By Kevin D. Williamson
Monday, August 19, 2024
If you think, as Kamala Harris thinks, or says
she thinks—(“thinks”)—that inflation in grocery prices is the result of
“price gouging,” then I don’t want to hear you ever complaining about
conspiracy theories. Because that is a big, dumb conspiracy theory, the sort of
thing that can be taken seriously only by asses of exceptional asininity.
Here’s a question: Why doesn’t a Big Mac cost $500? Why
doesn’t a pack of socks at Walmart cost $500? “Well, nobody would pay that!”
comes the usual answer. Au contraire mon frère! People will pay
$500 for a hamburger—and some people will pay $5,000
for a hamburger. And $500 for a six-pack of socks? Pantherella does a brisk business in socks
at that price point. “Oh, but those are super-high-end luxury goods!” you may
retort. Of course—and in most of the world, for most of human history, paying
somebody else to cook you a meal was a 1-percenter luxury good, too. But the
luxury goods are interesting for the same reason the bargain-basement goods are
interesting: because in a robust marketplace, you have lots of buyers and lots
of sellers, and lots of products at lots of price points. So you can buy your
tailored silk socks for $80 a pair or buy
300 on Amazon for 22 cents a pair. There are a lot of car buyers and car
sellers in the United States, and a lot of good options at different price
points.
The food market is, as you might expect, a big one: There
are a lot of different places to buy groceries in the United States, from big
corporate behemoths such as Walmart and Amazon (which owns Whole Foods Markets)
to the major national chains such as Kroger (which is, among other things, the
largest sushi seller in the country, as well as the owner of Southern
California’s beloved Ralphs, no apostrophe), to more regional concerns such as
Meijer (“Meijer’s”
if you are from Michigan) or Piggly Wiggly (which is a real thing in the
South!). There are also locally owned independent shops, and insufferably twee
people such as the Williamsons may sometimes get up on a Saturday morning and
go down to the local farmer’s market and buy bacon from a guy who was
personally acquainted with the pig. Behind those consumer-facing retail outlets
is a large and complex network of distributors—national and regional—warehouses,
trucking and logistics operations, and, upstream of them, producers ranging
from domestic farmers and ranchers to Israelis who sell us olive oil to Mexican
lettuce farmers and Thai fruit-juice producers. We grow more than $700 million
worth of tomatoes in the United States and import
another $2.5 billion worth. We import seafood from India, potatoes from
Canada, and meat from Australia (and New Zealand, and Mexico, and Italy,
Canada, and Chile—we love the stuff). Millions upon millions of people and
firms, billions of transactions, scores of countries—and, somehow, Kamala
Harris imagines a shadowy figure behind it all, pulling the strings.
Retailers’ pricing power is one of the most misunderstood
factors in economics in the United States. When Congress proposes some new tax
or costly regulation, you can bet you will hear some barstool tut-tutting about
how sellers “will only pass the cost on to consumers.” Sometimes that is true,
and sometimes it isn’t. Companies such as Walmart and McDonald’s have very
price-sensitive customers. Grocery-store customers in general are pretty price
sensitive: A large majority of American shoppers—80
percent or so—report frequently or occasionally putting items back on the
shelf at the grocery store because of an unexpected price increase. There is a
lot of money to be made at the lower end of the market, which means Walmart and
McDonald’s have a lot of competition. If McDonald’s just jacks up prices
willy-nilly, Burger King is right next door, along with Wendy’s, Chick fil-A,
etc. (The battle for
fast-food consumers is epic.) The guys at Walmart are pretty smart, and one
of the things they know is that Target exists, that Amazon exists, and that
Aldi exists. And if they forget that, their customers remind them—good and
hard. That’s one reason profit margins are historically so low in grocery
stores.
Why do prices go up? There are different answers for
different kinds of markets.
