Thursday, September 30, 2010

And another thing....

I'm not a fan of capitalism, at least not in its current form. I have a long list of gripes, but the one that's bugging me right at the moment is the idea of "buying power".

The idea that the more money you have, and the more money you spend, the cheaper things get for you sucks in every possible way.

In the business arena, it's highly anti-competitive. Small companies trying to start up and compete with bigger companies have to pay more for exactly the same products and services. They also usually receive much poorer customer service. (If you've ever dealt with both the corporate and small business arms of a telco, you'll know exactly what I mean.)

This then flows directly on to consumers. It's ok if you live in an area where the really big companies want to be, but if you don't, you get to pay more for everything too. And surprise, surprise, the places where the big companies aren't are very highly correlated with the places people earn less.

I understand that there's a reduced cost of sale to a big company, but this doesn't even come close to accounting for the differences in pricing. For starters, it's not at all uncommon for companies to "buy business". They'll go into a large organisation and offer their product at less than cost in order to get the business, and since they still have to make enough money to stay afloat, the costs of this practice are passed on to their smaller customers.

Also, when companies get big enough not just to control the demand for their product, but also to control the upstream providers, you see these huge companies dictating their own costs at the expense of providers. I know I'm heading into dangerous territory here, but Bob Katter is right about the impact that the massive dominance of Coles and Woolworths has had on farmers. And you may have noticed that the price of fresh food hasn't dropped to us small value customers. The wholesale price of milk dropped substantially, but the retail price rose.

There are all sorts of other ways that big companies are advantaged over small ones, and the net effect is always to increase costs to consumers. I do believe in competition, but all competitions need rules and regulations, or you just get bullies. Where competition works as it should, we see prices fall and service improve (fibre telco services in cities in would be an example of this). Where competition is strangled by oligopolies or insufficiently regulated monopolies (think supermarkets for the former, and copper telco services for the latter) we see prices rise, and service levels drop.

The heavily skewed pricing structures we see in many industries are a major barrier to the type of competition that results in good outcomes for the population at large.

Unfortunately, the thing that annoys me the most about capitalism is that I don't know enough about economics to be able to present solutions or alternatives. I know that putting prices on things that are currently not valued by our system (such as environmental costs, human life costs and so on) are a start, but I simply don't know enough to envisage what the next economic step is. I know it clearly isn't anything that's gone before. What I want to see is people discussing where we go next, instead of accepting capitalism as an inevitability, and countering any criticism with "What, do you want us all to be communists?".


  1. I have no answer but I agree with you. My own small humble suggestion I guess as consumers is we have to vote with our feet and shop/buy at the alternatives. Keep the local corner shop if you are lucky to have one alive.


  2. I can understand where you're coming from, and in a local sense, it certainly makes sense to help keep the little guys afloat, but in the global sense, it's only reinforcing that individuals pay more. Unless we could manage a large scale boycott of Coles and Woolworths, mostly those people voting with their feet just get to pay more. The oligopoly aren't fazed.

    I do shop at my corner shop for some things, and I hope it helps the owners earn a living, but I don't think it's making a dent in the supermarket strangle hold. I think the odds are stacked so far against individual consumers, that it's really hard for us to do anything, Or maybe I'm just weighed down by Friday night, and it's not really all that gloomy. Some days I'm much more optimistic, honestly. :)