Tuesday, September 18, 2007

We Are All Poorer For It

I work for a "media company" as they call it. Years ago, our income was derived from clients who paid us for information. Then came the internet and Wal-Mart. Both have resulted in huge changes.

With the internet, people expect information and other services without wait and without cost. You get on the internet and read the news, sports, weather and whatever, whenever you want, and you don't pay for it. (Actually you do and you'll see how in just a bit). So the company I work for has a web site (just like every other company) where people can obtain information at no cost. So if no one is "paying" for the information anymore, where does the money come from for my salary and that of my co-workers? Advertising, that's where. Advertising pays for your free news, your free sports, weather, etc. It pays for many of the web sites you visit, the TV shows you watch, the radio programs you listen to, and in part for the newspaper or magazine you read.

So what is advertising all about? My definition of advertising is a company paying money to get you to spend money you don't have on something you don't need. The purpose of advertising is to create a want, or even better, a perceived need for a product...to make us feel that we cannot live, or at least live well, without it. This works well with children, but even many adults are easily swayed by advertising. Why else would someone spend $500 on an I-phone, hundreds of dollars on a suit, tens of thousands on a car, etc. A large part of our economy is now dedicated to advertising and it's associated costs. A large percent of the cost of virtually every product you buy goes to advertising. So in reality, all of that "free" news, weather and stuff on the internet isn't really free. You pay for it every time you buy something. Even companies that are essentially monopolies spend money on advertising, which is ridiculous. Why should a company like Exxon, that sells like 90 percent of all gasoline and makes billions of dollars in profit doing it, need to advertise. Why should the electric company advertise; I can't get electricity elsewhere. Interestingly enough, technology makes it possible to avoid and ignore most advertising. Pop-up ads and spam e-mails, the bane of the internet just a few years ago, can be effectively blocked. VCR's and more recently TiVo and DVR's make it possible to fast-forward through ads on TV. So companies are spending more on advertising that people are seeing less of.

Now on to the "Wal-Mart effect" as I call it. "Always the lowest price " the ad says. Maybe so, but at what cost? The goods and services that are not "free", people want be sure they are getting the lowest price for, and are not necessarily concerned about quality (at least not until the product turns out to be defective). The result is fierce price competition (and more advertising) between the producers of goods and services. That is a good thing, right? To an extent yes. But too much of this is now driving down wages and benefits and sending many jobs overseas.

So the end result of advertising, the internet and WalMart in America is lower wages, poorer benefits and higher costs for all of us. I don't know about any of you, but I am no better off and am perhaps worse off than my parents, who had no internet and no WalMart.

So Sayeth The Shack

1 comment:

Jeni said...

points well taken, well stated.