Archive for the ‘Capitalism’ Category


When Amazon started, the company’s founder and directors decided to use books as a loss leader, to sell them at prices where they were certain to lose money — a lot of it. Why would they do that? While no one except Jeff Bezos and his minions knows for sure, there are several likely reasons:

  • The ISBN (International Standard Book Number) system. That system gave Amazon immediate access to a numerical listing of almost every book in print (or out of print, since the ISBN was introduced in 1970) — perfect for database-organized online sales.
  • Selling books at or below cost was an easy way to build market share and visibility.
  • That money-losing strategy drove competitors out of business, especially independent bookstores and most of the chains — Borders, B. Dalton, Waldenbooks, etc., and it greatly weakened the only remaining large chain, Barnes & Noble. This drastically increased Amazon’s leverage with publishers. Jeff Bezos famously said that Amazon should “should approach these small publishers the way a cheetah would pursue a sickly gazelle.” And Amazon has done that.
  • Amazon, which was founded in 1994, had deep enough pockets to lose money — a great deal of it — in pursuit of its goal of complete dominance of bookselling and damn near everything else, and in fact did not turn a profit until 2001.

The results of this are well known. In addition to driving myriad independent booksellers — who simply couldn’t compete on price — out of business, Amazon also drove out most of the chains, which bore massive expense through their bricks-and-mortar stores, and so again couldn’t compete on price. The irony is that the chains had driven huge numbers of independents out of business by undercutting them on price, and they in turn were undercut by Amazon.

Amazon still sells books fairly cheaply — though it seems like their massive book discounts of decades past have largely disappeared except on the most popular titles — and, using their ill-gotten reputation as the lowest-price seller, have branched out into selling damn near everything.

Many people apparently still assume that Amazon will provide the lowest price on almost anything they buy. Guess what — they’re wrong.

I occasionally order goods online, mainly musical gear, computer gear, electronic components, and optics. When I do so, I always check prices, and I’ve almost always found lower prices than those on Amazon, usually on eBay. Here are a few examples of items (all brand new) I’ve purchased recently where I could find exact comparisons between Amazon and other sources:

  • NUX OD-3 guitar drive/preamp pedal — $35.99 on Amazon, $20.02 (with free shipping) on eBay.
  • 1/4″ female guitar jack (metal construction) X10 — $4.57 on Amazon, $1.89 (with free shipping) on eBay.
  • 10mm Plossl eyepiece (for telescopes) — $34.00 on Amazon, $6.26 (with free shipping) on eBay.
  • 250K audio taper potentiometer — $1.40 on Amazon, $1.32 (with free shipping) on eBay
  • Acer S200hql monitor — $127.95 on Amazon, $79.99 (with $8.50 shipping) on eBay

There are other online retailers who usually have better prices than Amazon for the things I often buy; a few that come to mind are SurplusShed for optics, Newegg and Fry’s for computer gear, and Musicians Friend and Sweetwater for musical gear. However, while their places normally beat those of Amazon, you can often find whatever you’re looking for on eBay for even less.

So, you think you’re getting the cheapest price by buying from Amazon? Think again.

 

 


Paul Street

“[We] know that five people owning as much wealth as the bottom half of the species while millions starve and lack adequate health care and half the U.S. population is poor or near-poor is capitalism working.

“We know that giant corporations buying up every last family farm, tapping every new reserve of cheap global labor, raping the Congo’s raw materials in alliance with warlords, purchasing the votes of nearly every elected official, extracting every last fossil fuel and driving the planet past the limits of environmental sustainability is capitalism working.

“We know that a giant military-industrial complex, generating vast fortunes for the owners and managers of high-tech ‘defense’ (war and empire) firms while schools and public parks and infrastructure and social safety nets are underfunded—we know that that too is capitalism working.

“I could go on.”

–Paul Street, “Needed Now: A Real and Radical Left” on Truthdig


As the famous quote from All the President’s Men goes, “Follow the money.”

In this case, that’s all you need to do to immediately realize that Trump’s supposed plan to lower prescription drug costs is total bullshit: When Trump announced he had a plan to lower those costs, pharmaceutical stocks plummeted. When he announced the details, they immediately spiked. Pharmaceutical stocks finished higher on the day than at the start.

That makes sense when you realize that Trump proposed nothing that would have much of an effect on prices. His plan consists of wonkish tweaks that won’t touch the basic problems.

What, you ask, would? Here are the top four things that would help. Of course, none of these are in Trump’s vaunted plan:

  • Allow Medicare to negotiate with the drug companies on prices. When the Republicans passed the Part D law (which took effect in 2006), they specifically forbade Medicare from negotiating prices. This giveaway to big pharma has cost Medicare and Medicare recipients (responsible for co-pays) billions of dollars, probably tens of billions, since then.
  • Allow Americans to buy prescription drugs from Canadian pharmacies. Prices are much lower there and the drugs are exactly the same.
  • Have the Justice Department apply anti-trust laws to big pharma. In recent years, generic drug prices have skyrocketed at the same time that the big pharmaceutical companies have been buying up generic drug producers. The drugs haven’t changed, but the prices have, as has the concentration of drug-producer ownership.
  • Outlaw “pay to delay” collusion. At present, it’s common for the big pharmaceutical companies that have drugs on which the patents are expiring to bribe generic drug producers to delay introduction of generic alternatives. These payments for delays of a year or two often run into the tens of millions of dollars. Forbid this exercise in sleaze, and drug prices would drop.