The market for certain kinds of luxury goods, certain
positional goods (meaning goods that are consumed for status-enhancing
reasons), certain Veblen goods (meaning a subset of positional goods for which
demand counterintuitively increases as the price goes up) have changed a
great deal in the past few decades for macroeconomic—and
macro-socioeconomic—reasons unrelated to the goods per se. You might have
noticed, for example, that prices for really good seats at a big-name concert
or Broadway show have increased shockingly, even if the cheap seats haven’t
changed all that much, or that certain brands now put out limited-edition
products at prices that seem entirely out of step with the usual expectations
associated with those brands—and that in many cases, the manufacturer’s
suggested retail price (MSRP) is only a fraction of the price on the secondary
market, which is where real prices emerge for many of these artificially scarce
goods. If you happen to score a coveted pair of limited-release sneakers or a
particularly desirable model of luxury watch, you often can double or treble
your money—or make even more—by turning around and selling that product. A
basic Rolex Submariner is notionally $9,100 from an authorized dealer, but, if
you actually want to get one without waiting for years, then you pay the real
price, on the secondary market, which is more like $15,000. Taylor Swift
tickets aren’t easy to come by, and the best seats are going for
as much as $15,000.
These absurd prices come from the combination of two
factors. The first is that many of these goods are truly limited in their
production—Swift is playing only so many shows, and there are only so many
front-row seats; Rolex, which is owned by a charity, is not under the kind of
profit-margin pressure that a normal company would be, and though it is a
high-volume maker by the standards of Swiss luxury horology, it’s only going to
make what it is going to make. The second factor is that there are a lot more very
rich people in the world than there used to be, and a whole lot more
pretty-rich people than there used to be. In the 1990s, the number of people in
India, China, and many other countries who were rich by rich-world standards
was pretty small. In 1996, there were no Indians among the
world’s richest 150 people, no Chinese (Hong Kong was still notionally
independent in that year), only a handful of Saudis, etc., with most of the
world’s super-rich living in the United States, Western Europe, Japan, or
Canada. In 1996, India’s middle class was probably 100 million to 125 million
people; today, it is more like 440 million and likely on its way to 1 billion
by the middle of this century, and it is a richer middle class than it was in
the 1990s. India’s middle class, like those of many similar countries, is also young:
65
percent of middle-class Indians are under 35. They are young, mobile, and
have money to spend.
People are used to thinking of businesses as competitors
and thinking of producers and sellers as competitors, but it is at least
equally true that consumers are competitors—not only in their roles as
workers and producers but in their role as consumers per se. We don’t just
compete for high-paying jobs; once we have those high-paying jobs, we compete
with socioeconomically similar people for scarce goods—especially positional
goods, genuinely limited goods, and status-conferring goods. (If you want to
begin to understand life in the capitalist world in the 21st century, begin
with the fact that once people have obtained a surprisingly modest level of
material comfort, their attention shifts away from competing primarily for
material resources and toward competing for status.) In 1996, a well-off
American was competing for the best concert tickets with other well-off
Americans, mainly. Even in the case of tourist destinations such as Las Vegas,
visitors were competing for the best hotel suites mainly with other similarly
situated Americans. Today, those same Americans are competing with the
grandkids of Indonesian billionaires and young Indian executives and Brazilian
bankers you’ve never heard of but who have serious money. And even among the
lower-level affluent—the well-off but not ridiculously rich—a
once-every-few-years splurge on a vacation or a show is much more within reach
than it was a generation ago.
The case of luxury goods is a reminder that there is
always room at the top of the market. When James Bond bought his Rolex
Submariner in the 1950s, he would have paid the equivalent of less than $2,000
in 2024 dollars, not the $9,100 you’d pay for one today if you could find a
Rolex shop that will sell you one or the $15,000 you’d pay on the secondary
market. Until very recently in human history, those $2 million watches from
Richard Mille had no real equivalent. It is worth keeping in mind that high prices
do not necessarily mean high margins or large profits. Tom Ford tuxedos still
cost $6,000, but the brand still makes most of its money from higher-volume,
lower-priced items such as perfume
and accessories. And the best way to get seriously rich isn’t always selling
more expensive stuff: The guys who sell Big Macs make a heck of a lot more
money than the guys who run Per Se or Eleven Madison Park and similar
restaurants with $1,000-a-head
tasting menus. But McDonald’s can’t raise prices 500 percent in a couple of
years simply because there is a booming economy in Singapore or Kuwait
producing a surplus of rich people willing to spend the price of a used Honda
on dinner for four.
