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United 3411 And How The Rules Of Capitalism Have Changed

The shocking incident of the brutal eviction of Dr.Dao from the overbooked United Express flight 3411 to ostensibly make space for some of their crew was, as per the free-market gospels of the post-WW2 world religion of capitalism that promises salvation through consumerism, an unpardonable sacrilege that promises eternal punishment for United Airlines in bankruptcy hell. However, something strange is happening. Even after the firestorm that raged on social media for days after the incident, not only did the United management seem to be totally unapologetic about the incident, but they also seemed to be laughing at the “I will never fly with you again!” threats echoing everywhere! It is almost as if they do not even care for their passengers, and despite shit-level of customer service everywhere, they continue to thrive, even!

But this does not make any sense, this is not how it is supposed to work!“, stutter confused customers, who were taught that service providers will go any lengths to please their customers, because else “the market” would take care of them. Something has changed here. Something very fundamental the way service providers view their consumers. Did you think you had choices while choosing an airline? Did you think you had “power” to punish erring service providers? Did you think they would buckle under the power of you, the consumer? Think again. The rules have changed.

There is something that the Twitter mobs, swearing that they will never ever set foot on a United plane again even if they were offered free lap dances, are missing. All those rules relentlessly drilled into their heads from childhood, from the virtues of free markets to “The customer is always king”, have changed. In this brave new world, the provider has dispensed of all pretention to say in clear, unambiguous terms that “We don’t give a shit about you lousy assholes“. As we have seen in this chapter here, the dogma of the “free-market” gospel is majorly a farce, a smokescreen created to make gullible people believe that they are some kind of king and keep them in line, so the real kings behind the scenes could keep making good money and live fancy lives. Anyway, the reason for providers in general and airlines in the USA, in particular, treating customers like shit is mainly two-fold: The disappearance of choice for the consumer and the great growth of inequality.

To begin with, what we are seeing today is history repeating itself because they did not learn from it the first time. Happens, when you relegate history as a subject for “loser” arts graduates with no relevance in today’s technological world. This consolidation and loss of consumer power have happened before and with alarming similarities.

The History of Oligopoly Repeats

By the middle of the 19th century, railroads held a monopoly on all long-distance transport in the United States, which they abused by arbitrarily fixing high prices, illtreating customers and running trains in whatever way they saw profited them the most, making railroad tycoons, like Cornelius Vanderbilt the most powerful people in the world at the time. It was only when these men, called the Robber Barons, started getting bigger than the United States of America itself and massive protests and riots broke out against railroad monopolies, did the government attempt to regulate them. But the big railroads continued to push consolidation by taking over smaller companies by coercion, threat or force, that by 1906, the biggest 7 railroads controlled about 70% of the market. After World War 2, the USA heavily subsidized roads (Interstates) and airports while retaining the choke hold on railroads and unable to compete with airlines and highways, most American railroad companies died out by 1970. While all this was happening, this same story was being repeated elsewhere.

Around 40 years ago, there used to be numerous airlines crowding the American skies. In 1978, the American airline industry was deregulated as part of Reagan’s policies, which also created most of the mess the world is in today. The result of this was that airlines almost immediately started consolidating to stay in business. They merged and merged and merged, and by 2000 there were only ten major US airlines: American, United, Delta, Northwest, Continental, US Airways, TWA, Southwest, America West, AirTran. And today, there are only four – the United Continental Group, Delta, American Airlines corporation, and Southwest, and these four control 80% of the American airline market. Airlines are wafer-thin margin businesses usually not very profitable. Airline companies very long ago realized that competing among themselves is detrimental to their wellbeing, so they started merging into each other. This process, just like the railroads of yore, continued until we have reached where we are today, with only four left, who collude with each other to “fix” routes, prices, etc., because this is a cozy agreement where everyone stands to gain, much more beneficial than mindless competition which will punish everyone.

When service providers collude and fix prices, features etc while keeping up an external facade of competition, it is called an oligopoly. An oligopoly is a monopoly with different brand names. If you are wondering why competition is not driving down prices like we were taught it would, and why customers are being asked to go take a hike, oligopoly is the reason. And the best thing about it is that there is no anti-trust law against this.

Choice and Capitalism

The power to choose (so-called “Free Will”) with full knowledge of its consequences has been celebrated as mankind’s greatest cognitive ability and the defining feature of it as a sentient species. This “choice” is also the foundation stone of the principles of capitalistic free-market religion, according to which choice is superpower the consumer can wield to punish bad providers and reward good ones, ensuring a permanent state of orgasmic customer service utopia at minimum or no cost, just like the classless utopia prescribed by its competing philosophy. However, none of that exists in this world, and not just because they are utopias, but because the consumer does not have a choice to make, though they do not know that. People are made to believe that they have a choice by providing them with an illusion of choice. In this case it is only different paint on the same planes, making them believe that they can easily switch to another provider if they are treated badly. But not only are services offered by providers identically bad, but they also do not care if the consumer ditches them and switches because those switching consumers will eventually return because they have no choice. But still, these have-nots are still made to believe in the virtues of the capitalistic religion by the customer is “king” etc.

