TARIFFS
About 50
years ago, with the popularity of VCRs, many local stores started up a new
industry. They stocked up VCR tapes of
virtually every movie ever made, and rented them.
Now, as I
recall, the tapes of most of these movies would cost maybe $25 to purchase and
$3,50 to rent.
It was a
great deal, and a great idea.
Pretty soon,
come Friday, families would rent several movies for the weekend. They could even rent a VCR if they did not own
one. For less than $15 you had movies
for the weekend…plus popcorn!
The first
local VCR rental store in my neighborhood was an investment by several local entrepreneurs. They borrowed heavily, worked their asses off
and within 6 months their risky investment was paying off handsomely.
Until…
Along came Blockbuster. A larger, fancier super VCR rental store.
I remember
my kids excitedly telling me that you could rent a movie at the new store for
$1.99!
Within one
year Blockbuster was the only store in the country where you could rent a
movie. Within one year and a half,
Blockbuster was charging $4.99 for a movie rental.
What looked
like a great deal, and a money saver, ultimately ended up costing consumers
more to rent a movie, and a lot of little guy risk takers lost their shirts.
CRANKY!!
What the Hell
does all this have to do with Tariffs?
Well, for example,
if China starts building cars with cheap labor in Mexico and sells them for considerably
less than cars built in the US, it would be great for consumers. Taxing these imports through tariffs would in
effect be a tax on US consumers.
Except, once
car producers in this country were put out of business, what might happen to
those Chinese owned Mexico produced vehicles?
Much like Blockbuster
rentals went from $1.99 to $4.99 in a short time, imported car prices would
also take off.
We would be
left with even more expensive import vehicles and destruction of an industry
which was basically invented in this country.
Tariffs on some
imported products are not a tax on consumers, they are a tool to stop another
country from destroying our productive industries with the ultimate effect of
uncompetitive long term higher prices.
When people
tell you that all tariffs are bad and simply a tax on consumers, think Blockbuster.
On the other
hand, I graduated 55 years ago with a degree in economics. I had a C- average so…
What a fascinating comparison! Your insights on the evolution of the VCR rental industry and its impact on local businesses are spot on. It’s a powerful reminder of how quickly market dynamics can shift.
ReplyDeleteYour analogy with tariffs really resonates. Just like Blockbuster's rise led to the downfall of local rental stores, unchecked imports can undermine domestic industries, ultimately hurting consumers in the long run. It's important to consider the broader implications of these policies beyond immediate savings.
As someone involved in the engineering sector, I see parallels in how local engineering firms in Salt Lake City, UT operate. Supporting local businesses is crucial for maintaining healthy competition and innovation in any industry. Thanks for sharing your perspective!
Some of that goes over my former valedictorian head, but I sure miss renting movies at the grocery store and Blockbuster!
ReplyDeleteI remember Blockbuster and renting movies which were supposed to be rewound before returning them but some people didn't and we had to rewind at home before we could watch them. I also remember some movies being so worn out viewing was near impossible. When they switched to DVD rentals prices went up quite a bit, so people like me bought our own copies of favourite movies so we could watch as often as we wanted without having to pay a fee.
ReplyDelete