Prices at the grocery store have gone up for a few
reasons. One is that prices, like wages, can be “sticky,” and COVID-era
bottlenecks and supply-chain disruptions caused a price spike that did not
subside entirely—or at all, in some cases. Another factor is that important
inputs have become more expensive: Fast-food restaurants typically spend more
money on labor than they do on food (something to think about the next time
you’re at the drive-thru), and, though I don’t have numbers for grocery stores,
it is safe to assume that the same is roughly true of grocery stores. In fact,
for Americans’ overall food expenditures, labor
is the single largest cost, accounting for almost 50 cents on the dollar,
as the USDA runs the numbers. (Farmers take in less than 15 cents on the food
dollar.) Wages for grocery-industry workers climbed significantly during the
pandemic and continue
to climb—and are likely to continue doing so as long as trends such as a relatively low workforce
participation rate keep it relatively hard to find workers. That’s great
for workers, but even if the “pass it along to consumers” story is an
oversimplification, it is going to put upward pressure on prices.
And then there is good old-fashioned supply and demand.
You may have heard of something called the “quantity theory of money,” which
is, in effect, a fancy way of saying that the laws of supply and demand apply
to money just as they would to any other good. Flood the economy with a lot of
money, as Congress has been doing for years with the aid of both the Trump and
Biden administrations, and you’ll end up with money that is worth less than it
would have been if there were less of it in circulation. (Yes, it’s a little
more complicated than that, especially if you want to account for the effort to
keep prices nominally stable, but that’s basically it.)
And this brings us back to Harris: Like any populist
worth the name, the Democratic presidential nominee is promising to keep
flooding the economy with lots more money, proposing, among other things, gigantic
subsidies for homebuyers and covert welfare payments through the tax
code—some $1.7 trillion in new handouts, as the New
York Post runs the numbers. Democrats are also all
over the Fed trying to get it to cut rates, hoping that will reduce the
interest rates charged on mortgages and car loans. So: Give would-be homeowners
$25,000 in assistance and lower mortgage rates to drive down their monthly
payments, and what do you think is going to happen to housing prices? They are
going to go … up. They are going to go up for the same reason grocery prices
have: more money chasing a constrained supply of goods.
Harris’ team has talked about tax subsidies and other
incentives for developers who build lower-income homes and rental properties,
but the problem there isn’t a lack of incentives—the problem is that Harris’
buddies in San Francisco and other similar places make it damn near impossible
to build houses, so the only houses that get built are relatively expensive
ones. There are some progressives who have got the message about the need for
zoning reform, and it isn’t only progressives who have hindered development—there
is NIMBY-ism
on the right, too—but, so far, there hasn’t been a lot of real progress on
that front, and progress on that front probably is going to have to come mainly
from Democrats: There are a gajillion
unoccupied housing units in this country, but they are mostly in places
where nobody wants to live. Even in Republican-leaning states such as Texas, it
is the cities that are the real engine of economic growth, and the metropolitan
areas are where the desirable jobs are—and where the housing shortages are,
too.
Harris’ economics are, as economics, just wildly
illiterate—straight-up buffoonery. And that is why she needs a conspiracy
theory, which is what you should call the imbecilic notion that there is a
shadowy cabal of avocado bosses robbing the American middle class.
And Furthermore …
So, what’s a little pander? A lot, potentially.
Harris is plainly a say-anything-at-any-time kind of
politician, one without any real beliefs or non-negotiable principles. At
least, that is the impression she is giving right now. I’m no fan of the
base-stealing opportunists who call themselves “pragmatists” and pretend that
they are beyond ideology, interested only in “what works,” but I will say a
good word for genuine pragmatism, which is oriented toward coalition-building
and the cultivation of consensus, a political attitude rooted in the important
knowledge—so often ignored in our contemporary politics—that the other
side exists, that it has some power and is going to have some
power, that these facts have to be taken into account if you want to build a
stable, long-term policy environment that reflects, however imperfectly and
incompletely, your philosophy and preferences. As Jonah Goldberg has often
observed, one of the most destructive and unproductive ideas in our current
politics is the naïve belief that total victory is possible for either side.
