If by intuition, you really mean creativity, i.e. divergent thinking, then I'd say yes, that is a key to success. But to ignore the contributions of good cost accounting is to lay the groundwork for financial suicide.
C&NW, CA&E, MILW, CGW and IC fan
The one thing that gets conveniently overlooked by today's railroad scholars is the lack of pricing power that railroads had during the pre-Staggers era of ICC regulation. No matter what the cost basis of the carriers the final arbiter of all interstate rates was the ICC, where the carriers were basically viewed as the 'over dog bully' and decisions rarely favored the carriers, Despite all the signs of impending failure from the carriers in the Northeast - the real wake up call didn't occur until Penn-Central filed for bankruptcy and even with that bankruptcy it took several years to get to Staggers, which gave the carriers to opportunity to set prices and service to correspond with demand. Even after Staggers it took the carriers nearly two decades to understand what operating as a minimally regulated industry was all about - educating leaders whose entire careers had been in a highly regulated environment in operating in a deregulated world was not a easy transition.
The calls for re-regulation of the Carriers is coming from monopoly industries who, in the past, could get the carriers to ask 'how high' when the monopoly industries commanded 'jump'. The monopoly industries find having to negotiate transportation with a 'equal' as being against everything they hold dear. Those who are crying loudest about being captive to a single carrier, have for years been the sole supplier of their own end products to their customer base.
Never too old to have a happy childhood!
BaltACD The one thing that gets conveniently overlooked by today's railroad scholars is the lack of pricing power that railroads had during the pre-Staggers era of ICC regulation. No matter what the cost basis of the carriers the final arbiter of all interstate rates was the ICC, where the carriers were basically viewed as the 'over dog bully' and decisions rarely favored the carriers, Despite all the signs of impending failure from the carriers in the Northeast - the real wake up call didn't occur until Penn-Central filed for bankruptcy and even with that bankruptcy it took several years to get to Staggers, which gave the carriers to opportunity to set prices and service to correspond with demand. Even after Staggers it took the carriers nearly two decades to understand what operating as a minimally regulated industry was all about - educating leaders whose entire careers had been in a highly regulated environment in operating in a deregulated world was not a easy transition. The calls for re-regulation of the Carriers is coming from monopoly industries who, in the past, could get the carriers to ask 'how high' when the monopoly industries commanded 'jump'. The monopoly industries find having to negotiate transportation with a 'equal' as being against everything they hold dear. Those who are crying loudest about being captive to a single carrier, have for years been the sole supplier of their own end products to their customer base.
Thx IGN
PS to the above. One thing I could never understand is this: Why the electric power companies have not tried to get railroads to electrify. It would entwine the two together like nothing else would.
I know this is kind of off topic.
Sam1 Allocation of overheads and fixed costs to product lines is a complex subject. It is beyond the scope of these forums. Having said that, a business can determine the cost of goods sold, which includes an allocation of overheads, to determine its operating profit, and then look to cover the fixed costs with the combined product operating profits. In the case of the electric utility business in Texas, upon deregulation, we determined that we needed to allocate some of the fixed costs, i.e. depreciation, interest, taxes, etc. by product line and by segments, e.g. generation, transmission, distribution, retail, etc. Actually, the regulator required us to do it. We were able to come up with fixed cost allocation models that were acceptable to management, the regulators, and perhaps most importantly our external auditors. Allocations contain heaps of estimates. The key question is whether they are logical and can be supported.
Allocation of overheads and fixed costs to product lines is a complex subject. It is beyond the scope of these forums. Having said that, a business can determine the cost of goods sold, which includes an allocation of overheads, to determine its operating profit, and then look to cover the fixed costs with the combined product operating profits.
In the case of the electric utility business in Texas, upon deregulation, we determined that we needed to allocate some of the fixed costs, i.e. depreciation, interest, taxes, etc. by product line and by segments, e.g. generation, transmission, distribution, retail, etc. Actually, the regulator required us to do it. We were able to come up with fixed cost allocation models that were acceptable to management, the regulators, and perhaps most importantly our external auditors.
Allocations contain heaps of estimates. The key question is whether they are logical and can be supported.
