My radical idea for fixing American capitalism

Filed under: capitalism 

Disclaimer: I'm not an economist... not even an armchair economist (I lack both training and an armchair). Nevertheless I'm going to forward an idea that I see as interesting fodder for thought. Please feel free to disassemble it in whatever fashion you choose.

I'm going to just jump right in and lay the idea on the table with no preparation whatsoever:

Eliminate the concept of bulk discount.

There. I said it. And I mean it: no more buying 1000 items and saving a percentage per item over buying one. When Compaq buys 10,000 processors from Intel, they pay the same price per unit as I do when ordering just one. A 16oz cup of coffee costs twice as much as an 8oz cup of coffee. Supersizing a milkshake will supersize the cost proportionately.

So what are the benefits? I see several right away:

  1. It would significantly level the playing field between large corporations and small ones.
  2. It discourages over-buying and stockpiling (and hence helps prevent both shortages and dumping).
  3. It has no effect on economy of scale, which I consider a cornerstone of progress.
  4. It protects against a whole realm of anti-competitive actions (i.e. Microsoft's shafting of Gateway over Windows licenses).
  5. It encourages competition based on quality rather than quantity.
  6. It cuts down on global waste (because it encourages the practice of buying what is needed rather than trying to achieve the best price per unit).
  7. It provides a check against the unrestrained growth of large corporations.

How would it be enforced? The same way antitrust and anticompetitive laws currently are, except it would be much simpler as it's no longer important to prove motive (one of the more difficult aspects of any legal action).

What about downsides? I'm sure there are some (not least of which would be the disruption as the change was enforced).

Some things I don't think would be a result of implementing such an idea:

  1. Reduced profit margins would negatively impact the job market. Companies hire people because they need people, not because they have extra money lying around. This was one of the fundamental flaws in the reasoning of Reaganomics. Undoubtedly companies might take a second look at whether they actually need some people, but this would only serve to make the company more productive on the whole. This would also be offset by the increased ability of small companies and startups to compete.
  2. Economy of scale would be damaged. It would still cost less to produce a large number of items, and hence they would still be sold for less. What's eliminated is favoritism toward large companies who purchase the items.
  3. Made-to-order would be impossible. Made-to-order items are always cheaper in bulk because the setup time is amortized across many items. All that's needed is to separate out the setup/breakdown time. The item itself would cost the same.

And to clarify, some things I'm not talking about:

  1. Retail markup.
  2. Wholesale pricing. What I am opposing is tiered pricing.

Anyway, this is a rather poorly thought-out idea (in that I've thought on it very little rather than it's a bad idea) but I'd be interested in hearing other people's thoughts on it.



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