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Capitalism's Unintended and Unimagined Consequence

From bags of chips to burning gas, if too efficient, it loses customers

This is Dark Cloud on Wednesday, June 19, 2013.

Bill Maher, whose "Real Time" program on HBO is a staple of my week, had an anecdote last year illustrative of what is wrong with our economic system. Manufacturers of the air-tight bags in which potato chips arrive had been under fire because those bags seemingly last forever in land fills and ocean. So, they found a solution: a bag that lasted only a limited time and then dissolved in sun and water with no environmental horror attendant to that process.

But consumers complained that these bags were loud when touched, much louder than the ones they replaced and infringed on the enjoyment of the television show or movie with all that noise, and this obviously was worse than the Great Barrier Reef covered with the products of Frito Lay and others. So, the story went, the manufacturers returned to the previous bag. If true, the stupidity and hypocrisy of the consumer will find no better illustrative example, because in this country a bag of chips, once opened, is near always finished, and as Maher pointed out, you could always pour its contents into a bowl. Indeed. I suspect the new bags cost a tad more, is all. And a tad more per bag can add up to the plantlife in accounting.

But now comes the great horror of Capitalism, the point where - when a business is set up and successful and long lasting - the supposed great gift of capitalism - innovation - is often quashed and the consumer and the environment both suffer. The only ones who benefit are stockholders.

If, like me, you live in an apartment and use a coin laundry facility in the basement, it can be a pain to clean your clothing. You have to bring your big gallon jug of detergent down with you. A First World tale of woe, of course, but bear with me. I'm a guy, and I don't measure. I sort of pour in a guesstimate and let her rip. Detergents are really concentrated these days, and you only need, literally, a tablespoon of the stuff for most loads. Most of us put in much more, to be safe, to be clean, but mostly because the manufacturer profits from it and so they make it easy to waste.

Well, actually, most of us use these premeasured packets now, where the bag dissolves in water and the correct amount of soap is applied, reducing environmental damage and demand on the water reclamation devices at the end of the pipe. This means good-bye to the gallon jugs of powder and liquid. These pods of soap cost more for soap delivered but you save overall because you don't waste or spill any. Sales of laundry soap and detergent are down 5% in the last three years. That's a lot of suds not killing fish and poisoning the environment. Win-win.

But James Craigie, CEO of Church & Dwight, who make Arm & Hammer, OxiClean, and other brands, is upset and complaining. Furious that even this modest innovation is hurting his profits, he went full reactionary at a recent industry conference. Craigie said that "New products ought to expand the revenue pie for manufacturers and retailers, not shrink it... That is what innovation always did in the past... What kind of a new product is good when it's hurting the total category?"Craigie wondered. By good, he means profitability only. His company also made detergent pods, but didn't compare with the 75% of the market held by Proctor and Gamble, who make Tide.

This is the crisis in miniature. Capitalism is quite capable of becoming so efficient you need fewer workers, producing items so specific to exact need there is no waste. And supposedly you'd become the huge success you want to be because of it. But, when the price comes down as it should and consumers still cannot afford it because they have insufficient income, what then?

Well, it surely should mean less profit, and why not? Your business has become totally efficient and served Adam Smith's ideal. The original idea, one supposes, is that the company who achieves it moves on to other things.

But greed's most telling stigmata is lethargy, the reluctance to start again, and the inertia to just enjoy the profits and to stand in the way of innovation that threatens it. This happens all the time.

For example, ask oil and power companies why the hell the night sky is alight with flames pointlessly burning natural gas. Couldn't a building or two housing turbine generators be powered off those flames which currently only serve to pollute? Well, yes. Yes they could.

So, why aren't they?