Gotham Diary:
These Low Prices
13 February 2014
George Packer has an interesting piece about Amazon in the current issue of The New Yorker. There’s not a lot that’s actually new in the report, but, as usual with Packer, deeper depths are sounded, and one of these helped to clarify my vision of an unexamined “truth” in today’s political economy: lower prices for the consumer are the highest good.
Well, hardly “unexamined.” In 2009, Ellen Ruppel Shell published an excellent survey called Cheap: The High Cost of Discount Culture. I mentioned this book at the time, but I did not do much more than that. (As I now see. You can too, if you do what I did.) Perhaps the book is worth a re-read. Here’s a fascinating quote from the prefatory “Note to Readers”:
And why was there such a scarcity of things reasonably priced? It seemed that almost all consumer goods were cheap, like the Chinese boots, or extravagant, like the Italian boots. Where, I wondered, was the solid middle ground that offered safe footing not so very long ago?
This is eerily like asking, What happened to the middle class? I believe that they’re the same question.
Do you remember Amazon’s 2012 FTC complaint against Apple and five of the largest publishing houses, which were attempting to introduce the “agency model” into e-publishing? Amazingly, the government, in both commission and court, came down for Amazon — leading to some malignant conspiracy theories that everyone involved ought to have foreseen. But even the substance of the government’s position, Packer writes, seems mistaken:
Apple, facing up to eight hundred and forty million dollars in damages, has appealed. As Apple and the publishers see it, the ruling ignored the context of the case: when the key events occurred, Amazon effectively had a monopoly in digital books and was selling them so cheaply that it resembled predatory pricing — a barrier to entry for potential competitors. Since then, Amazon’s share of the e-book market has dropped, levelling off at about sixty-five percent, with the rest going largely to Apple and to Barnes & Noble, which sells the Nook e-reader. In other words, before the feds stepped in, the agency model introduced competition to the market. But the court’s decision reflected a trend in legal thinking among liberals and conservatives alike, going back to the seventies, that looks at antitrust cases from the perspective of consumers, not producers: what matters is lowering prices, even if that goal comes at the price of competition. Barry Lynn, a market-policy expert at the New America Foundation, said, “It’s one of the main factors that’s led to massive consolidation.” Judge Cote’s opinion described Amazon’s business practices in glowing terms, and she argued, “If Apple is suggesting that Amazon was engaging in illegal, monopolistic practices, and that Apples combination with the Publisher Defendants to deprive a monopolist of some of its market power is pro-competitive and healthy for our economy, it is wrong.
It is right, Judge Cote, and you are wrong. I remember the migraines that studying anti-trust law gave me in law school. No other body of the law seemed remotely so infected by the party-line opportunism of totalitarian pronouncement. There was no logic whatsoever, only a desirable outcome: low prices. Healthy competition, supposedly the objective of anti-trust jurisprudence, was jettisoned whenever it got in the way of low prices.
The cost of these low prices is jobs, and, behind the jobs, the very fabric of the national polity. The unintended side-effect of these low prices is the consolidation that Barry Lynn mentions, and therefore these low prices are also the cause, not only of income disparity (a matter of wiping out the middle class) but of grotesque wealth accumulation by a tiny number of Americans. These low prices have driven the sensible, well-made shoes from the stores. And for what? So that we can all have closets full of stuff that we don’t use? Storage units crammed?
There is an unseemly demagoguery here. The fact that liberals and conservatives agree about low prices is disturbing; it suggests that low prices per se can’t be very important to either tribe, but that they serve as a distraction from differing partisan objectives. Lower prices (usually in the form of cheap goods afflicted with Homer Simpson’s “fallapart”) will obviously make Republicans less objectionable to lower-income voters. Less cynically (but not much), liberals desire to make consumer goods “affordable” to the same voters. But it’s a bad bargain, because the pressure to lower prices has no internal governor, no brake. Workers are beginning to fight back. We can only hope that they understand that success will entail some sacrifice in the range of things that they are able to buy.
I thank George Packer for putting this all so neatly, for bundling the Apple/publisher challenge with Barry Lynn’s observation and Judge Cote’s dismal wrongheadedness in one paragraph. What goes in there comes out here.
Competition is a subtle concept. Everyone understands competition on price: that’s what I’ve been writing about here. But when prices are fixed, competition emerges on other fronts, such as quality and design. One might well argue that the “lower prices” mantra leads to fixed prices, or at any rate to successive plateaus of them, where it is the consumer who effectively fixes the price. Sadly, the consumer is not as savvy as the producer when it comes to manufacturing. Nor is the consumer as conscious as a government agency might be of the effects of lower prices on general economic health. Anathema it might be to Tea Partyers, but the ordinary American is not the best judge of most things. Especially the ordinary American living under the noisy hairdrier of a big screen.
You can call me a cultural snob if you like. I’ll even go along with you, as long as we agree that you’re not imputing any hypocrisy with the application of “snob.” But my snobbery has a purpose beyond the propagation of Matthew Arnold’s “all the best.” I want to live in a society that affords its members opportunities to do meaningful, or at least not-degrading work. This seems to me to be the only stable, sustainable model. It requires that more attention be paid to the operation of social institutions (including jobs), but the objective is to improve those institutions. There is no worthwhile alternative.