From MoneyWeek · · 1m 40s
Apple's price inflation is bad for capitalism
Luxury goods keep getting more expensive, pricing out the middle class and threatening support for free markets.
In brief
Luxury goods keep getting more expensive, pricing out the middle class and threatening support for free markets. When status goods become unaffordable to most people, it breeds resentment toward capitalism itself. Originally reported by MoneyWeek.
Apple's new phone costs $3,000
The latest iPhone folds in half and costs nearly $2,000 to $3,000. The original iPhone in 2007 was $499, or about $800 adjusted for inflation today.
“It costs almost $2,000. A top-of-the-range version will retail at more than $3,000.”
Luxury goods are getting pricier
Glastonbury Festival tickets jumped from £170 in 2000 to £408 today. Chanel handbags have risen fivefold, and Rolex Submariners more than doubled in real terms.
“Chanel's signature handbag has risen fivefold in price over the past two decades.”
Status goods need exclusivity
Luxury brands must raise prices to stay exclusive. If everyone owns one, it loses its prestige and appeal as a status symbol.
“By definition, a status good only maintains its position by having some degree of exclusivity.”
The world is getting richer
The number of millionaires doubled from 30 million a decade ago to 60 million now. More wealthy buyers chasing limited luxury goods drives prices up.
“The number of millionaires in the world has roughly doubled from about 30 million a decade ago to roughly 60 million now.”
Prices will keep climbing
On current trends, the iPhone 20 could cost $5,000 or more by the end of the decade as demand from emerging markets continues to surge.
“On current trends, the iPhone 20 will cost $5,000 or more by the end of the decade.”
The middle class gets squeezed
Most people's living standards are already under pressure. As luxury goods become unaffordable, even affluent middle-class earners feel excluded.
“Even people who, by any reasonable measure, are making enough money to count themselves part of the affluent middle class may suddenly find they can't afford an Apple phone.”
Inequality breeds anti-capitalism
When luxury goods become unaffordable to most, people feel alienated from free-market capitalism. Calls for wealth taxes and profit caps will grow louder.
“The latter will feel more and more alienated from a free-market economy that no longer seems to deliver.”
Apple will pay the price
Corporations profit from raising prices, but if it destroys faith in free markets, the cost is too high. Apple and others will face backlash for pushing too hard.
“The likes of Apple will only have themselves to blame for pushing prices up too aggressively.”
The short version
When status goods become unaffordable to most people, it breeds resentment toward capitalism itself.
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