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Things Have Been Too Cheap for Too Long

 

Once upon a time, gasoline cost roughly 35 cents a gallon. That halcyon era came to an abrupt halt during the Carter administration, when oil-rich Arab states severely constricted our petroleum supply, causing hours-long lines at the gas pump that are still fresh in the memory of anyone who was there.

When the dust cleared, gas was four times more expensive, and now we count ourselves lucky if it’s only ten times that long-ago price.

But we did get over it, more or less. We learned to live with it.

Around that time, some pundit I can’t remember said something that has stuck with me ever since. To paraphrase, “This country was built on cheap energy and cheap labor, and we’re running out of both.”

It stuck with me because it’s even truer now than it was then. This despite the best efforts of corporate interests — and their Republican flunkies in government — to do all they can to keep both energy and labor as cheap as possible.

For several decades, they made it work. They closed domestic factories and opened new ones overseas, where labor was far cheaper. They went to the ends of the earth — and its depths — to chase down petroleum sources that could fuel the global economy cheaply, or at least less expensively.

But they — and we — were always living on borrowed time. There are all sorts of signs that the era of cheap labor and cheap energy is ending, and with it, an entire culture of cheap that has long permeated our lives.

We’ve grown addicted to cheap everything. We cut coupons obsessively. We comparison-shop online. We bust doors on Black Friday. We’ll spend ten bucks on gas to knock five bucks off the price of a new snow blower. And we’ll drive all over town looking for the gas station that will save us maybe thirty-five cents on a full tank.

The word “save” itself mesmerizes us. Come-ons like “Save 15 percent” have come to mean “Now you can spend what you might not have spent at all, if we hadn’t told you it was a bargain.” The reality — that we’re not actually saving, but spending — is something we prefer not to think about.

The business models of Walmart and Amazon — the two dominant retailers of our time — are built on cheap. These two corporate whales insist on relentless cheapness at every point in their supply chains. Any manufacturer who wants to sell through them is forced to squeeze out costs until their profit margins barely exist.

Both companies decided long ago that cheap is what consumers want, even if the price of cheap is measured in hollowed-out towns, undernourished children, and people working three jobs to make ends meet.

And the costs that are so ruthlessly squeezed out consist, in large part, of the labor and energy that go into the product, neither of which is getting cheaper.

We have to assume that the cost of energy will only be going up for the foreseeable future. Energy supply chains, already rickety from the pandemic, have been shaken up by the Ukraine war — not to mention the new war in the Middle East. This serves to underscore both the precarious nature of trade with dictators, and the urgent need to build an infrastructure of alternative energy sources sooner rather than later. Both of these factors will continue to drive up energy costs dramatically, and with them the cost of virtually everything else.

As for labor, we can see it getting more expensive before our eyes. The resurgence of union power — so visibly apparent in the recent UAW, UPS, and Kaiser Permanente settlements — is signalling, not just that workers are fed up with cold-hearted exploitation, but also that economic reality seems to be turning in their favor.

UAW’s Sean Fain, the new star of the labor movement, is making no secret of his designs on other car companies he considers ripe for unionization — Tesla especially. Likewise, Teamster president Sean O’Brien, architect of the near-total surrender of UPS, has both Amazon and Starbucks in his sights. Many of the workers in all these targets want to be organized, and these guys might just have the leverage to make it happen.

Then, just last week, the National Labor Relations Board (NLRB) came out with a stunning, yet under-the-radar, ruling that could give union organizers new legal tools to up their game.

For decades now, large companies have gotten around employment laws by putting layers of subcontractors between them and their employees. The subcontractor — a franchisee, a temp agency, a staffing firm — becomes the employer of record. These subcontractors, some of them slippery, get paid by the real employer to take on the burdens — and risks — of paying the wages and salaries, providing the benefits, enforcing workplace policies, and assuming legal liability for compliance violations.

This gets the real employer off the hook for any labor problems that might pop up. And it makes organizing extremely difficult — how do you form a union when you’re not actually working for the company you’re working for?

But NLRB might have just blown up that scheme. It changed its rules regarding such employer-contractor arrangements, reclassifying them as “joint employers.” They can now, in a sense, be joined at the hip legally, held jointly accountable for any unfair labor practices.

This means — and I’m oversimplifying here — that labor agreements made with the subcontractor could be binding on the company itself. This would give organizers a viable way to counter anti-union tactics, whether from Amazon and its staffing suppliers, from McDonald’s and its franchisees, or from any company that outsources its labor practices to sleazy contractors that you suspect might be cheating on your paycheck.

Companies will resist this, and the arguments they’ll make for keeping labor cheap will be more-or-less accurate, and certainly heartfelt. Yes, paying more for labor could cut into their profits. Yes, it could raise the prices of their products. Yes, it could make them less competitive. Yes, consumers will scream about the higher prices. Sob.

And yes, there will plenty of pain to go around — at least in the short run — as we adjust to the idea of paying more across the board.

Personally, I love cheap, and I’ll hate to see it go. But if it means real pushback against the forces of income inequality and corporate greed that are corroding the country from within, it would be well worth it.

And just as nobody even thinks about 35-cent gasoline anymore, we’ll learn to live with it.

 

This post is a riff on an op-ed piece, well worth reading, by Rana Foroohar in The Washington Post, entitled “The Era of Cheap is Over,” which got me thinking. 

Comments

  1. I have too much to say about this, so I'll make just a few points. Big energy, with the aid of both parties, has held a grip on fossil fuels far too long. We could have switched to a solar/wind/nuclear power system by now if we had the will. In fact, the power companies fear a distributed grid in which everyone generates their own power like Whoville fears the Grinch.

    As for labor, AI and robotics are advancing at a rate that will allow the elimination of massive amounts of labor in the coming years. So any hard won concessions will be short-lived. Capital seeks the optimal path and labor isn't it.

    One one thing we do agree. Prices are too low. They are low enough that people like you and me can buy crap we don't really need just because we want it. The level of consumption is unsustainable for the planet. No amount sustainable production will help you if you keep turning the planet into stuff to sell. Raising prices is the only way to slow consumption down. Sadly, capitalism relies on continuous growth. See the problem?

    ReplyDelete
    Replies
    1. Good points. A bit dystopian, but I can't say any of it's wrong.

      Delete
    2. Agree completely with Tim Bellinson that the waste resulting from cheap prices plunges planet into further distress. This is a global issue that seems to be off the RADAR of common discourse perhaps because we are intoxicated by acquisition.

      Delete
    3. I'm not the only one talking about the potential for a dystopian future if we don't start being more proactive about it. Sam Altman, the CEO of ChatGPT's OpenAI, has himself warned of various disastrous consequences if we don't put some guardrails on AI.

      Delete
  2. There is a retailing trend, particularly at the grocery6 stores, that when the news talks of price raises or inflation the stores raise their prices, because they can. The stores believe that people are used to being screwed because the news tells them they are being screwed. The
    unmotivated price increases on some items at the grocery stores are on every isle. You can research the supply chain for that product and find no motivation for increase until the final spot on the shelf. The farm-raised catfish I bought for $5.00 per pound five months ago is
    now $7.00 per pound and on and on and on. There is more to the end of cheap than you say. Greed is still motivation number one.

    ReplyDelete

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