Wednesday, November 13, 2019

Consumers in control.

For about twenty-years now I’ve heard about twenty times a week that “the consumer is in control.” Anecdotally, I’ve always believed that that statement had more than a small soupcon of Orwellian semantics woven in it. It’s “Newspeak” on the order of “war is peace,” “ignorance is strength” and “freedom is slavery.”

The consumer is in control. Yeah, right. Just like the United States is a government of the people, for the people and by the people.*    *Koch Brothers not included.

On Sunday in “The New York Times,” columnist and Pulitzer-prize winner, David Leonhardt wrote a short piece titled “Big Business Is Overcharging You $5,000 a Year.” You can read it here. 

The column basically recounts the massive consolidation of major industries in the United States and the massive lobbying efforts that accompanies consolidation. This has given a few giant companies monopoly control over your life and your pocketbook.

Leonhardt's column is largely based on the work of Thomas Philippon, a Ph.D. in economics from M.I.T. and now a professor at New York University. Philippon has just published a new book called “The Great Reversal: How America Gave Up on Free Markets.” You can order it here. 

Blah blah blah, Boomer.

Leonhardt quoting Philippon says, “In one industry after another a few companies have grown so large that they have the power to keep prices high and wages low. It’s great for those corporations — and bad for almost everyone else.

“Many Americans have a choice between only two internet providers. The airline industry is dominated by four large carriers. Amazon, Apple, Facebook and Google are growing ever larger. One or two hospital systems control many local markets. Home Depot and Lowe’s have displaced local hardware stores. Regional pharmacy chains … have been swallowed by national giants.”

Don’t like something? Lump it.

Leonhardt borrows some graphs from Phlippon. From this one you can see prices in the US relative to wages have skyrocketed when compared to European companies.
In this, you can see the share of the economy going to wages in the US and in Europe.

Labor's share of the economy--that's you and me, folks--has decreased.

Prices in the US, compared to labor costs, 
have risen much faster than in European economies.

You might feel this rising corporate concentration almost every day. When you pay your phone bill, internet bill or cable bill. You might feel it when you head to the airport to fly somewhere.

According to Leonhardt, “The largest four European airlines control only about 40 percent of the market. In the United States, that share is 80 percent, and, as you’d expect, airfares are higher.” 

As “The Economist” reported in April, 2017, “Air fares are higher per seat mile in America than in Europe. When costs fall, consumers in America fail to enjoy the benefits. The global price of jet fuel…has fallen by half since 2014. … but in America ticket prices have hardly budged. Airlines in North America posted a profit of $22.40 per passenger last year; in Europe the figure was $7.84.” In other words profits for US airlines are almost 3x those of European airlines.

Even the rock-throwing radicals at McKinsey Consulting have noticed. The chart below shows how labor’s share of “gross value added,” has fared from the end of World War II to today. 75% of the decline occurred between 2000 and 2016.

 I don't know about you, I hate my phone company--and I get my cell service through work, nominally for free. I hate my cable company and internet provider. They're expensive and unresponsive. I hate every airline, every time I fly. I even hate Apple and the way they lock you into their "ecosystem," then provide lousy service and charge $39 for a $.75 cord.

I hate that about three-out-of-four advertising jobs are controlled by four holding companies--and in 2017, one of those company heads made 596 times what his median employee made. That wasn't exaggeration for effect. You can look it up.

I hate that in just about every consolidated chain store you can't get help and workers barely get paid a living wage.

I especially hate when people spout things like "the consumer is in control." 

I don't know what it means.

And I don't know how you could make it up, much less spout it.

BTW, if you want to think a bit more about consumers and control, consider one Henry David Thoreau and his 1849 essay, "Civil Disobedience." (Resistance to Civil Government.)

Thoreau went to jail rather than pay his taxes which in effect were supporting the Mexican-American War and the extension of slavery to new territories. 

In those days, pre-mandatory withholding taxes, you could protest government malfeasance through non-payment. Now we can only rail against Trump but our tax dollars (while he pays no taxes) support this klepto-kaki-stocracy while impoverishing the masses (that's us.)

[Thoreau argued that individuals should not permit governments to overrule or atrophy their consciences, and that they have a duty to avoid allowing the government to make them the agents of injustice.]

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