A Bad Idea from Amazon


Amazon’s Socialist bent is showing with their announcement this week that those on EBT cards will be able to get Amazon Prime at half of the cost per month that they charge regular customers.   Their thinking is probably that they can get some people who don’t subscribe now to sign up and maybe help those in need get access to television shows and movies, as well as free shipping for head phones and iPhone accessories.  But you need to wonder what effect this will have on their regular customers who now will be charged twice as much as others who are already receiving money for food, housing, cell phones, and other things, especially when that money is coming from taxes those paying regular price for Amazon Prime are paying.  If I had an Amazon Prime account, I’d cancel immediately, or at least demand the discount.
If Amazon is unsuccessful in luring many EBT customers, which would be a good thing since if you can’t even manage to feed your family, you probably don’t need to be buying things on Amazon, this hopefully would just go down as another bad marketing idea.  If they are successful, however, and don’t see a big backlash from their regular customers, that would be a really bad thing for Capitalism and the standard of living in America in general.  Imagine if others then followed suit, charging customers based upon their income instead of the  value of the goods and services they were receiving.  One person would pay a dollar a gallon for gas, where the next person would need to pay ten.  The same would go for milk, and food in restaurants, and cars, and so on.

              

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As always happens when you start a Socialist program, the first thing that will happen as Amazon starts this program and it attracts a lot of people is that prices for regular users will go up.  Imagine if a lot of people start paying less than the cost of shipping and providing the TV shows – Amazon would need to raise the price of the standard service to make up the difference.  As prices rise, there will be fewer people paying full price as they dropped out of the program, which will make the price go up even more.  This will cause even more people to drop the service.

For an example of this, look at the cost of college.  As more and more students get a break from tuition, the cost for everyone else goes up faster than inflation.  This results in fewer people paying the full rate, until now it might cost $40,000 in tuition alone to send your child to a four-year instate college if you don’t get some sort of discount.  This then provides an incentive for people to not do well economically since doing to leads to you paying more for the same goods and services.

 


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And this is where programs such as the one by Amazon will hurt the standard of living in America.  If you incentivize people to not work and not produce, there is less to go around.  This leads to scarcities and high prices.  You want everyone at least doing something to contribute to society. Right now we have it pretty good with lots of choices and easy access to low-cost goods through places like Amazon.  That may not be the case if Amazon changes the way prices are set in America through their actions.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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