The Little ShoemakerSunday, October 4th, 2009
By Author Tony De Maio
Once upon a time there was a town called “Got Nuttin”. Things were done mostly by hand in this town and most of the inhabitants were poor. Life was hard.
There was a little shoemaker in this town. The shoemaker could make one pair of shoes per day. Since it cost about $20/day to live, the shoemaker had to charge $20 for each pair of shoes. Only the very rich could afford shoes. Fortunately, there were enough people that could afford shoes so the shoemaker could make an adequate—though not good—living. Most of the citizenry made their own “shoes” or went barefoot. All the children went barefoot.
One day Tom (a citizen) ordered his first pair of shoes. He watched as the little shoemaker made the shoes and thought, “I could make a machine to do that.” He went home and began to work on his invention. It took him two years of working nights and weekends, but he finally perfected the machine. It could turn out 5 pairs of shoes every day.
Tom began making shoes and selling each pair of shoes for $10/pair. He had no shortage of customers—many of whom could not afford shoes at $20/pair.
The little shoemaker appealed to the city council. He claimed that Tom was engaging in “unfair competition”. Since the little shoemaker knew everyone on the city council, they agreed with him, and imposed a $5 tax on every pair of shoes made by machine. Tom raised his price to $13, absorbing some of the costs, and continued to sell shoes.
In his spare time, Tom continued to work on his machine, and it soon began turning out 10 pairs of shoes each day. He lowered the price of a pair of shoes to $10 (50% tax). He had far more customers than he could service.
The little shoemaker again appealed to the city council to “save his job”. The city council responded by providing a subsidy of $15/day to the shoemaker and $5/day for a “shoes for the poor” fund. These subsidies would be paid for by increasing the tax on each pair of shoes to $7 (a $2 increase) —$1.50 of which would go toward subsidizing the little shoemaker; fifty cents of which would go toward the “shoes for the poor” fund. The little shoemaker could thus “earn” $15/day for doing nothing—paid for by his competitor. Tom raised the price of his shoes to $12. Some of the citizens could no longer afford the shoes.
Tom became somewhat bored running the shoe machine, so he hired the little shoemaker to run the machine. He agreed to pay the shoemaker $25/day. The little shoemaker agreed, but continued to claim the $15/day subsidy to which he was “entitled”. Tom took up hunting and fishing, being satisfied with the income of:
10 (pairs) x $12 = $120/day (gross) – $70/day (tax) – $25/day wages = $25/day
It became clear to everyone that Tom was not working. He was not “giving back to the community”. (What was NOT “clear” to them was that the little shoemaker was making $40/day—$15/day more than Tom.) The citizens complained to the city council with the cry of, “Tax the greedy corporation.” The city council noted that Tom was running his shoe machine in his garage. Since Tom was using his home commercially, they raised his property tax $5/day. They also stated that it was necessary for Tom to supply health and welfare benefits for his employees ($4/day) and pay for environmental and safety inspections ($4/day). They also stated that he must have at least two employees on site for safety reasons, and must pay them both the same. This raised Tom’s costs to:
$70/day tax + $50/day wages + $17/day (additional) tax = $137.
This was $17/day more than Tom’s gross sales. Tom tried to increase output, but the city council told him he would have to pay overtime wages of double time ($10/pair). He tried dismiss the employees and run the machine himself, but was informed by a union lawyer that a “wrongful termination” suit would result. Tom raised his price to $17/pair, but there was not enough people that could afford that price and not enough business to support that price increase. Tom hung on for a few months, then closed his establishment and moved away.
The little shoemaker reopened his shop and started selling shoes for $20/pair. He continued to collect his subsidy for several years. During that time, he was able to purchase some investment property. The other employee applied for unemployment, then welfare. Being deprived of the revenue of Tom’s shoes, the city council raised property taxes to recoup the money “lost”. (For one thing, they had to fund “Shoes for the Poor”.) After a few years, when Tom’s shoes wore out, most of the folks in Got Nuttin started going barefoot again or making their own shoes. All the children went barefoot (again)—except the very poor children because the city paid for their shoes through a special fund. There were rumors that Tom had reopened his shop in a town several miles away—which led to some grumbling and complaining among the citizens about how the greedy capitalist had closed his business rather than pay his fair share of taxes and fair wages. Such talk was encouraged by the city council. There were also rumors that shoes were selling for $8/pair in the town. THAT talk was NOT encouraged.
Sam put his house up for sale. Someone asked him why he was selling and moving away. He smiled and replied, “Well, you see, I invented this bread machine that will bake bread….”
Tony De Maio
No related posts.