Cav's Place

The plan for today was the usual one for Sunday, write as much as I can of a personal update, post it just before midnight and then edit it in order to add the rest over the coming days. But I doubt I’ll have time to add much of anything Monday or Tuesday and, whether I’d have chosen to catch up on the runs or on the odds and ends, plus one run, from June, the post would have had to be huge, so I’d have had no chance to write more than a small part of it today, seeing as I want to watch quite a few things as well. But, while this makes me wonder how far behind I’ll end up being, it can’t hurt to write another non-personal post, free another “slot”, and a little exchange I had with dad yesterday offered the topic. We were talking about the high prices of cakes, but it can definitely apply to everything.

It may seem counter-intuitive, but in times of crisis, those trying to sell nonessential products cheaply are more in danger of losing their customers and needing to close down than those with higher prices. In the example we were discussing, a confectionery that used to sell cakes for 6 RON had as customers people who also looked to buy cooking oil for 4 RON per liter, so when the cooking oil became 9 RON, even if that cheap cake only became 7 RON, that public will just give up on the cake completely and only buy the cooking oil. On the other hand, if at a time when 6 RON cakes could be found, another confectionery had customers willing to pay 15 RON for one, those customers will usually continue to be willing and able to pay even 20 RON, so their profits may even increase.
But that’s not all of it, because even poorer people may end up purchasing those cakes from the more expensive confectionery, albeit very rarely. Of course, one of the reasons is that the cheaper ones will go out of business, so they won’t have that much of a choice anymore, but another is that buying just a few more expensive cakes at such a time will make them feel much better than buying more, but still way fewer than before, cheaper ones. If a person was used to treat themselves to a cheap cake per week and now finds themselves only able to afford one cake of the same kind and from the same place per month, that will be depressing, so they may well choose to stop buying from the cheaper place completely and instead buy themselves a cake from an expensive place a couple of times per year, feeling that, at least at those moments, they moved up, matching those from a higher social class. And such very rare additional purchases help those more expensive businesses more than they’d help the cheaper ones, since the cheap ones have low profit margins and tend to need a constantly high volume of sales in order to stay afloat, while the expensive ones are far better prepared to endure boom and bust cycles.

Things are, of course, different when it comes to essential goods, since people can’t give up on them completely, and the first steps are actually beneficial, since we’re talking about deciding what actually is necessary and increasing efficiency, reducing waste and overconsumption, but once the need to save exceeds what can be achieved in that manner, the businesses that are hurt far more are once again those that try to keep prices low in good faith, as inappropriate as using the term for anything that supports this rotten Capitalist and finance-based system is. True, as prices continue to increase, the middle class will no longer be able to keep up, but the wealthy, and the luxury market in particular, won’t be affected that much. On the other hand, those trying to keep prices low will be in a race to the bottom, with customers focusing on an ever smaller number, those who have the very lowest prices, leading to the rest shutting down or selling the business. As such, the wealthy, who can cover losses and possibly also purchase rivals, will benefit and make it through at this low end of the market as well.
Taking the scenario to the extreme, prices increasing continuously will lead to a complete split, with only the luxury market remaining, everyone else unable to actually purchase the necessary goods and, in the parts of the world where some sort of welfare system is in place, relying on state aid. This will lead to a small number of businesses taking over everything but the luxury market, surviving on contracts with the state and delivering products of ever poorer quality, since ever fewer will dare to check and challenge them, the result of doing so likely being losing even what little they still have access to. And it’s also obvious that such a scenario will greatly favor corruption, those with the greatest influence and capacity to pay the biggest bribes most likely obtaining those contracts and also almost complete immunity. And the luxury market, businesses and customers alike, will enjoy a similar level of immunity because the taxes paid by them will fund everything else. As a result, it’s quite likely that a handful of extraordinarily wealthy and influential people will actually control all aspects of the economy, and not only, by owning businesses at both ends of the spectrum, the money therefore going out of one pocket and into another.

The obvious conclusion is that, far from imposing any limits and encouraging what tends to be called enlightened self-interest, the greater the inequality and the worse things get for the greatest number of people, the closer the system gets to a secure position, ensuring that it will continue unchallenged and dominate even more aspects of life and society. As such, the only way forward is to replace it completely with something new, not to try to reform it in any way. But, of course, that should be nothing new to anyone who’s willing and able to think about such matters at least to some extent.