Failures of Capitalism: Manufactured Needs and Planned Obsolescence

Capitalism is incentivized to make products that easily break and which cannot be repaired

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core assumption about capitalism is that each and every human has a unique set of needs and preferences. Capitalists in the market will gradually discover these needs and create products and services to fill these needs.

In this rose tinted version of capitalism we end up with all our needs satisfied at a reasonable price and live happily ever after.

Except that is not how capitalism actually works in the real world. Capitalists are not passively listening to us and working tirelessly for our benefit. Of course in many cases they do, but that is far from the only mode they operate under. Unfortunately, it is frequently far more profitable to make stuff we absolutely don’t need.

One of the great myths perpetuated to rationalize the workings of a capitalist economy is the idea that every individual knows best what we need. Without further reflection most individuals will accept this as true.

The Stupidity of the Individual and the Wisdom of the Crowd

However individuals are often terrible at deciding what they need, otherwise nobody would be doing drugs, smoking, eating junk food, gamble and borrow too much money to buy things they can’t afford.

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Companies are not passive bystanders responding to our needs and demands, rather they are actively manipulating us to desire and buy things we often don’t need.

Okay, that came across as overly conspiratorial, but consider this: Most advertisement is not focused on giving us clear information about products. They are not designed to encourage a sensible buying decision based on actual needs. Instead ads are almost entirely focused on emotions. The field of marketing is strongly focused on learning new ways of how we can be emotionally manipulated into desiring the products a company sells.

This isn’t an evil conspiracy to drown us in debt and destroy us. Instead it is a natural outcome of the capitalist system. Say a company only sells what people need and stay 100% honest about its products, what would happen?

This honest company would get outcompeted quickly by any company which maximizes sales and profits through manufacturing a need and desire for their products. To be fair, there are limits to this, as a company can develop a horrible reputation which kills their sales. So selling genuinely horrible products through deceit is not a viable long term strategy. You could however sell decent quality stuff, which nobody needs. People seldom complain publicly about a company selling them things they didn’t need.

We are not helpless against this manipulation. While individuals are easily manipulated, there is wisdom in the crowd. As a society we know excessive drinking, smoking, drug abuse, gambling etc is bad. That is why we vote in laws to restrict or discourage the sale and advertisement of really bad products.

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GM pioneered the idea of changing the style of the car model frequently.

Planned Obsolescence

A related but different problem is that products, while actually needed, are made to last an artificially short time. This trend is attributed to General Motors in the early 1900s. Eventually Ford and GM managed to provide all American families with cars which made demand plummet. A core problem was that they made sturdy cars which lasted. The head of General Motors came up with the concept of Planned Obsolescence as a solution. It meant they would create cars with new styling every year and make their cars last for shorter time. This way they would get consumers to frequently change or upgrade their cars, thus creating a perpetual demand. It is how General Motors beat Ford, which focused primarily on making good and affordable cars.

Of course the idea has been around for a long time. I would claim clothing fashion is much the same idea. The idea of fashion goes back several hundred years. We purchase and consume a lot more clothes than we need.

This trend is just accelerating. It is hard to not notice how the quality and durability of many consumer products keep declining. The zippers on my coats are ruined much quicker than before.

Perhaps more pronounced is how increasingly difficult it is to repair products. Repair require ever more complicated tools and the spare parts are usually very expensive. In fact this has become part of the business model. I was told by a worker in a computer store e.g. that their margins on sale was so thin that they hardly made any money on it. It was selling small frivolous ad-ons and computer repairs which they really made their money on. This isn’t that different from how printer manufacturers make money on selling you printer cartridges.

When they are selling you the printer, they compete in a big fierce market. Once you got the printer, they got vendor locking and monopoly. Same with computer repair. This market logic creates a strong incentive to not make durable products. You just want to make sure you are not so much worse than the rest that you get known for it.

Final Remarks

This series is part of an effort to foster a healthy skepticism towards many of the claims made about the wonders of capitalism. I don’t believe everything in capitalism is bad. Quite the contrary. There are made positive sides to capitalism. But it is important to understand that markets are often imperfect in quite profound ways, and that is why regulation is often needed to deal with these issues.

Government mandated minimum warranties e.g. can help push companies to make products that last longer.

It is also worth reflecting on whether allowing as much advertisement as possible all over society is really a good thing. Advertisement serves a purpose but we must also be aware of that more advertisement does not make society a better place. Your life does not magically become better by higher consumption.

But one must also understand that you as an individual consumer has next to no power over this. By individual choice you cannot make companies manufacture durable practical items. That goes against their financial incentive. Only through regulation can you have any kind of hope of changing this.

Written by

Geek dad, living in Oslo, Norway with passion for UX, Julia programming, science, teaching, reading and writing.

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