The real absence of choice is not the non-existence of more airline brands to choose from, it is the non-existence of any other mode of transport than airlines. The USA over-regulated its passenger railway to extinction while subsidizing airlines and the motor/oil lobby, establishing the monopoly of airlines in cross-continental travel, which is why US airlines can get away with their monopolistic practices. Save a small stretch on the east coast, if you have to travel cross-country in the US, there is no way today but to get on a plane and fly. If fast, practical and comfortable trains were around in America today airline oligopoly would’ve kept in check and incidents like United 3411 wouldn’t have happened because the consumer would’ve had a choice, a real choice to not choose the air at all. In Europe, airlines are kept in line by high-speed railways like the TGV and ICE, but in the land of the free and home of the brave, you have no choice but to dance to the tunes of four airline companies. Or, you could live true to the American Dream and take to the open road and celebrate your freedom from airplanes, but you will also quickly discover that cross country trips are less awesome road movie and more boredom, dirty rest stop toilets, sticky steering wheels, backaches and red eyes. All of you raising war cries of #boycottUnited will be back under the blue tail very soon because you have no choice. Consider this. Today United beat you up, tomorrow it will be American. Then Delta, Southwest. How much will you keep boycotting? America is only reaping the fruits of killing the train. Flying has become the most horrible ways to travel, becuase in the absence of competition, airlines have no incentive to make their passengers feel better.

The Myth of the King

You can easily identify oligopolies by two of their consistent features: high prices and pathetic customer support. Almost all sectors today are run by oligopolistic businesses, funnily, by four dominant companies, referred to as the “Big 4”, just like the railroad companies of yore: The Big 4 of Banking, Automobile, Telecom, Technology and so on. In India, oligopolistic businesses are usually above any law, regulation or even logic: the private bus lobby, the real estate mafia, private schools, taxi services and so on. You can argue that prices are high because demand is (indeed it is) high in all these sectors. Demand is high, but only because it is artificially kept high by cartelization of businesses by oligopolistic businesses. You can read more about this here. But deluded “free-market” worshippers still naively continue to believe that what they are seeing is still “capitalism”, and that the poor little creature called the “customer” is still “king”.

A big reason why incidents like #United3411 happen is because corporations simply have stopped caring for consumers for reasons we saw above, choice. If you look closely, service providers from airlines to automobile dealers to schools to banks etc seem to get away with anything, from simply bad customer service to overcharging to kicking their customers in the face, and generally not giving a shit about it. Common complaints to big providers almost always go unanswered and unresolved. Threats to quit and move to other providers are laughed away. There is one guy on a Twitter satyagraha against HDFC Banks’ deceptive pricing practices running for 72 days when this was written, but they don’t even care to reply. Have you ever heard of any provider go out of business because of bad services? However, lack of choice is not the only reason for this. Check this out.

It is no myth that a single business or first class passenger brings in more revenue than an entire row of economy class passengers. When 6% of passengers contribute 30% of revenues, you can imagine who they will care about. If one or ten among the masses between 800 and 400 lines leave, they won’t care because they can easily be replaced. The consumer is still king, but only if they significantly contribute to the companies’ margins. The guy in First Class does that, and he is, indeed, king, and no company will ever do anything to antagonize high-value customers. The peasant in economy class gives so little margin to the airline that it will cost them more to retain them than what that retention will bring, and they turn a deaf ear to his rants and raves on Twitter. Also, the rich guy has a network of rich guys who will all bring in much business and margins, while the peasant’s network only begets more peasants. As inequality widens, the rich can be charged more and more, generating more margins, while the mass of low-value customers can be treated with impunity as providers please because they have no choice. This is also why banks arbitrarily raise charges all of a sudden. The inequality in income that the world faces today is most visibly seen in this, and will only get worse as the top gets richer and richer while the bottom poorer. It is a vicious circle.

There are some other rules that have changed. For instance, when you buy a ticket, you automatically surmise that you have a “right” to travel on the airplane. You have no idea. The ticket is just a “proof of contract” – a contract that you agree to pay them good money to abide by all their rules and regulations. The airlines, in all their magnanimity, are actually doing you a favor by letting you purchase a ticket from them and allowing you to travel on their aircraft, you thankless chicken! It is all there in those Terms and Conditions you always sign without reading. Check out United’s Contract of Carriage, for instance. Remember when they kicked those little girls off a plane because they were wearing leggings? Rule 21.H.5. All providers T&C gives them powers to do as much as they please.

There is one common fact about all these sectors where oligopoly is rampant. They are all unregulated. As per the free-market scriptures of the capitalistic religion, the best prices, services, and features can be provided when the “markets” are left alone to decide and find their own levels for themselves. After four decades of massive deregulation, the world seems to be in a much worse shape than it was in the 1970s, as globalization, have led to the rise of dangerously populist, close-minded, authoritarian and inward looking politics the world over. The problem here is that it is not just the market that is unregulated, but the providers are too, who are humans whose first instinct is to amass money and not to waste it by providing good services and all that. Only if service providers are forced to abide by rules and laws of customer service by enforced regulators can these rights of consumers be protected, which includes free and fair chance for any player to enter the market and antitrust regulations powerful enough to break up large corporations will true and real competition arise. It works well in European countries, and there is no reason it shouldn’t work everywhere. We should re-establish the principles that the primary concern of any establishment should be the overall improvement of the quality of life for the entire human race, and not for making more and more money for a selected set of rich people at the expense of teeming masses of ordinary humans being treated like shit by powerful corporations and the law and its arms that they command.

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Are you really making the case that air travel was cheaper 50 years ago as compared to now? There are plenty of articles waxing nostalgic about the golden era of air travel in the 50s and 60s with comfy seats, silverware and full scale meals – but air travel was definitely much more expensive back then. Today you have the option to fly cheap and reach your destination in a few hours even if it requires enduring cramped seats and lousy food. Back then it wasn’t an option at all for the average middle class American, they had to use the train or drive. Sure, a train may be more comfortable, but at the cost of time. Today in the US and in India, you can fly across the country in a couple of hours to spend the weekend with family or take a short vacation instead of wasting days spent on railway travel.
Yes, this kind of consolidation leads to oligopolies if left unchecked, but the economies of scale and standardization are what help them lower prices for everyone as well.

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