I pretty much agree with what you've said. Having said that, I'll point out very important differences between electric power supply and railroading. ("Boxcars aren't kilowatts" as some wise men once said.)
First, a question. While you've got all these allocation models, what do you do with unused capacity? Do you just let it sit idle if you can't sell it for the average modeled cost? Or do you sell the off peak capacity at a price below the average cost if that's all that's possible? That's really what we're talking about. The Pennsylvania Railroad could handle additional business, such as the ingots, without adding capacity. They wanted to sell the unused capacity for what they could get in a competitive situation. Doesn't your power company do the same?
As I said, people can develop all kinds of formulas to allocate overhead costs. But what it all comes down to is what price you can get for your product/service/capacity that will produce the best outcome for your enterprise.
You're talking about costs of goods sold by product line. Not individual sale pricing. There's a huge difference in deciding whether the operating revenues of a transmission line exceed the costs of the transmission line and deciding if the use sold during an off peak time was preferable to letting the line be idle and generating no revenue. (The average cost would go up if the line was left idle.) The less specific the costing, the more accurate the costing.
You're also talking about an enterprise with a single output, electric power. Every cost relates back to providing one output to the customers, electric power. Railroads aren't like that. They produce many multiple outputs. That greatly complicates any rail overhead allocation.
But, thanks for the great input.
schlimm Ken: I really don't know what would be exactly the best method to allocate fixed costs. But to "cover" them means to allocate them into the pricing of services so that the revenue stream in toto will cover those costs. If you only price a service with a margin above the variable (operating) costs, you will either not cover the fixed costs if they are high, as in a railroad, or you will end up with no profit. What you will end up doing by default is allocating that share of the fixed costs to some other service you offer, sort of a loss leader. There's no getting away from it. Perhaps the rationale for the ICC decision was that the PRR was operating a service below the true cost to eliminate competition, and once that was done, would have priced it at whatever they wanted? That sort of thing has happened in many modalities (retailing comes to mind), but it is uniquely grievous when unlike retailing, especially grocery stores, the limited competition is eliminated.
Ken: I really don't know what would be exactly the best method to allocate fixed costs. But to "cover" them means to allocate them into the pricing of services so that the revenue stream in toto will cover those costs. If you only price a service with a margin above the variable (operating) costs, you will either not cover the fixed costs if they are high, as in a railroad, or you will end up with no profit. What you will end up doing by default is allocating that share of the fixed costs to some other service you offer, sort of a loss leader. There's no getting away from it. Perhaps the rationale for the ICC decision was that the PRR was operating a service below the true cost to eliminate competition, and once that was done, would have priced it at whatever they wanted? That sort of thing has happened in many modalities (retailing comes to mind), but it is uniquely grievous when unlike retailing, especially grocery stores, the limited competition is eliminated.
Well, that's understandable. You can't know what exactly would be the best method to allocate fixed costs. There is no "Best" method for allocating fixed costs because there is no good method for allocating fixed costs. As I said previously, fixed costs "can't rationally be allocated in diverse output enterprises, such as a railroad.."
Now Sam1 did a good job justifying fixed cost allocation for electric power. Not for specific sales, but for lines of business. You can get close, with a lot of estimates, for lines of business (but not specific sales) in a single output enterprise, such as electric power. But when you're in a diverse output enterprise, such as a railroad, which hauls anything and everything from anywhere to everywhere, you can't get close.
OK, let me use a greatly simplified example to show how a railroad selling its service at below average costs benefits everyone concerned ---the railroad---everyone.
Let's say there is a railroad that runs from a coal mine to a power plant. Its sole business is coal from the mine to the power station. It's total cost in a year is $54,750,000. This breaks down to $36,500,000 variable and $18,250,000 fixed. (That's a reasonable ratio for a railroad.) The average cost is $1,500/load as they have 100 loads per day, 365 days per year. (I told you this was greatly simplified.) That would be $1,000 variable and $500 fixed for each load.
