Chapter 6 – Absurdity #2 – Prices

In capitalism, every product or service has a price, and people use money to pay the price. Unfortunately in capitalism, prices often have no basis in reality and can be completely arbitrary. It is quite common to find situations in capitalism where prices have no real bounds.

The concept of competition is intended to constrain prices, but there are myriad cases where competition fails for a wide variety of reasons. Also, in any capitalistic economy, companies can charge “what the market will bear” for a product or service. Thus, there can be no rational basis for prices in the marketplace, and companies routinely jack prices up on a whim because it is in their best interest to do so. Everyone in society has to pay these artificially higher prices, and there is no recourse.

Any reasonable economic system designed for the well being of all of the humans on Earth must solve this glaring problem with capitalism. This must be true in the new system:

  • Every price should reflect the true cost of production, and nothing more.

There should be no way for capitalists to concentrate wealth by artificially and maliciously raising prices and forcing everyone else to pay.

Let’s take a moment to understand how corrupt the price process can be on planet Earth today under capitalism.

The problem with prices in capitalism

The pricing problem inherent in capitalism is best seen in the medical arena in the United States. Classic example: the EpiPen once cost $100, and the company that makes it jacked the price up to $600 over the course of several years. There was no reason for the price increase except greed, and there was nothing to stop the company from raising prices, so the price rose and rose [ref].

Another example:

“According to the Wall Street Journal, lomustine was sold by Bristol-Myers Squib for years under the brand name CeeNU at a price of about $50 a capsule for the highest dose. The drugmaker sold lomustine in 2013 to a little-known Miami startup called NextSource, which proceeded to hike lomustine’s price nine times since. It now charges about $768 per pill for the medication.” [ref]

Another example: Martin Shkreli [ref] arbitrarily raised the price of the drug Daraprim from $13.50 per pill to $750.00 per pill for no reason other than to steal money from the patients using this drug.

Drug prices in the United States are rising across the board under this paradigm. There is no mechanism in capitalism to stop medical companies from raising prices, so they do so with abandon, stealing trillions of dollars from the economy for no reason other than greed.

This sort of thing is happening throughout the medical sector. Here is another example:

Fowler’s parents knew the scan might cost them a few thousand dollars, based on their research into typical pediatric MRI scans. Even though they had one of the most generous Obamacare exchange plans available in California, they decided to go out of network to a clinic that specialized in their daughter’s rare genetic condition. That meant their plan would cover half of a “fair price” MRI.

They were shocked a few months later when a bill arrived with a startling price tag: $25,000. The bill included $4,016 for the anesthesia, $2,703 for a recovery room, and $16,632 for the scan itself plus doctor fees. The insurance picked up only $1,547.23, leaving the family responsible for the difference: $23,795.47. [ref]

Why is it so expensive? Because the hospitals and doctors can charge anything they want in many cases. Prices have nothing to do with the cost of production. Horror stories like these are now routine. These articles can help you learn more:

There is even a medicine in America now with a price tag of $750,000:

“It looks like a drug that works for a tragic condition that afflicts children and cripples and kills them. That’s the good news,” Dr. Jerry Avorn, a professor of medicine at Harvard Medical School, says of Spinraza. But “how in the world did the price of $750,000 a year get chosen?” [ref]

“How in the world did the price of $750,000 a year get chosen?” It is simple. It got chosen the same way the price of the EpiPen and Daraprim did – it is completely arbitrary, and completely absurd. In capitalism, a company can charge “what the market will bear”. If a person’s choice is either pay an absurd price, or die, then the person is forced to pay the absurd price in order to live. Companies will use blackmail whenever they can in order to increase profit. This sort of abominable behavior is wired into capitalism.

Arbitrary Prices

We have discussed before the fact that Walmart pays billions of dollars in dividends per year:

“In fiscal year 2017, Walmart returned $14.5 billion to shareholders in the form of dividends and share repurchases.” [ref]

This quote is not from some sort of exposé article. This quote is straight off Walmart’s own web site. Walmart is trumpeting this fact with pride. Where did the $14 billion come from? Walmart simply jacked up their prices arbitrarily, and then sent $14 billion primarily to people who are already rich.

Even worse, a very large portion of that $14 billion goes to just a handful people:

“Meet the Waltons. They inherited control of Walmart. With over $150 billion, they are by far the richest family in America… Every day, the Waltons collect $8.5 million in Walmart dividends ($3 billion per year). That is enough money to buy an average American house every hour.”  [ref]

This kind of thing happens throughout any capitalistic economy, at thousands of companies, and it is obviously absurd. It is also harmful to every participant in the economy. This unbelievable and unconscionable process is fueling a meteoric rise in the concentration of wealth [ref].

Blackmail is a central tenet of capitalism. Theft through arbitrarily inflated prices is a central tenet of capitalism.

The new economic system that replaces capitalism must rationalize pricing, and must eliminate blackmail and theft.

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