Everyone always wants to eliminate the middleman but they can’t because of economic
reality.
Beyond some point, there are “middlemen” in the channel of getting your goods to the
end customer who can perform the next step in the sequence more efficiently and more
effectively than you can. At that point, it pays a firm to sell what it has produced to some
other channel that can carry on the next part of the operation more efficiently.
Oil companies discovered they can make more money by selling gasoline to local filling
station operators. When they did, they no longer had the burden of getting their product
to the public. It was out of their hands and not their problem.
When a product becomes more valuable in the hands of somebody else, that somebody
else will bid more for the product than it is worth to its current owner.
Go back to the oil companies. The filling station operators see the product to be more
valuable to them than it does to the oil companies because the oil companies are in the
business of producing oil. The operators are in the business of dispensing it. The owner
then sells, not for the sake of the economy, but for his own sake. However, the end result
is a more efficient economy, where goods move to those who value them most.
Middlemen continue to exist because they can do their phase of the operation more
efficiently than others. It should hardly be surprising that people who specialize in one
phase can do that phase better than others.
Genuine plunder of one nation or people by another has been all too common throughout human history. During the era before the First World War, when Germany had colonies in Africa, only 4 of its 22 enterprises with cocoa plantations there paid dividends, as did only 8 of 58 rubber plantations and only 3 out of 49 diamond mining companies. At the height of the British Empire in the early twentieth century, the British invested more in the United States than in all of Asia and Africa put together. Quite simply, there was more wealth to be made from rich countries than from poor countries. For similar reasons, throughout most of the twentieth century the United States invested more in Canada than in Asia and Africa put together. Only the rise of prosperous Asian industrial nations in the latter part of the twentieth century attracted more American investors in that part of the world. Perhaps the strongest evidence against the economic significance of colonies in the modern world is tha...
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