In “Cheap” she analyzes the reasons behind America’s obsession with low prices and its negative effects, which include over-consumption, rising debt, stagnating incomes, the decline of flourishing industries as well as craftsmanship. Although the author only focuses on the US this eye-opening study can also be applied to other countries.
As the middle class continues to shrink worldwide, consumer society has become bipolar. A minority can splash out $3,000 for a designer handbag while the majority struggles with the rising cost of staple food.
Luxury items can sell for more than 13 times their production price. Expensive prices give brands their value, yet few people can resist paying a low price for a designer item.
Retailers also never reveal their markups, which are viewed as trade secrets. Most of us in fact, ignore what goes into a price and are easily fooled by discounted goods. Yet there was a time when people knew the craftsmanship that went into a particular object. Useful things like cooking pots, kitchen utensils and furniture were handmade by local craftsmen and sold at a price agreeable to both parties. The customer paid the right price for an item designed to last.
The concept of luring consumers with the promise of low prices began during the 19th century in Europe and America.
Entrepreneurs such as Wanamaker and Woolworth in the US offered low quality merchandise cheaply with the customer’s approval. The hidden cost came in the form of low wages.
“We must have cheap labor or we cannot sell cheap goods. When a clerk gets so good she can earn better wages elsewhere, let her go,” F.W. Woolworth said.
Mass production flooded the markets with affordable and disposable consumer goods. Although discounting was increasingly used to convince consumers to buy, it was television advertising that truly created the desire for material goods like a nice house, car, home appliances and even exotic trips.
The Americans’ craving for whatever money could buy knew no boundaries but their monthly wages could no longer cover the cost of constant purchases.
“Third-party universal credit cards, introduced in 1949, would in 10 years time enable the conversion of frugal America to a nation in debt,” explains Shell. To afford unnecessary luxuries, families shopped at discount stores so they could save on essential commodities such as clothes, toiletries, hardware and food. In 1962, Fortune magazine ran a series of articles on the disturbing influence of the discount sector. One immediate effect was the fact it was putting scores of small retailers out of business.
Another effect concerns craftsmanship.
“As shoes and electronics and furniture become disposable, there is no need for craftsmen to craft or repair them. And as craftsmen become increasingly scarce, true craftsmanship becomes more expensive and rarefied, something for the wealthy but not for the rest of us. The combination of quality and value, once available to the many, is now affordable only to the few. For the rest of us, there is ‘design’,” says Shell.
This enthralling study is written at a time when capitalism and globalization are being blamed for the recent financial crisis. The IMF’s chief economist, Olivier Blanchard, acknowledges that the world was close to a catastrophe. Using cutting-edge technology with cheap labor has affected middle-class workers and their employers in America, Europe and Latin America.
This book’s message is clear. A world with cheap food, fuel, credit and labor is not sustainable. A global economy driven by a “more and more for less and less” attitude is not secure. We need to learn how to live in a world where natural resources are limited. We must not only produce and consume differently but also implement the 3R strategy: reduce, reuse, and recycle. We must realize that our purchases have consequences and that we as consumers have the power to change our society and the world.
“We can demand to know the true costs of what we buy ... we can enforce sustainability, minimize disposability, and insist on transparency. We can rekindle our acquaintance with craftsmanship. We can choose to buy or not, choose to bargain or not,” says Shell. Most of all, we need to stop thinking that hoarding material goods is an end in itself and pass that message to younger generations. In quite a few countries, children born in the 1990s are predicted to do less well than their parents. In these troubled times, Shell’s book helps us understand the global effects of buying cheap. It also shows that the ultimate power lies with the consumer.
