This begins as the tale of three colleagues – a devout Republican, the guy who became president of the Young Democrats for the county, and me.
All three of us were friendly and on good terms, but I naturally had a better political bond with the Young Democrat. It began one day when we were discussing the stock market and I volunteered my anti-profit perspective with the group. The short version, for those who have not seen my other posts on the topic, is that profit is a despicable thing that has supplanted a natural emphasis on revenue.
As the discussion unfolded, our Republican colleague offered a usual refrain that I hear to my position: should people not receive reward for their hard work? If, for example, one is able to build a company of Amazon’s size and reach, does that not entitle the owner(s) to an equally sizeable reward? What incentive do we have to strive for that level of accomplishment if we are going to place some sort of socialist cap on the reward?
This is precisely the heart of my profit versus revenue argument. What it takes to put a good or service in front of the consumer is the cost associated with that good or service. The organisation then charges a price for that good or service. If revenue the organisation receives through the sale of its goods and/or services exceeds that total cost, they earn a profit. If they do not, they show a loss.
My point, as it remains to this day, is that all of the stuff my Republican colleague referenced is already accounted for in the cost to produce the goods and services. At a truly fair price, the revenue matches the cost, and the organisation shows neither profit nor loss. Profit, by its very definition, means the organisation acquired more value than the goods and/or services were worth.
The second piece of this is the notion of a “fair price,” which is far less defined than one would like. The traditional Republican perspective, which is shared by plenty of Democrats and Independents, is that the fair price is whatever someone is willing to pay for it. If it costs only five dollars to produce a thing, but the public is willing to spend twenty dollars on it, then a person would be foolish to let it go for five dollars or even fifteen. At twenty-five dollars, the consumers start to rebel at the idea of surrendering so many resources in the exchange and stop buying. That drives down revenue and forces the organisation to drop their prices.
I find this breathtakingly ironic in a world where people rebuke the academic perspective in favour of the real-world reality. This academic definition of “fair price” exists in a fair market, and my argument comes from the base assertion that the market is not fair. Consumers do not have all of the relevant information, and the greed is so ubiquitous that consumers do not have an alternate route. The few control the overwhelming majority of resources, and if the many want any access to them then the many will need to participate in the rigged market. Only shrewdness and luck, not merit, allows an individual to travel up the economic hierarchy of our society.
Is the new video game console worth $500? No. Are people willing to pay $500 to acquire it? Of course. Enough consumers are willing to spend $500 to acquire it that the company manufacturing the console will keep the price set at that level. If they lower the price, they will attract more consumers but not enough to increase the total revenue. If they raise the price, they will repel consumers and decrease the total revenue. They found the sweet spot on the curve.
What I would argue, however, in this example or any industry, is that consumers have a limited number of options. Want a video game console? It’s $500. Too expensive? Here’s a competitor. Theirs is also $500. They aren’t competing to offer the best price – they’ve established an oligarchy with an industry-standard detente so that everyone can maximise profit. It’s true across virtually all industries.
Worse yet – we are not discussing frivolities and leisure alone. This trend is present in housing, in education, in healthcare, in food, in education… What are you willing to pay for clean, running water? What are you willing to pay for live-saving medication? What are you willing to pay for basic nutrition?
The consent in the “world’s best countries” – the US and the UK – right now is that cost of living is out of control. It’s getting difficult to afford food, to afford heating, to afford rent. So, we’re all agreed that prices are higher than we’re willing to pay, but there is no mechanism for us to lower the prices. You don’t want to pay that rent? Go pay it somewhere else where it’s also high relative to its area. You don’t want to pay that for your medicine? Wait until the condition worsens and you’re forced into even more expensive treatments.
It’s something that long agitated me about the “Millennials killed…” articles. Like the time we killed Applebee’s. The contention was that it was somehow Millennials’ fault for not subsidizing Applebee’s as a business rather than Applebee’s fault for not appealing to a particular market. Applebee’s made changes to their menu and still Millennials did not appear. “What more can we do?” Applebee’s pleaded?
“Well, the cost of everything is astronomical,” Millennials responded. “Consider that if it costs me even twenty dollars to have a meal at your establishment, that is twenty dollars that I cannot spend anywhere else. Every Applebee’s offers the same menu of the same quality and comparable experience. Why would I waste a precious twenty dollars of my hard-earned resources there when I could enjoy a unique experience somewhere else?” (This applies to all the chains). Alternately, that money may be needed in other areas where prices are far above the true value of the good or service, because we are gouged everywhere.
Now to the flip side of this equation.
