I've lived through inflation, deflation, stagflation, you name the "ation" and I've experienced it as a business person and as a consumer. While the news channels, online/broadcast/print, all lament, moan and groan, I started wondering exactly what makes inflation bad?
Not being an economist or financial expert, my opinion is that of an everyday product purchaser and service-user.
I went to the basics, starting with the most basic economic premise I first learned many years ago -- supply and demand. The more the demand and the less the supply means the price of the item is automatically higher, and vice versa. This principle applies to every business and product.
Example, you need a tech person but there is a shortage of qualified candidates. This means you will have to pay more to acquire the services you need. But if you have an abundance of tech people then salaries will be lower.
Or let's say you're looking to rent an affordable apartment, a hot topic nowadays. If there are few rental apartments but a lot of renters looking, then the landlord
can charge more rent. If you have a slew of empty rental apartments and a paucity of renters, then the landlord has to charge less to fill those empty units.
How about the price of gasoline? Lower gas prices are determined by supply. The more gas available the cheaper the ride. Due to the war in Ukraine, and the resulting embargo on Russian exports of oil and gas, the supply has been cut worldwide but global demand hasn't lessened. So we're all paying more at the gas pump.
Now I understand. But then I thought about the effects of consumption on the world around us. Manufacturing and production requires resources -- natural and monetary. The more we take resources from the earth the less remain. The same supply and demand law applies so the resources become more costly and that cost is passed on to the consumer in the price of the finished product. But that's only the economic effect. What about the environmental effect? What about the mental and emotional stability impact on consumers? What happens when housing, food, transportation, everyday items become so costly that they are unaffordable except for a diminishing segment of society? All of which leads me to my real question.
Is inflation really bad? Is a forced reduction in consumption such a terrible thing? From a business perspective,. if there is no growth there is stagnation and ultimately extinction. But at what cost growth? What prices are we as society paying for generating profit?
Should business plans now include an ethical element, and one that is kept to even in the face of failure? Should consumers be encouraged to under-consume rather than acquire as much "stuff" as possible? Now that would be an interesting marketing challenge.
Does consumption lead to new and valuable experiences or is simply living the experience to be valued? I don't have a totally satisfactory answer but if a smart marketer can concentrate on that question, they will be the winners regardless of inflation/deflation/stagflation. All it takes is thoughtful, need-fulfilling and benefit-driven inspiration.
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