Now let's say that there is a new ethanol plant near the coal mine. Excellent marketing work by the railroad determins that there is a 10 load per day potential from the ethanol plant, But the most they can price is $1,200/load otherwise the ethanol will go by truck. The railroad figures its variable expense for moving the ethanol would be the same as moving the coal. $1,000/load. But their current average cost is $1,500/load. Should they try to capture the ethanol business even though its revenue will be below their average cost?
Of course they should. The added revenue exceeds the added variable cost. Take the money and run the trains
Here's the nutshell:
Before the ethanol the railroad's total cost was $54,750,000 consisting of $36,500,000 variable and $18,250,000 fixed. After the ethanol the railroad's total cost was $58,400,000. ($3,650,000 additional variable and $0 additional fixed.) But the revenue increased by $4,380,000 which is $730,000 more than the cost increase. I'd give the marketing guy a bonus.
Keeping an established network, such as a railroad, in as full use as possible is key to efficiency. It drives down average costs for everyone. In this case the ethanol transported at below average cost would decrease the average cost of any carload moving from $1,500 to $1,455. Reductions in cost, they be good things.
Now look at what would happen if the dang government regulators blocked the railroad's price because it was below the average (or fully allocated) cost. First, the railroad is SOL because it doesn't get the additional $730,000. (Bye, bye Pennsy) Second, the ethanol plant is SOL because it can't use the most cost efficient method to distribute its product. (This is what happened to the steel mills.) Third, the nation is SOL becuase we've got to cover the cost of using a less efficient distribution system for the energy.
That's exactly what happened in this idiotic "Ingot Molds" decision.
As far as driving the competition out of business and then raising the prices; That's a fairy tale. The Ohio River wasn't going away. Neither were the highways.
Barges and trucks are mobile. They can go away. And they can come back. They only way this notion of driving them out of business and then raising prices could possibly work is if the railroad could establish barriers to entry for competition by the barges and trucks. i.e. "Once we get rid of 'em, don't let 'em get back in." The railroads had no power to do such a thing.
.
Fine and good, except for two things that your marketing guys overlooked: 1. You apparently did not include a contribution for that line to the overhead of the central administration. Every line, division, etc. has to contribute to that. 2. If the coal company finds out (and they will) that they are paying (in your example) $300 more per load than the ethanol company does, you are going to have to deal with an enraged primary customer. And that will change the entire picture.
schlimm 2. If the coal company finds out (and they will) that they are paying (in your example) $300 more per load than the ethanol company does, you are going to have to deal with an enraged primary customer. And that will change the entire picture.
2. If the coal company finds out (and they will) that they are paying (in your example) $300 more per load than the ethanol company does, you are going to have to deal with an enraged primary customer. And that will change the entire picture.
How wil it change the picture? What will the enraged coal shipper do as a consequence of learing the cost of shipping ethanol? Will they end the use of rail and shift to a different and cheaper form of transportation?
Who knows, but you may have to cut their rate and that will lower your overall margin. It is fundamentally difficult (and frankly wrong) to charge different rates to different customers for the same thing or service and not expect a problem. Then you have to manage that situation. Over time, it creates a lot of ill will, distrust and resentment with customers. Historically the rails created a lot of ill will with their customers for a variety of reasons, just one (among many) why the rails % share of freight traffic by measures other than ton miles declined.
narig01 PS to the above. One thing I could never understand is this: Why the electric power companies have not tried to get railroads to electrify. It would entwine the two together like nothing else would. I know this is kind of off topic. Thx IGN
"The When and If of Wires - future electrification projects"
But there were (and may still be) some major obstacles:
1. Both railroads and electric utilities are already capital-intensive - they each need a lot of money invested 'up front" - and the time frame for the repayment or return on investment of which is usually measured in decades (20 to 50 years, 'depending'). Such investment is usually 'stranded' or sunk - once it's made and the asset is installed in place, it's there for essentially forever - it can't be easily repossessed, resold to a new owner, converted to other uses, etc. Electrification only added to or shifted that handicap from one business to the other - it did not eliminate reduce that burden. Then in the 1970's inflation took off (from a variety of causes), which greatly increased interest rates and made capital investment even more risky and less attractive.
