Beaujolais & Big Macs

April 3, 2003

Dear Investor:

Whether of Beaujolais or Big Macs, the boycotts on both sides of the Atlantic are illogical pursuits. These boycotts, populist and porous as they are, will do little overall damage to the world economy unless they become sanctioned and enforced by governments. If that were to happen, Smoot-Hawley protectionism would complete the final phase of this market cycle, sending the economy into further tatters. We are watching very closely these turns of the political compass, because the outlook for stocks is entirely tethered to global flows of capital and goods.

The reason why we feel sanguine about this issue is that the global economy makes protectionism less likely than ever before. A boycott’s venomous intent reflects a crude ignorance of one of the great realities: no product, not even the lemonade on the street corner, is really a one-country job anymore.

Let’s take Big Macs, the favorite boycott item of French chauvinists. The French Big Mac, as identical as it may be to its US sibling, is co-sold by in most cases a French franchisee who buys French potatoes and French meat, shipped by French truckers who buy their diesel from Total Fina Elf which buys its legal expertise from French lawyers who buy their psychoanalysis from French analysts. Boycotting a Big Mac hurts local French businesspeople much more than it hurts McDonald’s who will simply shut down its French franchises and move them to China if they become unprofitable. The point is that multinationals have the great freedom of movement, not the locals who depend on the multinational for their livelihood. The locals, of course, are less likely and less able to move to the Far East.

In parallel, the boycott of Beaujolais is hurting the American importer, the American logistics company who aids the American importer and the American accountant who counts the beans of the American logistics company. Beaujolais may be nearly as American as a cold Budweiser when you think of the supply chain.

It makes people feel good in a petty sort of way when they pour the wine down the sewer or smash the glass window of that fast-food chain, but it would be nice if these boycotters learned a little more about the world first. In most countries for example, McDonald’s uses native franchisees, who know the culture and are local entrepreneurs. These local entrepreneurs are the only thing left holding up the pathetique French economy, yet these boycotters would see fit to put them out of business. Of course, the misguided French chauvinism would be much better served by embracing change, modernity and multicultural influences, the very things it fears and cannot understand. Someday, France will have to change, but until then, it will thrash around desperately.

Americans, less enfeebled by change—a decided staple of American society—are still stubbornly prone to shoot the Beaujolais first and ask questions later.

The truth is that the boycotters will not win, because they try to do the same thing that Communism tried to do: stifle the inevitable and all-powerful market forces that, in the end, make the world a better place.