Genuine pragmatism of the sort I have in mind is the
political attitude that says: “We need to make an expansive free-trade deal
with the European Union, which is going to be unpopular with some Democratic
constituencies and some Republican constituencies, but there are things we can
do to soften that opposition and reduce the disruption to U.S. business
interests that will face costs from new competition.” Or: “We need an expansive
education-reform package, which will be opposed by some Democratic constituencies
and by more Republican constituencies than you might think (Republicans are a
disproportionately rural party, and public-school systems are major employers
in many rural communities, often the largest single employer), but we can
sweeten the deal with this or that payoff, introduce the most painful reforms
gradually, etc.”
But Harris isn’t that kind of pragmatist. She’s a
demagogue. She is part of an administration that has made inflation worse by
fighting for and securing excessive spending, mainly on parochial partisan
interests, and, in order to dodge responsibility for that and shift the blame
to a politically expedient target, is pretending that the problem is greedy
businessmen who need to be regulated by central planners in Washington. She
probably doesn’t mean it and, if elected, probably won’t try very hard to pursue
price controls or have very much success if she does—probably. But
moving politics in that direction—a direction that combines centralization and
executive aggrandizement with cynical scapegoating—is inherently dangerous, and
not only for economic reasons. It is politically and morally dangerous as
well.
Another way of thinking about this is that Harris’
all-over-the-map politics comes from weakness rather than from strength.
Powerful, self-assured presidents—Ronald Reagan, Barack Obama, Franklin
Roosevelt—can and do work out compromises all the time. They aren’t idiots, and
they understand that there is give-and-take in a democratic system.
That isn’t what Harris is up to—at all. She is—the
inevitable and unfortunate truth—a lot like Donald Trump, belonging to a school
of politicians (Ted Cruz is one, Elizabeth Warren is another) who call to mind
the cynically earnest pickup artist in David Foster Wallace’s Infinite Jest,
who approaches women and says: “Tell me what sort of man you prefer, and then
I’ll affect the demeanor of that man.” For that kind of weak politician,
nothing is off the table.
Trump, of course, is the exemplary reminder that you
cannot trust a weak person with power. Weak politicians are dangerous—in many
cases, much more dangerous than the stronger kind. Government is a big mean
dog, and norms are the leash that keeps it from going Cujo on all of us
at any given moment. Weak men and weak women, who do not have principles to
limit them or strong characters to fortify them, can’t keep the dog on the
leash—they just let it run. And a candidate who will tell you that bananas are
expensive because evil men are plotting against you is weak—politically weak,
morally weak, intellectually weak. The U.S. government arguably is the most
powerful human entity in the history of our species, and it is very often
dominated by spiritual and/or mental weaklings: Joe Biden, Donald Trump, Bill
Clinton, Richard Nixon, Newt Gingrich—hell, Andrew Johnson, if you want to keep
digging.
Words About Words
There’s only one? Surely not. From the
New York Times:
Ms. Craig, the Minnesota Democrat
who is openly gay, said Republicans would have a hard time pigeonholing her
governor or making the liberal label stick. She recalled that during her first
term in Congress, Mr. Walz took her hunting for wild turkey. She could
shoot—trap shooting is a big sport in the state—but she had never hunted
turkey.
Watch your commas, New York Times! Or your
articles. You could write: “Minnesota Democrat Angie Craig, who is openly gay
…” Or you could write: “Ms. Craig, a Minnesota Democrat who is openly gay.” The
Times is having some trouble because it is mentioning Ms. Craig down in
the article a ways from where she was first mentioned, so the writers feel the
need to remind readers who she is. Commas can act like parentheses: “Ms. Craig
(who is openly gay) is a Minnesota Democrat …” There is a difference between
“The drummer, who has a drug problem, is someone you don’t want in your band,
for lots of reasons” and “We were trying to choose from among the three of them
and decided that the drummer who has a drug problem is someone you don’t want
in your band.”
Completely unrelated question: What does her being gay
have to do with turkey hunting? If there is some special kind of lesbian
turkey-hunting technique that the ladies have been keeping secret all these
years, I want to know about it.
In Conclusion
I wrote a pretty rough
review of a dumb book on Sunday. But worse than dumb, it was dishonest.
People who write about politics and public affairs should try not to be dumb,
but they should try even harder not to be dishonest. And if I may be parochial,
Christians writing Christian-themed books should try very hard not to bear
false witness. It’s important.
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