Economics for Dummies

Last Monday I received an e-mail from our local trash and recycling contractor that reflects the reality of economics in the year 2022. Here's the key paragraph:

"Although we have done our best to keep our rates as low as possible, recent changes in disposal fees, rising costs of material, and increased service times are severely impacting our business. Reluctantly, we must pass on a portion of these rising costs in order to maintain the level of service that you expect and deserve from us. Customers should expect to see an increase of 10% per month on their upcoming billing."

This speaks clearly to a fundamental issue with our capitalist economic system: every business can raise its prices and blame it on increasing costs, but workers do not have the same option: their salaries stay low because it's the easiest cost for businesses to control to maintain profitability and shareholder return. I have to pay my trash contractor 10% more for what is, in effect, less service (this past summer, citing workforce issues, the contractor cut our weekly service from two trash and one recycling pickup to one of each). Granted, I’m still getting the same amount of trash hauled away in one pickup that used to be spread out between two, but the contractor has reduced their* operating costs while raising my rates with the excuse that their costs have gone up. Do you see the contradiction here? 

There's another aspect to this e-mail that is reflected in every other notification from every other business that is hiking its prices: couching the increase in terms of a benefit to the customer. The trash collector's email cites the need "to maintain the level of service that you expect and deserve;" a similar letter recently received from our pest control service says its very substantial price increase is necessary "in order to continue providing superior service." Neither one says anything about the benefit to the company of maintaining or increasing profitability or shareholder return.

A related issue that has received recent attention is the concept of “shrinkflation” - the reduction in size of or quantity of a product (most frequently packaged snack foods and beverages) without a concurrent reduction in its sale price, as a way to increase profit margins or, at least, hold them steady in the face of rising costs. Pay more, get less. Don't like it? Too bad.

Defenders of the capitalist market economy argue that it has provided a historically high standard of living and delivered steady and bountiful supplies of products and services, and this is true, as far as it goes. However, it has also been fed by the fuel of greed at the expense of the consumer in order to deliver ever-higher profits to businesses and returns to shareholders. Low-income families and those living on fixed incomes (such as yours truly) do not find the system especially advantageous when businesses report record profits** while simultaneously jacking up the prices they charge to customers who do not have the luxury of arbitrarily hiking their income. 

And I won't even mention rents which go up each year, lately often by double-digit percentages. 

Welcome to the world of the 21st Century market economy. Bring money. Lots of it.

Have a good day. More thoughts coming.

Bilbo

* I’m tempted at this point to go off on a tangent about the use of “their” as a singular collective pronoun, but that’s a rant for another day.

** The highest profit levels since the 1950s, by most estimates.