2. Poor financial performance and credit-worthiness of the railroads in the 1960's and 1970's made almost everyone reluctant to invest in or commit financing to them, except for an FRA program which no one ever actually utilized. Some utilities got into financial trouble then and in the 30 years since, too.
3. Both railroads and utilities have lots of other projects and investments with faster paybacks/ higher rates of return, etc.
Nevertheless, I'm an advocate for and optimist about this. That previous thread occurred before I joined here, but there are a lot of good points there, esp. those by greyhounds. The economics can already work in some niche situations, and with gas and diesel fuel at close to $4 per gallon ('depending') and some electric rates now lower account of plentiful natural gas lowering the marginal price of purchasing electricity in the deregulated market ("merchant generators"), it's not far off in many other situations, especially as rail volumes increase on certain routes. I'd say that by 2020 electrification will be well under way - it'll take 20+ years to do all the Class I mainlines anyway . . .
- Paul North.
schlimm Who knows, but you may have to cut their rate and that will lower your overall margin. It is fundamentally difficult (and frankly wrong) to charge different rates to different customers for the same thing or service and not expect a problem. Then you have to manage that situation. Over time, it creates a lot of ill will, distrust and resentment with customers. Historically the rails created a lot of ill will with their customers for a variety of reasons, just one (among many) why the rails % share of freight traffic by measures other than ton miles declined.
I understand your point, but for a customer to have a valid complaint that a company is charging different prices for the same thing, a customer has to prove that the thing they are purchasing is the same thing that is being sold for another price. And even if they do prove that, there is no recourse other than simply not buying anything from that supplier. If enough customers do that, the company will have to decide if the ill-will is costing them more than the benefit of selling an item for a lower price than it sells to another customer. To the customers paying the full price, it does make them feel like they are subsidizing the ones getting the discount. So the resentment might go beyond just the failure to get the low price.
This question recently came up in some discussion about the Cumbers & Toltec Scenic Ry. If they board all the paying passengers and are ready to leave, and if someone shows up at the last minute without a reservation; should they discount the price if necessary to get that latecomer to buy the ride? If they are not willing to discount, and if the seat runs empty as a result, then they make less money than they would have had they offered a discount to make the sale.
However, if they offered a discount to the latecomer and if the other passengers found out, they might feel cheated and thus refrain from riding the railroad again in the future because of ill will. But then again, the latecomer had to take a chance on being refused a ride even at full fare if the train had sold out and had no extra seats. So, it might be argued that the discount for the latecomer was compensation for him taking a risk that the full fare passengers did not have to take. So, the latecomer really did not purchase the same product as the full fare passengers.
Thanks to Chris / CopCarSS for my avatar.
In my book, anyone who says it is unfair to charge different rates to different people is at heart a socialist, not an exponant of free market capitalism.
The unit train customer gets a service for half the price the single-car customer gets on a per car basis, and I think that it fair. That is because I believe in the free market system.
If Sothwest Airlines charges one-third the full-rate ticket price for off-peak middle-of -the-week travel, I think that is fair because I believe in the free market system.
If somone drives a Cadilac and I drive a Chevy, I have no right to resent him.
To me, the coal company has zero right to complain. If they want, when the contract is up, they can try to use the Ethanol price to bargain with the railroad, but the result should be the result of negotiation without any government interference whatsoever. That is my opinion.
In my opinion the #1 caause was property taxes. Not just the ones on RRs which were very unreasonable as the almst total political budgets came from prop taxes. NY might have kept the 4 track and PRR the same if if they could have "banked" the unneeded track ??
The property taxes on all the industrys that PRR and NYC served caused them to move to less tax locations thereby killing the RR traffic base. Maybe some would have bullt / re built their NE facilities.
schlimm Fine and good, except for two things that your marketing guys overlooked: 1. You apparently did not include a contribution for that line to the overhead of the central administration. Every line, division, etc. has to contribute to that. 2. If the coal company finds out (and they will) that they are paying (in your example) $300 more per load than the ethanol company does, you are going to have to deal with an enraged primary customer. And that will change the entire picture.
I strongly disagree with your assessment of the situation.
