The kid had eighteen cents.
The benevolent bully had a buck-forty-nine.
The kid went to the corner candy store and bought a licorice pipe and a jawbreaker for two cents. He was giving serious consideration to the chewable wax lips when he overheard a big kid at the fountain ordering a large lemonade for a dime. He put back the lips and hustled down to the grocer’s on the next block.
“I can make better lemonade and sell it for a nickel,” the kid thought. So he bought a supply of lemons, sugar, and paper cups, then scrounged up some pitchers and a lemon squeezer from the attic and a card table and folding chair from the garage. He perched out on the corner with a cardboard sign that read, “All-American Lemonade, 5¢.” It wasn’t fancy, but the kid was in business.
Meanwhile, the benevolent bully had spent his buck-forty-nine (“borrowed” from the smaller kids) on candy, comic books, and ten-cent lemonades. He liked to give away stuff to his favorite friends. He felt popular—and important. That is, until the money ran out. Then he had to borrow more from the little kids, which was tedious work.
The kid’s All-American Lemonade was a big success, and pretty soon he had expanded his line to other premium drinks—all for a nickel. After expenses he was making three cents a serving and, at 30 cups a day, had netted more than $25 the first month.
Then the kid had a brainstorm. He noticed that, for some reason, the little kids around town never had any money. So he proposed to set them up with All-American Lemonade stands in their own neighborhoods and split the profit 50-50. Within a few weeks, the kid had eight lemonade stands at strategic locations all over town. His local managers were making a phenomenal $10-$15 a month, and the kid was getting rich (by kid standards), which allowed him to open still more stands while hiring three helpers to run his own operation and keep the other stands stocked up. He kept improving his products, and the townfolks kept buying his beverages all the more. Life was good.
The kid’s success did not go unnoticed by the benevolent bully who, filled with indignation and a keen sense of social justice, insisted that he and his buddies deserved their fair share. The argument went something like this: The kid had too much money, while other deserving souls had none. To stimulate the economy the kid’s excess earnings should be redistributed to worthy kids as entitlements to spend on wax lips and comic books.
The benevolent bully’s ideas proved popular among the kids without lemonade franchises (most of whom had forgotten that it was the bully who had impoverished them.) Pretty soon the kid was being forced to pay a heavy “stimulus tax” to grow the economy (which, naively, he thought he had already been doing.) So he quit opening new stands. At the same time, the kid’s local managers were being told that their All-American Lemonade was actually un-American, because they were making and keeping too much money. They, too, were forced to contribute to the benevolent bully’s stimulus program, with a 50 percent tax on their ill-gotten gains.
Before long, all the benevolent bully’s friends could be seen around town in wax lips. But there didn’t seem to be as many lemonade stands as before, and people were starting to complain that the drinks tasted a bit watered down. The bully took immediate action, sensing that the capitalist-corrupted kid had compromised his product to recapture lost profits. He formed a Lemonade Quality Control Board, forcing the kid to use only premium, board-approved “green” ingredients. He levied fines on the kid and turned him in to the city for operating without a license and to the Board of Health for failure to have a State-certified kitchen.
To make a profit the kid now had to raise the price of his lemonade to 10 cents a cup. People soon quit buying his beverages, and by the end of the summer All-American Lemonade was out of business. Coincidentally, the market for wax lips and comic books dropped off about the same time. The benevolent bully reminded people how bad things could have been if it weren’t for the economic stimulus. The people were grateful.
Soon the bully had launched the Lemonade Stand Recovery Program (LSRP), paid for by the taxes extracted from the kid and his former managers. He set up stands around town, run by his friends and subsidized by the LSRP until money ran out. None of the stands made a profit (their lemonade was expensive and ordinary), but at least the benevolent bully was able to temporarily stimulate the economy while running robber barons like the kid (with his five-cent lemonade) out of business.
Many years later, the kid became a successful entrepreneur and grew a company that employed ten thousand in the manufacture of consumer goods. The economic recession, brought on by government inflation spending, borrowing, and regulation, has since forced the company to lay off three-quarters of its workforce.
The benevolent bully became a U.S. senator. He is working on the problem daily, diligently deficit-spending and redistributing wealth to stimulate the economy. …
This blog post has been reproduced with the permission of the Foundation for Economic Education. The original blog post can be found here. The views expressed by the author and the Foundation for Economic Education are not necessarily endorsed by this organization and are simply provided as food for thought from Bigger Pie Forum.