Against cheap stuff
When I was young, my mother briefly instituted a boycott against Nestle in our household. In her telling, it was because they were giving free formula milk to new mothers in developing countries, which babies got hooked on, meaning less breast feeding and more money for Nestle. The boycott proved hard to maintain given Nestle’s ubiquity at the supermarket, but the lesson stayed with me: free stuff isn’t always good stuff.
The tactic remains widespread in today’s economy, even if it’s not always so emotive. I learnt at school about how some bus companies slashed bus ticket prices after privatisation, only to hike them (and cut bus services) once local competitors had been driven out of business. The rise of some modern tech giants took this a step further. Amazon took many years to make a profit, routinely setting prices below costs as it sought to enter and take over new markets. Uber and other “ride-sharing” apps tried the same tactic, with less success. And the likes of Google and the social media giants took it a step further: they provided their services for free to consumers, permanently.
Free stuff is surprisingly common in today’s economy, especially on the internet. There is a whole range of news, videos, blogposts (!), social media threads we can get for free (although we have to pay for a device and an internet connection). Having a bank account is free, and we don’t pay directly to send all those contactless payments.
It’s very hard to argue against free or cheap stuff. Making people pay for stuff that used to be free is never going to be popular. As many companies (like Uber) have found, you can only really get away with it once you have people locked in — whether by a hard-to-cancel subscription, because there are no alternatives, or because all your friends also use the service.
It’s even harder for governments to rule out free or cheap stuff. If I’ve learnt nothing else from the last few years, it’s that people hate inflation and they blame their governments, even if it’s not their fault. But unduly cheap stuff is bad — sometimes almost as bad as overly expensive stuff — and someone needs to make the unpopular case against it. So hear I am.
When is cheap stuff bad? First, when it’s used as a ploy to grab control of a market, drive out competitors and lock people in. Monopolies are bad for consumers, and predatory pricing — it has a name, it’s widely recognised as anti-competitive behaviour — is a good way to create a monopoly.
Second, things we don’t pay for are sometimes a false economy. Free bank accounts incentivise banks to make money in other areas — such as selling us debt at more profitable margins. Which isn’t necessarily a bad thing per se, but it does shape incentives. Free social media means that tech companies sweat their assets — our data — intensively, which leads to a whole suite of issues, not least the tendency towards their own enshittification.
Third, when it doesn’t take account of externalities, the wider harm involved in producing the product. Cheap flights are a classic example — great for consumers in the short term, dreadful for the climate. Cheap gas is a slower burning example — we’ve avoided taxing the carbon emission from burning methane, and now that we really need to switch away from it, it’s become politically difficult to start charging for the externality.
Fourth — and perhaps most fundamentally — free or unduly cheap stuff means someone probably isn’t getting paid enough for their work. It could be dairy farmers being squeezed by the monopsony power of supermarkets. It could be journalists and writers struggling to make money from work that is given away for free. It could be warehouse or factory workers seeing wages squeezed by companies aiming to minimise prices.
As a result, I think governments should take a firmer stand against free and unduly cheap stuff (and unduly expensive stuff, too, as part of a consumer protection drive). They should be quicker to crack down on predatory pricing, the use of loss leaders and other attempts to create monopolies. They should look carefully at free-at-the-point-of-use services (not healthcare, don’t worry), and try to avoid new ones being created. They should tax carbon (alongside other climate action) and other externalities. And they should try, wherever possible, to help people get paid for the value of the work they actually do.
Cracking down on cheap stuff may not be popular in the short term, but if you’re looking for unpopular actions that pay off in the future, I think it’s a cause worth taking up.
