held up at the Liverpool Customs House
December 30, 2012 Leave a comment
It’s important for libertarians to distinguish between free-market capitalism, where profit and loss depend on the efficient satisfaction of consumer demand, and the political entrepreneurship of crony capitalism, where the capitalist’s energy is directed toward manipulating the political system to make profits at the expense of consumers and taxpayers. (I addressed this distinction several years ago in an LRC article called “Straw Men & Ham Sandwiches.”) Free-market capitalists deserve our gratitude and admiration. Crony capitalists deserve the opposite. And yet I can’t help admiring the way "one manufacturer, a man named Peck," managed to make a tidy profit at the expense of the hapless British taxpayer.
Henry Grady Weaver tells the story in The Mainspring of Human Progress (1947):
[Eli] Whitney is frequently spoken of as the inventor of mass production…
The brilliant, ambitious, and audacious Whitney, unwittingly perhaps, had taken on the job of laying the groundwork for the modern machine-tool industry, without which few, if any, of our manufactured products of today would be available at prices within the reach of the average person.…
[Eli] Terry was no newcomer to the clock business. For some years past, he’d been canvassing the New England countryside, selling high-priced clocks on the installment plan. But the idea of producing clocks of uniform quality at prices low enough to make them available to every family was something new and radical.
Eli Terry, as far as I can find out, was the first to put into practice the American idea of low cost and big volume through mass production and wide distribution. By the end of three years, he and his partner, Seth Thomas, had built and sold over 5,000 clocks.
Others were attracted to the field. Competition increased. Quality improved. Wages went up. Prices went down. The unique American formula was in the making!
One manufacturer, a man named Peck, saw possibilities in the export trade. His first shipment of low-priced clocks to England was held up at the Liverpool Customs House on grounds of suspicion. The Customs officials knew the value of clocks, and they knew that clocks just couldn’t be produced at the low prices shown on the Peck invoice — fraudulent payments must have been made on the side in order to avoid the full effect of the tariff.
British law provided that under such conditions the goods in question would be confiscated by paying the amount of the invoice plus 10 per cent. The clocks never reached the consignee. They were taken over by the government. What the government did with them, I don’t know.
But Peck, being a practical man, didn’t put up any argument. He was a hardheaded manufacturer, not a salesman. The 10 per cent extra profit was “pure velvet,” and he rather relished the idea of disposing of his output without any sales expense or credit risk. He added more workers and continued shipping his clocks to Britain and collecting from the Customs Office until they finally got wise to him.