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Dialogue: Ellen Ruppel Shell on Beyond Price
Dialogue: Ellen Ruppel Shell on Our Obsession With Cheap
This week, I'll be having an email dialogue with Ellen Ruppel Shell, whose new book, "Cheap", argues that cheapness is often no bargain.
Dear Megan,
In the matter of history, I must beg to differ. The Triangle Fire was the seminal event in a series of workplace tragedies that forced fundamental reforms and government regulations. As David Von Drehle, author of Triangle The Fire That Changed America reports in his superb narrative history, before the fire, roughly one hundred workers died on the job every day. At the time, he writes, "workplace safety was scarcely regulated, and workers' compensation was considered newfangled or even socialist." The Triangle Fire and the outrage that followed changed everything. Here is the account from the US Department of Labor website:
In 1911 a terrible factory fire in New York City made possible some of the culminating events in the era of progressive reforms in workers' safety and health. A special state commission conducted an investigation into working conditions, especially those affecting health, in a wide range of industries. It was the most massive effort any state had yet undertaken. The legislature adopted workmen's compensation and completely revised most of the state's occupational safety and health code along progressive lines. Furthermore, a young woman who played an active part in the investigations later applied some of its lessons on a national scale while Secretary of Labor.
Given this history, I find it puzzling when some seem to imply that indentured servitude is a necessary condition of the free market, and that to suggest otherwise is to be branded an "anti-globalist." I am a great fan of free trade! But free trade is not a force of nature--it is designed and controlled by humans. We can rationalize that millions upon millions of Chinese chose to work 70-80 hour weeks in dangerous factories to make our cheap goods. But this doesn't explain why the American Chamber of Commerce and the US-China Business Council lobby fiercely against labor reforms in China. It seems that "free trade" is a relative term: commercial interests must be "free" to scour the globe for cheap labor and resources, no matter the cost to environment or human dignity; but workers in those countries are not "free" to organize to demand a decent life for themselves. In countries where such freedoms do exist, and where rule of law applies, the price of labor goes up and the work goes elsewhere. Oh, you say, get rid of the sweatshops and the work goes too--isn't that bad for the Chinese? Well, I am not so pessimistic--not so down on my fellow Americans--to believe the only choice is between stultifying protectionism and unfettered exploitation. By insisting that multinationals pay more than lip service to the values they seem to expose, we would raise all boats--including the one we're sinking in.
I also find it puzzling that some Americans are outraged when products produced on the cheap are shoddy--and even dangerous. When Thomas Train sets aimed at children ages three to five are sprayed with lead paint by Chinese migrant workers in Dongguan it makes front page news. But who among us worries about the workers--many of them teenagers--exposed daily to this neurotoxin shower? And why should these teenagers who work 70 hours a week with no days off and no face masks to protect them give a fig about our children?
But the main focus of CHEAP is not China, or the developing world. Rather, the book is a journey through the science, economics, psychology and social history of low price in America and its formidable impact on our culture. Naturally, until the Industrial Revolution and mass production, no consumer goods were cheap. And until the invention of the price tag in the late 1800s, discounts were not part of the retail landscape. I found it fascinating that Americans have not always been thrilled with "everyday low prices." At the turn of the last century, the Retail Merchants Association railed against discounters, who "reduced the value of labour, and destroyed the purchasing power of many classes, thereby affecting all classes." Shopkeepers who touted low prices were derided as scoundrels and "gutter merchants." President William McKinley was particularly outspoken on this point: "Cheap merchandize," he famously said, "means cheap men." And so it did. Retailing wizard Frank Woolworth's "innovation" was to hire only unskilled workers, mostly young women still living at home, and pay them next to nothing. "It may look hard to some of you for us to pay such small wage but..one thing is certain: we cannot afford to pay good wages and sell goods as we do now, and our clerks ought to know it."
Woolworth, of course, set a pattern that discounters follow today--one third of the working poor in the US come from the retail ranks. The downward pressure on wages is undeniable: despite the nation's astonishing productivity growth, median family income, adjusting for inflation, dropped by $1,175 between 2000 and 2007, while family spending on basics grew by $4,655. So yes, as Megan has helpfully pointed out, many of us are getting health care benefits from our employers. But this benefit is more than swamped by the ballooning cost of health care. Meanwhile, we pay less and less for consumer goods: compared with the early 1970s, 40 percent less on clothes, 20 percent less on food, more than 50 percent less on appliances, about 25 percent less on owning and maintaining a car. Thanks to our flat incomes and growing fixed expenses, many of us don't have the extra cash to pay for all these "great deals," but no matter--until the past couple of years we took the money out of our homes--with cheap, "no money down!" second mortgages. We all know where the story went from there.
