Consumer Power And Restrictive Practices - PART 3 ISOEconomics / Isokratic Econommics
Iso Economics is the equilibrium between enterprise and consumer powers. For now enterprise harvests the combined buying power of consumers to capitalise on economics of scale gains. The enterprises then may choose to pass down or not a portion of such gains in the form of lower prices, which resulted from such combined buying power. Yet more than often, we see that enterprises now days do not pass the benefits of mass buying power which is lower cost, to the consumer, unless they are forced to by competition. In the future we may well see the consumers harvesting their own buying powers through different means. At some stage then to use their combined buying power to at least gain some of the benefits of the economics of scale in one form or another.
In more plain language for those not acquainted with economies of scale: Iso economics is the move to an equalisation between the seller ( entrepreneur) and the buyer ( the consumer). Presently when a store sets up in a location it buys according to the number of buyers (consumers) who buy from that store. If it is a chain of stores then all the buyers (consumers ) who buy from that group of stores become the buying requirements of that store or group of stores. The single store’s like a small grocery has a limited buying power which results in weak buying power and having to buy from the producers, wholesalers, importers, distributors and agents.
The large groups of stores with the combined buying power of millions of consumers behind them have a greater bargaining power. In addition with such buying power the superstores and chains of, can buy direct from the producers, manufacturers at very much lower prices. The savings in the buying cost is then pocketed and in some cases small proportions of such buying savings is passed down to the consumer in the form of lower retail prices.
When the consumers decide to harvest their combined power then the stores will have to share in the form of passing down some of the gains, to the consumer. Imagine the residents of a town jointly deciding to stop shopping from a particular store. That store will automatically have zero buying power because it would have lost the combined power of the citizens of that town who used to shop from that store.
How and when, will the consumers evolve to harvest their combined buying powers will come in many forms. I will only try to indicate some suggestions further on. The process to get there, the structure, the activity I call Iso-Economics. I call Iso because gradually the entrepreneur and the consumer will get closer to each other than the pure capitalist system positions them right now.
The same basic and simplistic principle would then expand and develop to cover the whole sector of the economic activity from retailing to manufacturing, services, banking and so on.
Summarising in simple terms if we assume that the consumers of an area, let’s say a country elect not to use a superstore and stop buying from that store, the buying power of such a store will diminish immediately. Therefore in final analysis, the economics of scale which bring today’s superstores the ability to amass super buying powers, could not be there, if the consumer elects to take control of it’s own combined buying powers. This model of thought could expand to every market operation which relies on supply and demand.
The same we see in a state to state behaviour. When we see country leaders bargain for trade terms, conditions, tariffs and so on, they are using the combined buying power of their country’s consumers; nothing else. When America convince other countries to scrap, or reduce import tariffs for American goods, or else they will do same and worse, they only use the combined buying power of the American consumer. When George Soros buys into or out of a currency he does so using the combined buying power of the consumers who consume the services of his organisation by investing in his investment funds.