My two coworkers and I all performed the same job. The company hired us individually to perform the same tasks, with each of us commanding a slightly different salary based on our education and experience. My Democratic colleague, for example, had a doctorate and earned more than I did with my bachelor’s.
Then came the day that we experienced high amounts of turnover on a related team. The department made an executive decision not to rush to rehire those positions, and instead came to our team to ask if we would help take on the work.
Our Republican colleague’s response was sure.
His Democratic colleagues’ response was, “How temporary is this? You aren’t sure? Then how will this affect our compensation?”
It triggered another discussion, and one that I found riddled with irony. See, our contention was: This company hired us as so many dollars per year to perform this list of tasks. Now they are increasing the list of tasks. In what free market would I do those additional tasks for the same compensation? If the company took on additional costs, would they not raise their prices? (Interestingly, if the company manages to offload costs, they wouldn’t decrease their prices because who bothers to enforce that against a company?)
His position was that a dutiful employee must sometimes go above and beyond in the course of their work. It was about having a good work ethic. Our counter was, “We do go above and beyond in our prescribed tasks as a matter of personal satisfaction and pride. We indicated a willingness to take on the additional work in a temporary capacity to ease the burden until they could refill and train those positions. They told us they have no intention to do that, which means this becomes our work indefinitely. We should receive compensation for that.”
It continues to strike me as odd, especially in this era of “quiet quitting” (kiss my butt with that nonsense), that organisations dictate the fair price based on what they decided consumers are “willing” to pay and dictate the fair compensation for their employees. They are both economic transactions. The one party does not get to hold most of the cards in both situations – remember, this negotiated cost that is our salary is part of their cost in delivering goods and services. They are driving down our salary to maximise the profits they earn from selling their services, which very much include the work that we do. In other words, the organisation supresses what is the fair value for our work and then turns around and overcharges another party for that same work.
The many, in our economy, are the workers. This is a widespread thing. Our salaries are held as low as possible while our employers charge as much as possible to consumers (the workers from other organisations) so they can maximise profit. Not revenue. Profit. It’s an enterprise to get as much money beyond the true cost of the goods and services as possible for the few at the expense of the many. We receive supressed wages for our work and then pay above the reasonable value, in all areas, to receive even necessary goods and services.
Republicans, like the one who was arguing that we should do unpaid labour in the spirit of being “good employees,” love to promote the idea of a meritocracy. Your hard work will ultimately reward you – the sky is the limit! The maths of the situation is that the harder you work, the more an employer can squeeze out of you to increase their resources while depleting yours. It’s literally the antithesis of getting ahead in life.
The more resources they acquire, the more control they assert over this whole process – see the decline in small business in favour of massive companies like Amazon, Apple, Meta, and Google. Is competition still allowed? Kind of but not really. If you arrive on the scene and make a legitimate challenge to one of the big guys, say by offering a superior product for five dollars to their six-dollar offering, then that massive company can reduce their price to three dollars long enough to cannibalise the small company until they either fold or submit to a sale to the larger company. The larger company might then come back and charge eight dollars for the improved version of their product that they did nothing to innovate.
Meanwhile, those same organisations contribute to politicians who promote policies that further enable their profiteering. Government is supposed to be one of the biggest mechanisms we have as a society to restrain economic abuses by the powerful, but they’ve aligned government with them (Republicans like to cheer their talking points loudly, while Democrats like to enable them while saying all the right things to voters).
The other big option? Boycott. But again, how are we to go about boycotting many of these services? We don’t like how the airlines are operating – what do we do? Stop travelling altogether? Car travel takes too long for many situations and rail travel, at least in the United States, is laughable except in a few metro areas (not to mention a tendency for our transportation infrastructure to connect economic areas while neglecting the people who would benefit most from access to public transit). Stop going to school? Stop receiving medical care? Stop eating? Everyone lives outside?
The especially “funny” thing to me is that the government also makes a practice of criminalising alternatives to much of these problems. Do we all live outside? It’s surprising the extent to which that is problematic. Most of the land has private owners who can say no. The public land loves to treat transients violently – the sort of “beautification” efforts one sees in cities to discourage homelessness where the average Joe might have to be aware of it on their way somewhere.
Like racism or patriarchy (these things are all very closely connected), the hypocrisies, paradoxes, and inconsistencies in these meritocracy/capitalism-is-the-greatest-reject-anything-that-even-sounds-like-socialism talking points exist to sustain the system. Price is whatever the consumer is willing to pay, but salary is whatever the worker can negotiate (from an inferior position). The onus is always on everything except the massive organisation, the very ones disproportionately responsible for so many of our biggest social problems.