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The State Aids the Increase of the Inventory Turnover

Average Joe sometimes feels the urge to ask why do national economies, as reflected in the GDP, need to grow every year? Why is it a tragedy if they stand still or even slightly recede? The same questions are valid for each big company. If things go well, why this obsession for growth?

The answer is simple: because of the debt. As a rule, under the current status quo, development - both on micro and macro levels - is financed on debt, on loans. Interests must be paid, and the debt must be rolled over. That’s why they can’t afford not growing every year: to preserve or possibly increase their profit margins, while paying the debts. The states, with their continuously growing budget deficits and debt ratios, need a growth of their big taxpayers like oxygen, to finance the budgets from taxes and dues.

That’s why the states have every interest in expanding and accelerating turnovers and profit margins of the big contributors to their budget. There are also direct state aids from public funds, but from obvious reasons these are less profitable for the governs. The most helpful subsidies are those paid directly by the consumers. And the most successful ones are those sold by PR means as mutual aid for their own benefit. Let’s help people buy newer goods, more cool and more environment friendly.

Some subsidies dictated by the state and paid by the consumers are more directly felt in their pockets and can hardly be advertised as discounts. For instance, the green certificates paid by the clients on the electricity bills; these amounts are directed to the developers of renewable energy facilities. Or, as already seen in many countries, the ban on Diesel vehicles.

But other subsidies are easier to wrap as gifts. This is the case of many government programs in support of the sales of durable goods like cars or home appliances or the like. You turn in your car to a junkyard and get a voucher, which you add to your own money to buy a new car. This incentive increases the manufacturers’ sales, the turnover of new inventories is higher, money circulate, debts are paid, and the budget cashes in. It also provides liquidity for the next production cycle.

For some products, like smartphones, it’s relatively easy - although promotion is expensive - to convince the clients to buy each latest version and give up the one they already have, because it’s also about status. Replacing the washing machine, the vacuum cleaner or the TV is not as trendy. Here, the client needs incentives from outside, and to this effect, vouchers are ideal. From this point of view, the introduction of standards for the energy consumption and the carbon footprint for these products was a blessing.

The very concept of “durable” thus becomes relative, as does “quality”. The newer products are perhaps more spectacular in technology terms, but they are lacking more “conservative” and perhaps more utilitarian values. We’re talking mainly about the actual service life of goods, beyond the producer’s warranty. Domestic appliances are not for life anymore, like they used to be; it’s out of question leaving them as inheritance. They are also increasingly difficult and expensive to repair, so their replacement becomes the logical economic solution.


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