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Quality and Integrity – The Age of the Rip-Off (December 2015)
So the collapse has started… it’s been a long time coming. The commodity markets are dying, copper and iron prices are down while oil continues to slump. The junk bond market is crashing (all those share buy backs are getting hit) and the stock market is teetering. Without China vacuuming up resources for its lonely concrete bridges, empty cities and industrial malinvestments driven by an oversupply of shadow banking credit there is no global industry anymore. The only production in the world these days is financial. The developing countries relying on exports are all looking at weaker currencies and therefore even more pain as their US denominated debt gets more costly. Meanwhile businesses raise their prices, lowering their quality and stealing if they have to, from the consumer.Â
This may not describe the conditions of life in every country but it does describe the conditions of society in many cities throughout Europe, Australia and the USA.
At a consumer level the change in social economics over the past decade reflects some of the macro-economic turmoil going on. Now more than ever it feels as if businesses, investors and people in general are scrabbling for the last few kernels of grain during a famine. The grains are cash and the famine of course is low interest rates. People, businesses, retirees and savers are starving to find yield and will do anything and everything for a dollar; they’ll even consider stealing… from anyone, including the poor, the retired, the indigent and sick.
Integrity in industry appears to have disappeared; the idea that a business should profit by creating reputable, useful, quality products appears to have been lost. Today the ethos has become: businesses should make money by selling the cheapest product or service it can produce and use trickery or hard-sell tactics to compensate the lack of quality and customer satisfaction. The loyalty of the customer is no longer important; it’s now all about marketing and psychology, that one big sale and the lock in contract. The hard-sell has always been there but lately it appears to have ratcheted up a notch to the point where the world might be seeing a return of the snake-oil salesman.
The trend toward higher costs is perhaps demonstrated by Adobe who recently decided to stop selling software in preference to forcing people to rent it.  Ultimately rent is just another form of tax and will cost the consumer more while taking the onus off producers to cut prices or be competitive - by raising quality etc… In Adobe’s case software that normally costs $1000 will cost $120 to $240 per year for life.Â
Recently, Microsoft followed suit. The company must have figured: Why sell Office/Office-365 software for a once-only purchase of $150 that people will use for 5 years when you can charge them $100 per year for 5 years (that’s $150 vs $500). To seal the deal MS will almost certainly make it so that future Office software will only run on a version of Windows 10 or better. Thereafter all support for the stand-alone versions of Office will no longer be available, thus forcing everyone to become a renter of software. It’s the yearly-upgrade mobile phone industry transmuted to software.
Maybe this is why people are being told how wonderful Windows 10 is and why they are being strong-armed into upgrading to it – so that at some point MS can sell unlimited upgrades and virus protection for $10 per month in addition to the cost of Office and so on. Meanwhile just how many features will be available when the subscriber’s internet connection fails isn’t clear. Once again integrity is down and so might be quality by way of decreased performance, versatility and privacy.
Supporters of Internet Explorer will understand exactly what declining software quality means. Chrome (another hard-sold but free product by Google), Firefox and Safari are now the most used browsers because Internet Explorer over the years has become unreliable with ever increasing display and performance issues. Microsoft’s new Edge browser doesn’t appear to be much better but the sales pitch will tell you it is; quality and integrity fails again.
Of course the gouging of the public purse by big companies is only the beginning. People may have noticed their electricity bill, council rates/tax, gas bill or insurance bill rising of late. It seems the companies selling life’s essentials believe that their cost increases (in the order of 2% to 10% per year) are justified. This seems unlikely given the cost of gas and oil is on the decline and wages are stagnant or have been dropping for the last five to ten years (in the USA, UK and Australia definitely) relative to the cost of living. Meanwhile the quality of these services has not noticeably improved; reliability and performance are no better nor were features added.
The world is quickly becoming a difficult and perhaps scary place. Honesty is dead; businesses of all sizes are out to take the last penny from anyone with a pulse. Quality is down and people get less for their money than ever before. Prices are on the rise.
In a collapsing economy you might expect prices to rise in this way as companies, staring at declining future profits, attempt to steal back money and horde profits any way they can. In theory however this is a short term phenomena which precedes deflation because it forces people to push even harder on the brakes of spending. In the meantime the best advice for the consumer and saver is probably to cut spending, save as much as possible and wait for poorly behaved businesses to keel over and die or at the very least restructure after taking a long hard look at themselves.
This is exactly how a future Great Depression might work. It is an equalizing event, albeit a painful one. The only concern of course is that modern governments may work to support unethical businesses instead of letting them fold, effectively letting the gouging continue until people finally revolt. We know governments can and will do that because we have the bail-outs of the banks in 2009 to prove it and taking a look at any recent failed states (Venezuela, Greece, Zimbabwe) shows us that the people in power (the government and their cronies or oligarchs) are the last people to suffer.