Note: I co-authored this blog entry with my wife, Mary Bona.
We hope you all enjoyed the holiday season!
Along with the holidays come many traditions. One tradition in our family is to watch the heart-warming, iconic holiday film, It’s A Wonderful Life, starring James Stewart and Donna Reed. It’s no surprise that this film is amongst my wife’s favorites, not only because she loves the old classics, but also because, like the main character George, she is a small-business owner, and, like George’s wife (also named Mary), she loves old homes and fixing up the dilapidated ones.
Frank Capra, the film’s director and producer, was a Sicilian immigrant who grew up in the Italian ghetto of San Francisco. He started from very humble beginnings to become one of the most influential directors of his time. During his acceptance speech for the AFI Lifetime Achievement Award in 1982, Capra stressed his most important values:
“The art of Frank Capra is very simple: …the love of people…coupled with the freedom of each individual, and the equal importance of each individual, [is] the principle on which I based all my films.”
He went on to recall “celebrating” his 6th birthday in the miserable steerage section of a boat full of other terrified immigrants. After 13 awful days at sea, the boat stopped, and Capra’s father brought him up to the deck of the huge ship. “’Chico, look at that!’”, his father cried, “That’s the greatest light since the star of Bethlehem! I looked up, and there was the statue of a great lady, taller than a church steeple, holding a lamp over the land we were about to enter, and my father said, ‘It’s the light of Freedom, Chico. Remember that. Freedom.’”
It’s no wonder that, when he finally formed his own independent film production, he titled it “Liberty Films,” and the first thing we see when the movie starts is the tolling of the famous Liberty Bell.
The importance of freedom was indeed stressed in most of his work. The public loved his films, especially during the Great Depression, when audiences needed uplifting themes of inspiration. His pictures allowed his viewers to witness “a triumph of the individual over corrupt leaders” (Pendergast 2000, pp. 428-429). His own personal history, transformed on the screen, helped audiences through difficult financial times.
Why am I getting into so much of the background of the film’s director, you might be wondering? Well, it turns out that despite Capra’s background and strong personal and political beliefs, many think this film promotes socialism. It is not uncommon to find many a scholarly analysis written about this movie, claiming that greedy, old Mr. Potter represented capitalism, and good ol’ “mossback” George Bailey was the epitome of socialism. In fact, It’s A Wonderful Life was actually targeted by the FBI for being “communist propaganda” shortly after its release in 1946.
After watching this movie yet again, while it is still fresh in my mind, I thought I’d take a less technical approach and speak to all of the good-hearted, hard-working George Baileys that might be out there, frustrated by an unfair competitor.
To me, this film is not at all intended as an effort to criminalize capitalism, but instead as a celebration of the spirit and significance of competition.
Potter controlled much of Bedford Falls, including the market for housing. Most of the town paid high rents to live in Potter’s “slums.” The small Bailey Building & Loan, however, offered the only alternative to Potter’s monopoly. It helped to empower residents by providing mortgage loans, so the town’s citizens could live in houses that they themselves owned.
George Bailey seems to be “stuck” in his small hometown, tied helplessly to the Building & Loan, after the sudden death of the founder, Peter Bailey (George’s father). In truth, he could have left, but his passion for keeping the business alive and preventing Mr. Potter from gaining monopoly power over the housing market is what kept George in Bedford Falls. Foregoing a college education and his honeymoon and using his own money to keep the business from going under was not forced upon him but was instead done by his own personal choice, stubborn nature, and strong moral compass.
Throughout the movie, Potter repeatedly tried to destroy the Building & Loan—his upstart competitor—through means other than just competing on the merits. Understanding the Building & Loan’s role in the town, George consistently and courageously resisted Potter’s efforts to solidify Potter’s monopoly. George is, in many ways, a hero for competition.
For example, early in the film, George fought Potter’s attempt to dissolve the Bailey Building & Loan (Potter was a board member on the Bailey Building & Loan, a conflict to which I could write another blog post, but I will digress) after George’s father, who had been running it, passed away. Potter, of course, had much to gain from its closure precisely because it applied competitive pressure to his slums, by offering a better alternative.
Listen to George’s speech, describing the “measly, one-horse institution” as providing “someplace for people to come without crawling to Potter.”
A few years later, George was on his way to his honeymoon when he noticed a mob forming near the Building & Loan — or a “run” on the company, manufactured by Potter. George’s dimwitted uncle, who was to operate the family business while George was away, panicked, closed the doors to the offices, and started drinking. George ran to the mob of panicked customers, opened the doors, and gave a memorable speech and convinced the crowd not to withdraw their money because it would allow Potter to have a monopoly on the town’s housing.
George’s determination and hard work had successfully built up “Bailey Park” as a superior home-ownership alternative to Potter’s rental slums. Potter’s rent collector warns Potter that he can’t laugh away this Bailey Park anymore—“dozens of the prettiest little homes you ever saw,” owned by former Potter renters. The upstart competitor is cutting into Potter’s monopoly.
Recognizing the seriousness of the Bailey threat to his monopoly profits, Potter reacted by trying to hire George—the only person capable of creating a thriving Building & Loan—for the obvious sole purpose of eliminating the competitive threat. George was tempted, but once he realized that Potter made the lucrative offer only to destroy the Building & Loan, he turned it down on the spot.
Because of George’s incompetent uncle, Potter inadvertently found himself with the $8000 that the Building and Loan sought to deposit. Having failed in destroying his competitor in other ways, he took advantage of the situation by secretly keeping the money, then invented a scandal by alerting the press and police, suggesting that George and the Building & Loan misappropriated the money.
George, despondent about the missing money and the inevitable scandal, was rescued from a suicide attempt by Clarence, his guardian angel. When George wished that he he were never born, Clarence granted him his wish, which showed George what Bedford Falls would have been like had he never existed. During this sad and frightening scene, we see what would have happened to the town and it’s people if George had not saved Potter’s only competitor, the Building & Loan.
In antitrust economics, we might call this a “counterfactual.” Here, we compare the world with competition to the world without competition. It is clear from the scene that the consumers are not better off in the world without competition. The “prettiest little homes” from Bailey Park are now a cemetery. The town is a wasteland, filled with seedy nightclubs and bars.
In the end, George Bailey made it possible for the citizens of Bedford Falls to not only achieve the Great American Dream of becoming homeowners, but created instant equity for them when they purchased their homes as well. He built beautiful new homes, contributing to a safe and welcoming neighborhood. And he kept Potter from getting rid of his only competitor, which would have turned Bedford Falls into “Pottersville” a slum filed with violence, poverty, and immorality. Not bad for a “measly, one-horse institution.”
There are many George Baileys out there today—businesses that are persevering to bring competition to markets dominated by “Potters” that charge too much for too little. Today, it is not only “Potter” that is trying to keep you from the market, but oftentimes it is the government, through onerous regulations, laws that raise entry barriers, or other anticompetitive actions or laws.
We are in your corner.