Tag Archives: Capitalism

Honolulu Car Rental Price Gouging

I got an email about this from my friend in Hawaii. It seems with the return of tourism to Oahu (which had been down 90% for almost the entire pandemic), that the demand for rental cars has gone through the roof compared to availability.

No doubt the car rental offices were selling off their fleets to help cover operating costs during the pandemic. Now that it’s ended, their short sighted move has caught them flat footed. In typical predatory capitalism fashion they’ve decided to charge over $700 a DAY for basic rentals and over $1000 if you want a convertible:

$1,000 a day to rent a car? Low supply, surging demand are pushing up prices in Hawaii (hawaiinewsnow.com)

Normally, I’m quite pro-capitalism. I understand that TO A DEGREE, supply and demand are going to factor into cost. Doing so covers the cost of increasing the supply to meet demand.

HOWEVER… Where do we draw the line in this kind of instance? Where does the law of supply and demand become predatory capitalism? I’m not sure I have an EXACT answer there, BUT, 10x the normal going rate would seem to be across that line. We rented a Mustang GT convertible a year and a half ago for our honeymoon and only paid $100 a day, which is still pricey compared to most other locations.

Wouldn’t an ethical business simply go out and buy some cars from local dealerships to increase their fleet size? At $100 a day rental rate, the car loan note can be paid for on 5 days of rental per month.

Just because you CAN do something doesn’t make it right. Look at the price hikes on insulin as another example. Somewhere along the lines the idea of business ethics got flushed and replaced with the SHORT SIGHTED idea that the only duty a business had was to provide as much short term profit as possible to it’s investors. If one has NO ability to ponder consequences, that sounds great also. In the long term though, it destroys a business’s reputation and customer loyalty. Look at Banks and Airlines as two other examples. They’re both hated.

Worse, these greedy businesses are only fueling the call for Socialism or outright Communism by people who don’t understand these are even worse alternatives.

How To Fix Capitalism:

(5 minute read)

One of the many things I hear nowadays that frustrates the hell out of me is the rants from the ignorant about the evils of capitalism and how it all needs to be torn down.

Capitalism, by definition, is private ownership and control of business. The proper differences between it, socialism and communism are something that will have to wait for another post. BUT, we have to define what we’re specifically discussing here.

SO, by that definition, there’s nothing inherently evil about capitalism.

The only way that argument can even be made is by someone who blindly believes that government is incorruptible and business is inherently evil. Common sense says that just isn’t true.

HOWEVER… the distorted mess we currently call capitalism definitely has some major issues. I’m going to lay out some ideas on how to set it back on a path that’s better for society in general. I’m NOT saying these ideas are doable without a major fight, OR even a complete solution. They’re simply a start at addressing what I see wrong with the system.

Almost all of these ideas are going against the idea of true “Adam Smith” capitalism also, but then I doubt he ever imagined how the uber rich would be able to exploit the system.

1) Eliminate Commodities Brokers

Most people don’t understand these at all, nor the impact they have on the economy. The Eddie Murphy movie “Trading Places” did a good job of showing what they do though. They’re middle men in the chain between producer and consumer, BUT they serve no purpose other than to create scarcity and drive up the price of a product. They buy up everything from orange juice to gasoline and housing lumber, then horde it just long enough to drive up the price and sell it back to the market.

Plain and simple, my opinion is that the supply chain should not involve anyone that isn’t directly involved in manufacturing the product, selling it, or transporting it to be sold. That means stores (even Amazon), warehouses, manufacturers and shipping companies.

The devil is in the details with this idea. First it would have to be adapted worldwide (as would all these ideas really), and then there would need to be nuances in the laws for collectors and similar people. Never mind the filthy rich will fight like mad to block it.

2) Eliminate Interlocking Corporate Directorships:

This is another HUGE problem that goes unnoticed. Not surprising since the people that control the media are a large part of the problem.

