alt Hacker NewsAdvertising spend being too high is a symptom of a supply glut. Too many products in the marketplace, not enough consumers to buy them.
In a different world where there are higher wages, more people would have more spending power. Then companies wouldn't have to spend as many dollars on advertising, which they could split between higher wages, higher margins and lower prices.
Alas, the short-term single-firm directional incentive for company decision makers in that world leads to marginal prioritization of higher margins. The loss of wages leads to loss of consumer spending power but it's spread across the economy. But every firm has the same incentive so they all do the same thing, and the good thing gets ruined.
This line of thinking leads to a Georgist-ish conclusion: The class conflict shouldn't be between workers and employers. They should be allies; the real cause of nobody being able to afford anything is rent extractors. (Writing in the 1800's, George [1] was most concerned about land rents; but the advertising monopoly of Google / Meta may be another form of extractive rent with similar characteristics.)
Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)...
[1] https://www.astralcodexten.com/p/your-book-review-progress-a...
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>Maybe Henry Ford was on to something when he shocked the world by paying his employees enough to afford the product they were making (more than doubling many workers' wages)...
That's a nice story to tell, but the economics never works out if you do the math. Whatever extra wages you pay, you only get a fraction of that back in increased sales. How much percent of a worker's income do you think is spent on a car? As a rough measure we can use the BLS's CPI weights for "new and used vehicles", which comes in at 7.4%, with an extra 1.4% if you include maintenance and parts. By that alone "paying his employees enough to afford the product they were making" is going to be a losing proposition, because Ford can only hope to get 8.8% of whatever they paid in wages back as revenue. And all of this is ignoring the fact that you can't pay extra wages out of revenue, only profit, so you can only hope to recoup a fraction of that 8.8%.
> the real cause of nobody being able to afford anything is rent extractors.
Employers/Owners are essentially rent extractors to workers. Its even worse IMO. They buy some of your time to do stuff for them. They also lend you the tools and materials to do your job. And they own whatever you produce. If you are selling your one hour for 100 bucks to produce ten linen coats worth 100 bucks each, you get a 100, everything else - minus costs of materials and your 100 the employer gets to keep as free rent.
I'm just going to add a recommendation for the book 'Technofeudalism' by Yanis Varoufakis. The short version is that the current cloud economy is similar to serfs working under a feudal lord.
>In a different world where there are higher wages, more people would have more spending power.
I don't think that's true, not for random goods. Rent scales with disposable income. If most people make more money, then rent becomes more expensive. Rent essentially vacuums up all the excess money people have available. (Rent = housing in this case)
Why would people want to live in these more expensive places rather than somewhere cheaper? It's because that's where all the (well-paying) jobs are.
When you see Americans complaining about how poor they are you might reasonably ask: okay, but how do people on $poorCountry get by when their income is 5-10x less? It's not like food, clothing, electronics, and other goods are 5-10x cheaper there. But what is much cheaper is housing. (You'll even find cheap housing in rich countries, it'll just be in areas with no jobs.)
I dont think you have to go georgist for that take, adam smith’s whole “free market” originally meant “free from economic rent”
> The class conflict shouldn't be between workers and employers.
Then why don't employers, the ones with essentially all the power here, tend to choose actions that go against the interests of the working class? Simple: regardless of what you think "should" happen, a study of history tells us what actually tends to happen in reality, and that tendency is towards class war between the ruling and exploited classes.
Anyways, in what way is "ownership" not rent-extracting in general? If you own shares of a stock and you get paid a dividend, that is rent plain and simple. All the arguments you can make against that being the case -- eg that you deserve a premium for parking your capital in a risky asset -- apply to advertising conglomerates and even literally renting out land too, so either they're all renting or none are.
I'm not familiar with Georgism, but employers and rent extractors (e.g. the majority stock owners) seem to be one and the same pretty often, at least in the US.
I don't think that's how it works. These companies have all the visibility control and make you invisible by default unless you pay them. It has very little to do with quality, demand, or any of the rest.
> In a different world where there are higher wages, more people would have more spending power. Then companies wouldn't have to spend as many dollars on advertising, which they could split between higher wages, higher margins and lower prices.
Interesting hypothesis. I looked it up in Wilkinson and Pickett, The Spirit Level.
The authors provide cross-sectional data across 23 rich nations, showing a strong positive correlation (r~=0.70) between income inequality (Gini coefficient) and advertising expenditure as a percentage of GDP.
They attribute it to increased status competition & anxiety in more unequal societies, leading to pressure to consume more.