Thursday, December 20, 2018

econlife - Throwback Thursday: When McDonald’s Went to Moscow (and Maybe Changed the World) by Elaine Schwartz

#TBT: Today’s Throwback Thursday was inspired by the rumor that McDonald’s could open in Pyongyang. It takes me back to 1990 when the first McDonald’s opened in Moscow.

Our story starts with five years of negotiations between McDonald’s and Soviet bureaucrats. One problem was the French fries. Approximately two inches long, Soviet potatoes were far too short to become a McDonald’s French fry.  The solution was to import the seeds from Holland so they could grow on Russian soil.

But there is much more…

Making the Moscow McDonald’s

Truckloads of potato, lettuce, and cucumber seeds had to be transported to local suppliers who were willing to meet McDonald’s specifications. To process it all, McDonald’s had to build a processing plant that could produce one million buns a week, 127,470 cheese slices, and equally large amounts of its other ingredients. They also needed a quality control laboratory and a distribution unit.

At the restaurant, 27,000 people applied for 630 jobs. Unlike typical Soviet sales personnel, employees were supposed to smile, to work efficiently, and treat customers with respect. The new managers attended Hamburger University in Illinois.

On that first day, January 31, 1990, they served a whopping 30,567 curious and excited people. In two kitchens, they prepared burgers, cheeseburgers, Big Macs, fries, shakes, drinks, and ice cream. A Big Mac cost 3 rubles and 75 kopeks–approximately one third of an average daily Soviet wage.

Do look at this two-minute video of the mind-boggling queue:

Our Bottom Line: A Positive Externality

In 1995, NY Times journalist Tom Friedman expressed his “Golden Arches Theory of Conflict Prevention.” Friedman explained that countries with a McDonald’s are high enough on the development ladder to afford a Big Mac. Because that burger connects them to the world economy, they have more to sacrifice during a conflict. So, they don’t fight wars against each other.

Yes, multiple wars prove Friedman was wrong. Still I would like to believe there is a glimmer of truth in the concept. An economist would call it a positive externality.

Returning to where we began, we can say that it’s not small fries when a McDonald’s opens in a country…And maybe one will open in North Korea.

My sources and more: A good starting point, The Washington Post Wonkblog alerted me to the North Korea McDonald’s rumor and linked to this NBC report. Next, you might enjoy pondering the 1995 Tom Friedman column and the Slate refutation.

Please note that my McDonald’s facts and some text came from my (favorite) textbook, Understanding Our Economy (available through econlife). Our featured image is from Adweek.

Ideal for the classroom, reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.