Interlocking corporate directorships are when executives sit on the boards of multiple corporations at the same time. It creates a HUGE conflict of interest, and SHOULD be outlawed by the Stock Exchange and other agencies.

As one fictitious example, mister Jones sits on the board of directors of a corporation that sells cleaning products and a media corporation. The cleaning company makes a defective product that sickens or kills several people, and mister Jones orders the media corporation to bury or white wash the story.

These interlocking directorships are also how competition killing mergers happen so frequently.

Bottom line; if you’re an executive, especially at the board of directors level, you get to work at ONE company only. Anything more is NOT looking out for the best interests of the shareholders or the company since you’re juggling loyalties between multiple companies.

3) Break Up Mega-Corporations:

Amazon is probably the poster child for this movement. They control 1/8 of the U.S. economy and over 50% of all internet sales. They’re hardly the only corporation with their hands in numerous pies however. Even Coca-Cola owns much more than soft drinks and bottled water.

In my opinion, the safest and fairest way to do this is to eliminate the parent company level of corporations. Make the divisions into unique and fully independent companies. In the case of Amazon, for example, break it up into a company for people to list and sell with (ie their affiliate marketing program), a delivery company if they want to retain that aspect, a grocery company and a book seller.

This leaves more room for competition, which encourages growth and innovation.

My own unanswered question here is how to deal with a company like Walmart that is just a giant retailer. With department stores already dying out, it might be time to consider limiting retailers to a single broad category of goods in the hopes that also fosters competition and innovation.

4) Eliminate Government Bail Outs:

Funny and ironic how some of the loudest voices against bail outs are rabid socialists.

Pure capitalism means if a business screws up, it crashes and burns and something smarter and better takes it’s place. That’s the way it should be. Government security blankets only encourage reckless business practices. There should never be any such thing as “too big to fail” or “what’s good for GM is good for the country”.

Bailouts shouldn’t exist beyond unemployment for the workers and perhaps some sort of streamlined process for new owners to take over a failed business. Not sure how that could work without creating a kill and cannibalize mentality within the business community.

5) Eliminate Corporate Raiders:

I’m tired and not sure I’m using ideal terminology. What I mean though is outlawing the practice of buying up a company to just shut it down and sell off all it’s assets. Let’s face it, the only people this benefits are the shareholders, and ONLY in the short term. It eliminates competition, and puts employees out of work.

There is the issue of companies that would have failed anyway, but I didn’t claim to have all the answers to every angle.

6) Make Mergers Harder to Take Place:

I’ll probably get alot of crap on this one from the Far Right, but mergers eliminate competition. They’re bad for innovation and the consumer. Look at the banking industry as an example. After the big five banks pushed the Dodd-Frank reform act through and wiped out almost all their smaller competition via regulation, they jacked up fees on everything and customer service went into the toilet.

How we pull this off and where we draw the line, I’m not sure. Maybe a cap on market share by percentage.

7) Political Term Limits:

What does this have to do with capitalism? Simple. Most politicians go to work for lobbying firms after they leave office. Ergo, aside from limiting political corruption, it limits the ability of former politicians to influence pedal once out of office. I’m on the fence about also suggesting outright banning politicians from being able to work as lobbyists. It seems unfair on one level, but we have laws against people working as other types of thieves, LOL.

8) Outlaw Protectionist Legislation:

This has gotten to be a big but barely covered problem the last decade or so. Did you know for example that Texas car dealers got together and bullied their state legislature to ban Tesla from opening any dealerships in the state? That eventually got overturned, but it never should have happened in the first place.

As I mentioned earlier, the Dodd-Frank Act was largely drawn up by lobbyists from the five major banks in the country, and was deliberately written to make compliance so costly and such a hassle that only those big five could afford it. Ironic since they were the ones most responsible for exploiting the government mandate to loan or else during the housing bubble. Clearly some sort of legislation was needed after that whole disaster, but it should have been done in a way that wasn’t a huge power grab and blatant crony capitalism.