So, why did Trump trumpet his bogus plan to reduce drug prices? Like all con men, he’s in it for the short term. He realizes that his brain dead followers will buy this obvious bullshit from the Dear Leader, and won’t notice by the time of the fall elections that it’s having no effect whatsoever on the ever-increasing prices they pay for prescription drugs. When they eventually do notice it, he’ll haul out scapegoats — my guess, penniless Mexican immigrants and Satan — and the goose-steppers licking the Glorious Leader’s boots will buy that, too.


Back in the ’80s, a friend told me, “If you really want to know what’s going on, pay more attention to the business pages than the front page.” By and large, he was right. I’ve been following business news for decades, because it’s often refreshingly forthright about what the multinationals and their minions in government are up to, and what they’re planning to do to us.

That’s often so, but not always. Business reporters sometimes use the same types of euphemisms, propaganda terms, and code words as politicians.

Which brings us to the topic at hand: “wage inflation.”

These seem to be the code words of the week on CNBC’s “Nightly Business Report,” where the hosts and correspondents tend to use that ominous sounding term (rather than the more honest “wage growth”) to explain why the Fed is going to raise interests rates — probably more than once — this year.

But what does “wage inflation” actually mean? It means that unemployment is low; that wages are going up faster than the rate of inflation; that it’s relatively easy to find a job or dump a loathsome one and (hopefully) find a better one; that rising wages will increase demand, which in turn will spur creation of new businesses and expansion of existing businesses to meet that increasing demand; and that that growth spurred by increased demand will lead to something approaching full employment and even higher wages.

Sounds pretty good, doesn’t it? Well, it is — for most people.

But not for the multinationals, big banks, their executives, and their shareholders. Why?

In theory, we have an economy based on competition. In many areas that’s no longer the case — think utilities, Internet providers, “defense” suppliers with cost-plus contracts, agribusiness subsidies/”price supports.” These monopolistic entities can simply pass along the cost of wage growth to customers, because customers have little if any choice.

But there still is competition in some areas of the economy. There, wage growth corresponds to lower profits. Why? When they have choice, customers will generally buy the lowest cost product or service. As well, importantly, there are two primary places where businesses can cut costs to remain competitive: wages and profits. (They can also cut corners, using for example inferior components, but there tends to be blowback from this, sometimes quite quickly and quite severely.)

So, in competitive areas of the economy in times of full or near-full employment and rising wages, there’s only one place where there can be significant cost savings: profits — dividends to stockholders and the now-routine gross overcompensation to executives (which would otherwise go to stockholders).

That’s why there are alarmed cries of “wage inflation” and “the economy might ‘overheat!'” every time it even seems like there might be full employment (or something close to it) and wage growth.

This is why even though the GDP rose at a relatively modest 2.6% last year (slightly lower than expected), business economists and commentators were alarmed: wages rose at 2.9%, a full .3% above GDP growth and (gasp!) a full .8% above the rate of inflation, with the prospect of more wage gains as the economy grows. And we just can’t have that, even though corporate profits are at or near all time highs. (Second quarter 2017 profits were at 9.5% of GDP, with analysts forecasting 11% in 2018.)

So, what to do, what to do? It appears that the usual “remedy” will be applied this year and next: the Federal Reserve Board will likely increase the prime lending rate several times. The purpose of these increases? To slow economic growth.

How do rate increases do this? One way is that it makes the cost of borrowing higher for businesses, making them reluctant (or more reluctant) to spend money on infrastructure, on new physical plant. The other way is that interest rate increases make it more expensive for consumers to borrow money, the two primary places being higher mortgage rates and credit card rates.

Both of these things take money out of the pockets of consumers and put it into the pockets of the big banks and the credit card companies. Since consumers have less money to spend on actual goods and services, this decreases demand. Then, since the monopolistic (or oligopolistic) companies (think your lovely Internet or cable TV provider) are under no constraints not to pass along the interest rate increases, they’ll pass along the entire cost to the consumer, again decreasing the amount consumers have to spend on other goods and services, and again decreasing consumer demand (roughly 70% of the economy).

The end result? Decreasing consumer demand, a slowing economy, higher unemployment, stagnant wages, and continued sky high profit margins for the banks and corporations.

 

 

 


“What could possibly go wrong? I haven’t felt this good since 2006.”

(on Trump’s economic policies)


J.R. Ewing

“Once you give up integrity, the rest is a piece of cake.”

— TV character J.R. Ewing (played by Larry Hagman on “Dallas”), quoted in the San Francisco Chronicle March 22, 1987, with a particularly apt and accurate bit of honesty for the age of Trump


Willie Edwards, "Everlastin' Tears"

Condemnation

To the global plantation

Bring it up

Elimination

On the road

To the company store

Won’t somebody tell me

Where I’m headin’ for

–Willie Edwards, “Company Store,” on the horrors of being enmeshed by the global corporate octopus, from the CD “Everlastin’ Tears” — a CD so rare that none of its cuts are up on youtube