Re: Size Matters . . . [and corporate response to government inflation]

Sunday, November 29, 2015
Posted in category Economics

This is an add-on commentary to Tom DiLorenzo’s blog post on LewRockwell.com.

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Tom, your point on inflation and how product sizes are chopped to mask price increases due to government inflation has been a huge marketing challenge for companies, especially over the last five years post-meltdown. I wrote this piece in 2011 (“Why Blame Corporations for Inflation?”) in response to an April 2011 article by the Inflation Street Journal that deemed inflation pressures to be “subdued” because economic indicators cited only took into account price trends, and, as you said, they completely ignore packaging downsizing trends as companies try to protect profit margins in an era of creeping inflation and other economic uncertainties.

Your link to the Tyler Durden article in Zero Hedge is acutely interesting, and that’s because I called out Mr. Durden in 2011 for an article he wrote in 2010 where he somewhat blames Walmart for “penny pinching” to “mask inflation.” He also points the finger at retail stores for “price masking gimmicks” even though he clearly seems to understand that the downsizing in packaging is an adjustment for inflation. He cites an example of Walmart brand coffee and writes that he is “confident this is not an isolated ploy to pass on surging input prices.”

Word usage here (“ploy,” “mask,” and “gimmicks”) tells me that Durden was confused in 2010 and he has since evolved his understanding of using product packaging and marketing to escape the ravages of government inflation. A marketing example being products that are labeled “concentrated” or “super concentrated” in trying to convince consumers that they can use less of the product (such as detergent or fabric softener) and still have the same – or better – results.

Other bloggers back during that time were also placing blame on corporations, with one in particular, the Modern Survival Blog, using the phrase “corporate scheming, trimming, squeezing, downsizing, profit optimizing…” It’s peculiar that these individuals who understand government policy and inflation would also, in the same breath, blame companies for not being willing to give a huge advantage to their competitors by leaving size untouched and instead attach escalating prices to their products. Perhaps those folks need a couple of years in a corporate finance department working in accounting operations, management accounting, and financial reporting.

The industry I work in is such that our products are not so “touchable” and are more service-based, thus we can’t reduce packaging. Instead, executives and managers are constantly challenged to find ways to offer insurance that lowers coverage and reduces cost; makes services performed by health partners more efficient; and offers cost-cutting buyers such as groups and individuals myriad benefit options, such as larger deductibles and co-pays, to avoid the rise in costs. But the whole healthcare industry in the age of ObamaCare is challenged well beyond inflation in terms of its spiraling costs. And the auto industry – where I used to work in Finance groups – has a similar challenge in dealing with the government’s green-environmental and safety mandates.

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One Response to Re: Size Matters . . . [and corporate response to government inflation]

  1. weak stream says:

    December 1st, 2015 at 8:04 am

    Karen, you’re absolutely right about this and it’s very disconcerting to me to hear those like Zero Hedge going anti business on what is the fault of government. Perhaps people need to go back and reread Human Action, this time for understanding.

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