Government regulation should be as minimal as possible, and have the purpose of protecting the public while promoting competition.

9) A Return to Morals:

No political or economic system will ever work without morals in place.

It’s nothing that can be legislated here either. People have to get sick and tired of seeing the world around them treated like some video game where short cuts are cool and there’s no wrong in screwing everyone else. No morals just means more of the same no matter what system we work under.

I will NOT entertain any arguments about religious freedom here either. Morals like not stealing or killing, and treating each other the way you’d want to be treated are universal concepts. They’re just inconvenient to people looking for easy money and power. Forty years ago, people frequently did business based on a handshake and a person’s word of honor. Displaying a lack of integrity was unthinkable.

Now we operate in a world of fifty page contracts full of mice type, gotchas and indemnity clauses. It sucks, and is driven by a business and moral climate that is only focused on how much can be grabbed today. Long term growth? Customer loyalty? Who cares? Gaming the system at the expense of society as a whole should be unthinkable, NOT business as usual.

I’d also add that this need for morals also extends to people who think it’s OK to cheat and steal from businesses, and employees who make a game of seeing how little they can do for their paycheck.

10) Restore Financial Education:

Almost an afterthought on my part, BUT making things work also requires an educated public who understands finances and economics. If we continue to have a public who believes “profit” is just money gobbled up by the elites, and doesn’t understand how profit is reinvested into supporting and growing the business, we’re in trouble. Right now, most people can’t even explain the difference between gross profit and net profit, or even balance a bank account. That’s in DESPERATE need of change.

OK, that’s enough. Is most of it socialism light? Yes, BUT it’s regulation that’s designed to promote competition instead of kill it. Diversity in the marketplace is good for the economy and the public.

ANY human institution is going to require some oversight anyway, because humans aren’t perfect. I’d prefer to see rules like these as opposed to the socialism that really only results in crony capitalism.

Talking Down the Economy

Anybody care to guess what the biggest real flaw of capitalism is?

NO, it’s not greed (a legitimate topic for another time), or some of the things you hear from socialists or communists.

It’s quite simply that a capitalist economy is almost totally driven by consumer confidence in that economy.

This is a little bit of an over simplification. Tax levels and bad moves by companies certainly can impact the economy. I won’t deny that. At the same time, the reality is that most times, the economy will recover quickly or continue right on track IF people believe it will AND keep spending.

Crashing chart

Likewise, all it takes to trigger a massive sell off in the stock market (ie causing a crash) is people believing that one is coming and then rushing to sell. With automated trading systems, it’s now built into the network. A few lemmings jump off the cliff and everyone follows.

What’s the point beyond a little trivia?

It’s that I’ve sat back for decades and watch people in the media and in politics try to trash the economy. This is NOT a Right vs Left thing either. Both sides do it when they’re not in power in an effort to undermine the side that is in power. I watched Republicans constantly trash the Obama and Clinton economies, and I’ve watched Democrats talk down the Reagan, Bush and Trump economies. It’s politics at it’s worst as politicians try to ruin lives and businesses to gain votes.

The media? They’re just into hysteria for ratings, as the Covid-19 coverage shows.

If you’re worried about the economy, TRY not to be. Reality is, this is a new situation and nobody knows for sure what will happen. If people remain paranoid, stay home after the all clear is given, and are too afraid to spend, we may be in trouble. If people breathe a big sigh of relief and are eager to get back to living life, things will likely return to a pre COVID situation pretty quickly. Life will be fine if that’s the case.

The point is, we don’t know for sure and we can only control our own little piece of the economy (our personal finances). Anybody that tells you otherwise is lying. Period.

Do NOT worry about what is out of your control. Stay calm, hope for the best and please be aware that when you see politicians trashing the economy, especially if the numbers say different, they’re only trying to make hay at the risk of your financial well being.

That’s your basic economics lesson for a COVID Wildcard Wednesday.