1) In the cited example the railroad will have $730,000 more in its bank account at the end of the year than it would have had without the ethanol. This $730,000 can be used to pay interest on debt, taxes on property, and other overhead. That's a significant contribution to overhead. In fact, any revenue above the variable cost is sometimes referred to as: "Contribution to Fixed Costs." 'Cause it ain't no profit until all the costs are paid.
2) The coal company is using the railroad for one reason and one reason only. That reason would be that the railroad is the most cost efficient way to move their coal. They'd leave the railroad in a heartbeat if they could save money by moving the coal another way. That's got to be the railroad's focus. To keep themselves the low cost method of transport for their main customer. Getting additional revenue from the ethanol will help the railroad do this. They won't have to have the coal company pay for everything. Odds are that the coal company will understand this common sense and not be upset by the railroad's lower rate on ethanol.
It's far better if a buyer and seller have a good, cordial working relationship. But there is a natural conflict between a buyer and seller. (Think of the last time you bought a car.) I've had customers stand there and literally scream at me. We kept on getting their business. Why? Because we were the most cost efficient way to move their product, that's why.
Why is it "Frankly Wrong?" Look at the situation. (This is a very realistic situation often faced by railroad marketing/pricing people.) Under your "Frankly Wrong" belief the railroad can do nothing to get the new ethanol business.
1) They can't charge more to move the ethanol because of the truck competition.
2) They can't lower the coal rate to the ethanol rate because they wouldn't cover their total cost if they did so.
Under your unfounded "belief" all the railroad can do is watch the trucks go by hauling freight that the railroad could make money on. That's the position the government regulators put the Pennsylvania in with the "Ingot Molds". If it was just that little bit of business it wouldn't have been significant. But it wasn't just that little bit of business. That's the way they regulated rail rates. It helped kill the Pennsylvania and it hurt the people of the United States.
If the railroad in the example did establish the ethanol carload rate at $300 below the coal rate there would be no adverse effect on the coal. Their charges wouldn't change by a dime. Don't cry if you ain't hurt.
On the other hand, the railroad would benefit from extra income and the ethanol folks would benefit from whatever savings they received by shipping at a lower cost. In the end, since all costs are eventually passed on to the end users (us), the American people would benefit. You don't seem to want that and I don't understand why you don't want that. Government price regulation of rail rates created inefficiencies that cost the American people dearly.
The best example I can think of that proves the benefits of selling the same service at different prices comes from the airline industry. They basically auction the seats on a flight. People on the same flight can be paying vastly different prices for the same transportation. Would your "Frankly Wrong" belief prevent this?
If such pricing were prevented it would certainly result in a less cost efficient airline industry. Since everyone operates on their own personal demand curve, preventing the auction of airline seats would result in empty seats. This would be unsold production by the airline. This would drive up the cost to people who did buy seats - not a good outcome. You seem to want this, and I don't understand why.
The investment dollars needed for rail capacity (and airline capacity) are a precious scarce resource. They should not be wasted. Government price regulation causes such waste.
One more time. Why did the dang government need to involve itself in the "Ingot Molds" case?
As to the last point, the ICC got involved because the law required it. And that particular regulatory law existed because there was a demand for it when the statute was enacted.
Are most of the rates/charges today contract rates or tariff rates?
Contract rates will be confidential while the tariff rates are an open book. My guess is that a carrier would want to keep certain prices open and certain prices confidential. This example is a very good one of showing what can occur.
Many companies have a clause in their contracts and require that they have the lowest rates applicable and if the carrier negotiates a lower rate with another company then that will trigger the lower rate.
It all comes down to pricing power. Do you have it? If you do, you are in the driver's seat, at least for awhile (until alternatives come along...and the alternatives always come around). Think not? Look at Microsoft. Look at oil. Look at coal. Each is experiencing price swings as alternatives are developed.
Microsoft will compete with "the cloud" and others. Sovereign oil nations now are competing with North Dakota and Canada. Coal vs natural gas.
