Wednesday, September 14, 2016

Eureka Moment

For yea these many years I've been wondering why American businesses, including the health care biz, suddenly began jacking up the prices of nearly everything with no apparent regard for affordability. In fact, the very same items and services could be (and can be) had in any other developed country for far less cost, so that essentials like food are affordable for the populace at large. 

My creeping awareness that something was amiss began oh ten/ fifteen years ago when it was announced that there was a sudden wheat shortage in the US. Hence the price of bread, including the small fry artisanal types made here in Maine, went up markedly. Okay, you feel for the bakers, the farmers, so you pay the (nearly doubled overnight) increased price. But wait: then the price of wheat went way down, but the price of bread did not. No one seemed to notice, no one complained. So I'm thinking: Whassup wit dat? As Aretha might say: Who's zoomin' who?

Maybe this was just the first of many items I noticed getting pricey in my world; it was not the last. Since then I've been steadily and increasingly shocked at the price I pay for common everyday things when there is no obvious economic reason for it. Maine is a potato growing state, they should be fairly cheap here, and organic local potatoes are fairly cheap at the local grocery store. But head on down to the local "co-op" and you'll pay not five bucks for five pounds, but three bucks for two potatoes.  Take spinach, for example; fresh spinach from a local, highly successful farm and sold at the co-op in my town (more like a faux-op) or at the local boutique "farmers' market" (nothing like the real farmers' market in Trenton, NJ, for example – now that's a farmers' market – fair prices, good quality.) Spinach was TEN BUCKS a pound.  Ten fekkin bucks for a green that traveled from a field only three miles away to that co-op, where I picked it up – for the last time as it happens. Because that farmer also went from packaging their greens in soft bags to hard plastic 'shells', those obnoxious fridge space hogging boxes that have-to-be-recycled lest they end up in the already plastic- infused oceans.  That was the last straw; bags are cheaper and more environment conscious than hard plastic; 90% of plastics aren't recycled. With two strikes against it, you can see why I stopped buying that spinach and grew my own.  The sheer mindlessness of it all. The utter disregard for the customer AND the planet, by supposed hippie farmers and vendors clearly out to make not just a buck but as much buck as the market will bear. And in a town full of retirees flush with invested funds the market will bear almost anything. And there's the rub.  I'm so pissed off  I could be one of those 'deplorables' Hillary's on about. (I'm not; but would she think so? Do I care?)

We were raised to believe that American Business was about making quality things available to the masses at a reasonable price, allowing for a nice profit for the maker, the guy who takes the risk of loans and manufacture... isn't that the old saw?  But prices of everything just go up and up, often 30% a year (mayonnaise? Where's the rationale 30%?).  But you won't see that reflected in the "basket of consumables" whereby the government calculates the cost of living increase, do you? NO, because they change what goes into that basket every year so it doesn't look like we're having mass inflation. When did they start doing that? The new MO seems to be keep the price of gas low (allo, allo: it was 30 cents a gallon fifty years ago) and heating oil manageable to mask the price of everything essential going way up, including the price of drugs (like insulin) that used to be cheap and affordable.  There is simply NO economic, fact-based reason for this to be so. Unless...

The economic paradigm in America has shifted dramatically. The avowed goal is no longer (a la Henry Ford and his ilk) good quality at a reasonable price, a chicken in every pot, a Ford (just one) for every family. Now a nice profit is not enough, it's every man for himself as prices reflect what the "market" will bear, and too many people simply cannot afford to live. Squeezed tighter than a deer tick voters are desperate to understand why, with two full time (poorly paid) jobs per household, they can't have a decent quality of life free of the stress and strain of basic survival in a dog-eat-dog world.  Oh the Horror.

So how did this come about? This corporate rule of the economy's ethics? It occurs to me perhaps we can thank the Graduate Schools of Business for this state of affairs.  Sometime in the seventies they came up with what they figured was "a better business" notion,  a way to maximize profits.  I studied economics, history of economic thought in addition to the usual Econ classes. Never did I encounter the clarity of concept, the purity of description I discovered today in the  comments section of this article in The Nation about the Epi-Pen scandal. It was an economic revelation!   The answer to why things are SO fekked in the US today. WHY prices of everything are so HIGH!  Such a brilliant money-making scheme, the ultimate corporate system, and it's the new American Paradigm; it completely ignores he notion of societal benefit. This is how we all became the 99%.

I have no idea how we'll ever get back to Kansas.

Here's what the commenter said:

Victor Sciamarelli says:
There is a sixth myth that should be added to this fine article. That is, we do not have a for-profit medical system, rather we have a system of maximum profit. These are two different things.
For example, assume there is a movie theater which has 100 seats, the owner charges $1 per ticket, and since everyone has $1, the seats are full and the owner makes $100 in revenue, some profit, and everyone is happy. But, of course, it doesn’t work this way.
The owner then raises the price to $5 per ticket, since not everyone has $5, especially families, the attendance falls to 80 people on average, but the revenue rises to $400.
Again the price rises to $7, $8, $9 and then finally to $10 per ticket. This price proves ideal because on average 60 people attend and the revenue is $600. Beyond the $10 ticket price the attendance declines and revenue falls below the max of $600.
This can become complicated. Airlines use a computer program to manage this process and a fancy name “yield management” but maximum profit is their goal.
The point is that in order to maximize profit a business does not need or even care about you. It has nothing to do with corruption or whose in power. And price gouging is just a blatant example.
It is the nature of a maximum profit system that a large group of people will be excluded and the ones who are part of the system will pay a high price. That is how it works.
Most people intuitively think that business wants as many clients as possible. This is not necessarily true when your goal is maximizing profits.
Movies are not life and death, but health care is. Yet, this corporate system runs our health care. If some people can not afford medicine, heath care, or even partial care, then you can see it is irrelevant to max profits. This fact, that many people will be denied, is not just a part of the system, it is the system.
Sweden and Germany are examples of a for-profit system, that is, prices for health care are set so that everyone can afford it. America is a max profit system. We don’t need more congressional investigations, rather we need universal health care.


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