delicious, cheap, widely available beef sandwich is an unimaginable dream come true.
Even at the retail level, consider the way capitalism works to everyone's benefit in the fast-food industry. To attract more business, McDonald's is slashing the price of a Big Mac (that's "two all-beef patties," etc.) to 55 cents. That's one-fourth of its current price and only a few pennies above the cost of its ingredients.
Moreover, the company will serve it in 55 seconds, or you get it free. This discount harks back to 1955, the year McDonald's began to revolutionize how people eat, in America and all over the world. In time, the company will offer the same deal on other favorites like the Quarter Pounder. And this is despite the dollar having lost 83 percent of its value since 1955!
Why is this huge company, with sales of $31.8 billion and 42 percent of the fast-food burger market, doing this? Not because anyone ordered them to do so or because the management swells with compassion for humanity and its need to eat cheaply. McDonald's would love to raise its prices. But it can't, so long as it needs to strike back against competitors making serious inroads into what it sees as its territory.
Burger King won the hearts of many by offering a Whopper that weighs more than the Big Mac. It's also tapped into the huge market for breakfast that McDonald's pioneered with the Egg McMuffin. It turns out that consumers are also impressed by Burger King's Croissanwich. Then there's the "problem" of Wendy's. Sales are growing by 7 percent per quarter, because consumers like the old-fashioned atmosphere, larger burgers, and ketchup that comes in cups instead of aluminum baggies.
It was, of course, a huge error for McDonald's to do away with its wonderful Styrofoam boxes on crazy eco-grounds. And like all large companies, it has an institutional tendency to want to rest on its laurels, a temptation the free market does not allow anyone to indulge.
Americans tend to take all this scampering for consumer loyalty for granted, but think what it implies on a deeper economic level. It shows who's really in charge of the free enterprise system. It's not the moguls who own or manage the company or the franchises. It's not even those who make the food.
No, the king of the market for fast hamburgers is the consumer. With his decision to buy or not to buy, he shapes the market and determines the range of qualities and prices of goods and services. And it is he who will decide the winners and the losers in the burger war. No matter how big a company is, or how vast its market share, all is lost without the vote of the little guy with the spare change.
Under no other system of economics (forget politics) does so much depend on the individual choices of the average fellow. He can be as fickle or finicky as he wants; there is no penalty for him either way. Meanwhile, the private company can't complain; it can only respond. It is enslaved to the whims of the buying public, which is exactly as it should be.
History is littered with businesses that despised this system because they grew tired of competing. Instead, they enlisted the state to gain a leg up, bypassing the competitive marketplace and the will of the public. This is how we came to have anti-trust laws, trade protection, business subsidies, loan guarantees, and government-enforced cartel arrangements.
Thankfully, the fast-food industry is still largely governed by market forces, as the burger wars show. The profit and loss system functions here as well as anywhere. This system turns double-entry bookkeeping into the crucial means for the public to communicate its desires to those who provide the goods we depend on every day. If you don't like the Whopper, you don't have to call Burger King's corporate headquarters. You merely refrain from buying it.
Neither are any of these competitors free to waste resources in pursuit of consumer dollars. They must scrimp and save, cutting costs at every corner. And they must find the most efficient way of getting consumers what they want without ever sacrificing quality.
The result is a vast, efficient, and productive process that serves all of society. And it happens without costly elections, bipartisan commissions, ethics-in-hamburger laws, regulators, bureaucrats, special prosecutors, or any of the other trappings of government.
So successful is this system that its fiercest critics are reduced to complaining of the supposed "cultural decline" it brings about, as if the ability of everyman to buy a burger is a grave threat to civilization. This aesthetic critique of capitalism is about all that's left of the socialist lie.
What, then, have been the cultural effects of the fast-food industry? In fact, they have been wonderful. It has rescued us from socialist puritans who hate cows and want to permanently ban beef from the American diet. It has provided jobs to millions of young people, and taught them the work ethic. It has single-handedly kept alive the great American birthday party. Above all, it has showed us that eating well in good times and bad does not have to be the exclusive privilege of the well-to-do.
We take it all for granted, but make no mistake: without the institution of capitalism that makes fast food possible, the vast majority of the human population would be reduced to hunter-gatherer status in short order.
Is there a way to bring the workings of the market to bear on now-frustrating sectors like education, mail delivery, utilities, public safety, and the courts? Of course. The government merely needs to get out of the way, and let the market do for these services what it has done for the great American habit of eating on the run.
Llewellyn H. Rockwell, Jr. is president and founder of the Ludwig von Mises Institute
Cite This Article
Rockwell, Llewellyn H. "Capitalism and the Burger Wars." The Free Market 15, no. 7 (July 1997).