Ed
Differnt rates for different customers for the very same service provided is OK...and its done in every industry. The reasons for that are many... no two customers are exactly alike, and the marketplace is ever changing....when customer A called on Monday the sales hopper was looking empty so I gave him a good rate..when customer B called on Wednesday things we're looking up and I charged him more accordingly. Smart customers in any industry know how to play the game and get the lowest pricew for themselves by understanding what primary factors influence the service provider's pricing.
Ken: One more time. I think we are basically in agreement here and differing over those bedeviling details. The fixed costs have to be covered and what should happen is every time new business is added in a tariff industry like the rails were, the old tariffs should be modified to reflect the additional revenue. In other words, using the ethyl and coal example, the rate charged to the coal company should be lowered because there is now more business to spread the fixed costs over and the rate to ethyl should reflect that it covers its share of overhead. As to why the ICC was involved? Paul's answer covers that succinctly. The history of the gilded age is complex and the ICC was one consequence. The situation changed and much of those efforts seem out-dated now, looking at it through our late 20th-early 21st century prisms.
As to preferential pricing? That is really a different issue and varies from sector to sector. However, the notion that most people are just fine with the idea that the person next to them paid less on the same day, from the same vendor for the same widget flies in the face of market research.
schlimm As to preferential pricing? That is really a different issue and varies from sector to sector. However, the notion that most people are just fine with the idea that the person next to them paid less on the same day, from the same vendor for the same widget flies in the face of market research.
Instead of simply insisting that fairness doesn't matter in business enough to try to achieve, try looking at some market and other research to see how customers react in terms of product brand loyalty when they discover others consumers are getting a better deal from the same source. You may wish to pejoratively label them as "unreasonable" but they are likely the norm. Check "equity theory" studies. Of course businesses and customers are free to do what they want, but damaging a company's goodwill for short-term gain is the risk taken. Maybe the customer base will be ok as you say, maybe not and look elsewhere, if that is an option. But it is clear, the consequences have to be taken into account to order to make a wise business decision.
Although it's a bit different situation (the wholesale end), you may find you are whistling a different tune if a major home improvement chain sets up an outlet near your lumber yard, offering lumber at retail prices, below your cost, b/c they have a deal with one of your suppliers, who then tells you in effect, "Tough. Get over it. Move on."
I agree that what the customer perceives as fairness can influence their buying decision. However, what the customer perceives as fairness is often in the eyes of the beholder. It cannot be regulated because it cannot be defined. So, the way fairness is controlled is through the law of supply and demand. If a customer feels that product is unfairly priced, they are free walk away and search elsewhere. What could be more fair than that? The seller wants the highest price and the customer wants the lowest price. Neither one is free to dictate to the other what the price should be.
A lot of people believe that a gas station has no right to raise the price on gasoline that is in their underground tank, bought, and paid for. They would say that if they bought gas there in the morning at $3 per gallon, the station has no right to charge them $3.25 in the afternoon for gas out of the same pool of gas from the same tank. They reason that the value of the gas in the underground tank is only determined by what the station paid for it, and therefore the station has no justification in raising the price because they paid one price for the gas in the underground tank.
However, the value of the gas in the underground tank fluctuates according to supply and demand. So the value of a tank of gas can change from one moment to the next. So, the gas in the underground tank is really not the same item from one minute to the next. It depends on how much gas is in the whole supply chain and how much the whole world wants gas.
A business (except utility-type businesses) has the right to charge whatever they want. All I'm saying is the impact that has on the mindset of the customer base has to go into the decision matrix in a well-run company. If you own a hamburger joint, you can raise your prices to $25.00 for a "cheezbuhga" if you want to, or charge one guy $3 (below cost) and another guy at the next table $30 to compensate, and then the 1st guy $15 the next day, because you can. But don't expect much repeat business.
schlimm A business (except utility-type businesses) has the right to charge whatever they want. All I'm saying is the impact that has on the mindset of the customer base has to go into the decision matrix in a well-run company. If you own a hamburger joint, you can raise your prices to $25.00 for a "cheezbuhga" if you want to, or charge one guy $3 (below cost) and another guy at the next table $30 to compensate, and then the 1st guy $15 the next day, because you can. But don't expect much repeat business.
