"The cynic knows the price of everything and the value of nothing", so spake Oscar Wilde.
Today, it seems, even the cynics appear challenged to put a price on, for example,....real estate, securities of financial institutions, depleting energy resources, food stocks, pro athletes and nursing home attendants, medical care and music, news and reality t.v. If price is the mechanism of rational allocation of resources in a competitive market economy, the collapse of various pricing mechanisms is yet another indicator of the cancer afflicting Capitalism.
Price is supposed to represent an agreement of value between buyer and seller, both of free will, and based on equal opportunity to ascertain the realizable benefit of the exchange. But too often in the current economy, price has become a weapon of deception. The mechanisms for setting price have been so tarnished by recent events that a fundamental tool of capitalism is rapidly being rendered impotent.
Let's consider real estate and other toxic assets in the current banking crisis. One of the many difficulties facing the resurrection of our financial institutions is isolating the toxic assets and exorcising them from the banks with an exchange of value that injects needed capital into the ailing institution and/or properly extracts from its balance sheet the loss reserves attached to these toxic tumors.
There are two problems here. One is the assumption of a static situation in which the tumors are knowable and are not metastasizing to currently healthy organs. The other is assigning a value that generates capital to the bank exclusive of the value of the asset, because the 'market-place' has so utterly mangled the assignment of value that price becomes nothing more than an arbitrary settlement.
We have lost a third of everything. Real estate value, portfolio value, earnings in many cases. Was that 'value lost', or 'value inflated'?
Even now, as employment crawls back, the stock market is attempting to will itself back to its pre-crash heights. Has our economic recovery to date justified the market breaking $10k? A market based on an economy which is 70% consumer based would seem to take its value from the state of employment, which by no means has bounced back to anywhere near the extent of the market. But our capitalist crack-heads will tell us that the market reflects future prospects. A future in which employment is not expected to return to pre-crash levels for four years. A future in which those who have jobs will feverishly de-leverage their personal balance sheets and make up for lost time saving for a retirement that is more distant. They are unlikely to support that 70% consumer economy, and the rest of the industrial economy that hangs off of it.
So fogetabout the US. We're investing overseas, where the real growth is. Yep. We're going to compete in parts of the world where Ch-India's cost structure and technology is a lot closer to their economic profile than ours. We're going into foreign markets with market intelligence equivalent to our intelligence in Iraq and Afghanistan. We'll sell them high tech gear their economy can't sustain, and fast food that's contributing to the growth of our health-care industry at home, which our economy can't sustain.
What can be said of an economic system that pays a pro-athlete $18 million to entertain our fantasies and indulge his own, and pays a nursing home aide $18,000 for work that is more socially meaningful, but not sufficiently valuable to provide a basic living for her family. Or $100 million to a financial crap-shooter who made billions for his organization at the expense of the world economy, and who can now afford to indulge his very own private art collection in his very own special castle. We have a corruption of values that should be criminal by any rational determination. But it's legal, at least for the moment.
As 'reality t.v.' grows in fulfilling our lust for voyeurism, and talk radio fuels our society's indulgence of ignorance and hatred, legitimate news media shrink or evaporate, lacking the necessary 'value proposition' to sustain themselves at an attainable price. Newspapers fold in competition with web based 'free' content, which isn't really free. It's paid for by advertising and loss of personal privacy. But even that business model is beginning to crack as advertisers discover that the Web is not a magic carpet to profitability. The infinite marketplace is littered with infinite distractions. Where will Google's price-multiple be in five years? What happens when people wake up to the fact that it's just another corporation?
Airlines have become subways with wings. Their 'competitive pricing' is little more than crude manipulation of the consumer with ever changing structures designed to confuse the unwitting rather than to compete on value.
Coal is 'cheap' because it is not required to pay for the responsible management of its own waste, and the consequences of its pollution. Its price does not cover its true economic costs. Oil is cheap because we price it to push it through the consumer distribution pipeline in three months, and not to conserve a depleting resource for the long term.
We are seduced to sign up for the cable t.v. package or cell phone service at the special price that lasts for three months; but try to find the website that will tell you the price in month four. Why is that? Does this oft repeated ploy demonstrate anything but overt contempt for the intelligence of the consumer? And yet, we consume, because in truth we have few real choices among the competing purveyors of anything, who seem to compete too frequently only in deception, and not in value.
Capitalism has become like an unruly teenager, discarding any sense of responsibility to anyone but itself, and indulging its excess with no sense of consequence. It has built itself an economic hot-rod, but not the good judgment to operate it responsibility. As too often happens with irresponsible teenagers and their over-powered vehicles, Capitalism could conceivably collide fatally with reality. And, as too often happens with irresponsible teenagers, it could take with it those who came along for the ride, with little thought of the possibility that their fate was at risk.
Comments