Tuesday, April 23, 2013

The Pricing Free Market Myth

There are a lot of myths about our capitalist economy. I dislike the cliches and platitudes spoken by politicians and business leaders about free markets that often leave the idea in the abstract. They need to do this to keep us imagining a system that we consider good, when the system has changed dramatically and does not reflect the mythical capitalist world that leaders dredge up in public. One of the worst myths is that prices are set by the market where consumers and producers come together and send signals back and forth for an optimal price where demand meets supply. That might have been the case in smaller scale capitalism with local producers. This is not the case now, and hasn't been since roughly the 1920s. The rise of multinational corporations and consolidation of industry has destroyed the quaint notion of the market. This is why politics is lame and behind the times as society has raced ahead of and then bought off political parties and institutions. When the free market pimps speak of the free market for prices, they really speak of the unregulated ability of producers to mold your tastes to pay for their planned revenues.
 
This is not about basic needs like food, shelter and water. Any food products beyond the basic diet of three generations ago are excess, manufactured demand food products. For consumer goods, producers set the price to generate enough sales for enough profits to pay out shareholders and bondholders since they have to keep them happy and make sure salaries are paid to execs and technical expertise personnel of the firm. Consumers don't send signals. Consumers get bombarded with advertising. That advertising is unregulated in amount, rarely regulated in content, and the largest corporations have the biggest advertising budgets. As one of millions to consume an item, what power does the individual have? The signal is not producer to consumer, consumer returns message and producer complies. The information flow is producer wants X revenues, conducts surveys or market research for what they need to do to separate that revenue from consumers, then deliver a product that meets the anticipated desires of the consumer. Big business can afford to do this, and we live in the age of multinational conglomerates. How many markets are now dominated by oligopolies? We spent decades fearing monopolies, but no one cared if each sector of the economy came to be controlled by a handful of competitors. Customers rarely ever set the price. Marketing and corporate finance departments do; they just manipulate enough of us to get their way.

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