In Texas, as well as several other states, the generation of electric energy has been de-regulated. That is to say, the commercial terms have been de-regulated, and the generators can charge whatever price the market will support. Generators can differentiate between classes of marketers, i.e. residential, industrial, commercial, etc., but they may not discriminate against customers in the same class.
In Texas customers served by investor owned utilities, as opposed to public power and co-ops, have a choice of service providers. They can buy their power from the retailer offering them the best deal. The retailers can charge whatever the market will bear. And they can compete against each other, which they do robustly. Residents of Dallas, for example, can choose from more than 30 electric energy retailers. However, a retailer may not discriminate against a customer within a class unless it offers the same incentive to everyone in the class.
schlimm Instead of simply insisting that fairness doesn't matter in business enough to try to achieve, try looking at some market and other research to see how customers react in terms of product brand loyalty when they discover others consumers are getting a better deal from the same source. You may wish to pejoratively label them as "unreasonable" but they are likely the norm. Check "equity theory" studies. Of course businesses and customers are free to do what they want, but damaging a company's goodwill for short-term gain is the risk taken. Maybe the customer base will be ok as you say, maybe not and look elsewhere, if that is an option. But it is clear, the consequences have to be taken into account to order to make a wise business decision. Although it's a bit different situation (the wholesale end), you may find you are whistling a different tune if a major home improvement chain sets up an outlet near your lumber yard, offering lumber at retail prices, below your cost, b/c they have a deal with one of your suppliers, who then tells you in effect, "Tough. Get over it. Move on."
Read this with interest. I've always felt we needed to keep our steel mills going, even if it cost more. This country has done too much outsourcing just to save a buck. The heck with helping our own people seems to be the philosophy of big business.
I can remember my parents and I coming into Pittsburgh on the Pennsy in early morning and the skies were lit up with the fires from the blast furnaces. American industry hard at work. Never knew they would someday be gone, along with the Frisco and so many other RR's.
Interesting, Sunnylands comment about Pittsburgh. I've been to Pittsburgh twice on business, met and talked with some of the locals. Certainly at one time "Pittsburgh" and "steel" were synonymous, then came the tough environmental laws forcing the mills to either clean up or close. They closed. The result was an economic catastrophe that took the area decades to recover from. Although the area now is virtually smog free and the views from Mount Washington are spectacular, most of the locals I've spoken to aren't sure it was worth it, considering the cost. If anyone from the Pittsburgh area's reading this feel more than free to correct me.
Reminds me of something Mike Bednar wrote about in an article about the cement producing areas of Pennsylvania. Cement dust was everywhere, and you could see it at night like a fog around the streetlamps, but nobody cared. To the locals it wasn't cement dust, it was gold dust. It meant jobs and a strong local economy.
Murphy Siding What you are suggesting, is that all things and all people are exactly the same. That all prices and all wages should be the same- no matter what. 'Turns out that's been tried. It didn't work for ol' Joe Stalin either.
What you are suggesting, is that all things and all people are exactly the same. That all prices and all wages should be the same- no matter what. 'Turns out that's been tried. It didn't work for ol' Joe Stalin either.
As a Russian speaker and someone who has studied the former Soviet economies I can say that there is very little comparison to the differential pricing models used by the ICC in the Sixties and Stalin, a paranoid who killed anyone who thought would be a challenge to his authority, in a society without a tradition of parliamentary democracy that was 97% peasant (only 3% engaged in industrial production of any kind ) in 1917, that faced a highly industrialized Germany in a war that killed somewhere between 20-40 million Soviets and survived through massive mobilization and incredible privation. And if you criticized Stalin's resource allocation policies you would either be sent to Siberia to die of hunger and overwork or be killed outright. Not really similar to the ICC, right?
LOL, there is a rule in debate that the first person to mention Hitler loses, and that should apply to Stalin as well.
Oh and interestingly given the topic we are discussing, the psuedonymn "Slalin" (his real name was Iosif Vissarionovich Dzhugashvili) comes from the Russian word for steel, Stol, and refers to his method of ruling "with a steel hand".
Our community is FREE to join. To participate you must either login or register for an account.