Now of course, no one forces us to stock up on cheap stuff, so why do we do it--even when we suspect it's not in our best interest? Depending on what Megan has to say, I'll try to tackle that in the next post.
All best,
Ellen
Dialogue: Ellen Ruppel Shell on Our Obsession With Cheap
This week, I'll be having an email dialogue with Ellen Ruppel Shell, whose new book, "Cheap", argues that cheapness is often no bargain.Dear Megan,
It seems we have several things in common--I, too, spent a college summer working in the Catskills--as a waitress in an Italian themed hotel where I served three meals a day to a very demanding clientele and shared a room (though admittedly not a bed) with eight other waitresses. The gig ended abruptly in scandal; one of my roommates was caught in flagrante delicto with the cook during working hours. In the spirit of fairness, the entire waitressing staff was fired without pay and sent home--I think the bus boys took over the serving duties until replacements were mustered.
These memories are light years away from the subject at hand--which seems to be Bagis clothes hangers and Kura loft beds and banana leaf Gullholmen chairs made by happy workers in China and Vietnam. IKEA does not play a large role in CHEAP but I was lucky enough to spend a few days there--one at corporate headquarters in the lovely and historic costal city of Helsingborg, Sweden, and a couple at the charming and remote town of Almhult, where the company was founded and where today stand its design headquarters, quality control center and--most impressively--the airplane hangar-like studio where the iconic IKEA catalogue is shot. (More copies distributed around the globe each year than the Bible!) Many of us think of IKEA as the world's largest furniture maker, but in fact, the company makes very little of anything. It's the world's largest furniture retailer, its much vaunted Swedish "style" hammered out by tens of thousands of workers mostly in the employ of other companies. China is the company's largest supplier, but IKEA has suppliers in fifty-two countries, including the United States, where to great fanfare it installed a factory in Danville, Virginia last year that builds coffee tables made quite literally of particle board and cardboard.
I chose to visit IKEA because it seems like the anti-Wal-Mart, a classy, progressive company where value and good values coexist. It flaunts what business scholars call "brand personality traits" to convey an image of youth, friendliness, and hipness which, along with its famous design, combine to make low price furnishings acceptable to a crowd that would never consider buying a night gown--let alone a night table-- at Wal-Mart. Target, H+M and a number of other low price purveyors work almost as hard to undermine the very sensible assumption that low price is a signal of low quality. But no company does it better than IKEA.
IKEA challenges its designers to create to a specific price point--say 50 cents for a mug, or $100 for a table and two chairs. And every year, the price is to go lower. This "making the impossible possible" (a refrain I heard again and again in Almhult)--requires that IKEA cut corners, just like any other discounter. There's no miracle here--founding chairman Ingvar Kamprad--today one of the world's richest men living in tax exile in Switzerland--had a dream of applying what he described as "shrewd logistics to offer home furnishings at such low prices that the masses can afford to buy them." What this means of course is that the masses who make those furnishings are treated pretty much the way other makers of low price goods are treated. It also means that environmental considerations take a far back seat to price. So we can trace to IKEA the by now familiar reports of environmental degradation and labor abuses, things we've not only come to take for granted, but to rationalize. After all, workers in China and other low wage countries are better off laboring in factories under less than savory conditions than staying home and starving on the family farm, right? At least, that's what we are told, and told, and told again, even by well meaning thinkers like New York Times columnist Nicholas Kristof, who earlier this year penned a column entitled "Where Sweatshops are a Dream." The thinking goes like this: poorly paid, overworked and even abused workers in the developing world are on the first step of a path similar to the one that led Americans from the abuses of the Industrial Revolution to the glorious opportunities we enjoy today. But such arguments, while compelling, tend to oversimplify history. Workers rights in the US were forged in a crucible that was highly visible to consumers--many of whom were either workers themselves, or knew someone who was. It is this identification that led to public outrage and eventually to reforms. But the thousands of labor linked incidents killing and injuring workers in China, Cambodia, Vietnam and other low wage countries happen out of sight--and out of mind--of most American and European consumers. All we see is the price, and few of us stop to think about how it got so very, very low. Part of the reason these prices are so low is that American interests work mightily to keep them that way, by scaling back protections for workers and sharply curtailing the role of unions in the developing world. That is, the workers in these countries want to fight back--and would--were American interests not so intent on keeping them in their place. Some of these workers return to their farms, but many others cannot make the fare. They're stuck--they work in factories not because they believe it will pull them up, but because they quite literally cannot get out. And if those workers try to improve their lot by demanding better conditions or overtime pay, the factories can and often do move go elsewhere--further and further beyond the reach of rule of law. This "race to the bottom" may serve workers temporarily, but over the long term, it leads to income disparity and--for many workers a cycle of hopeless entrapment and poverty.
Roughly 25 percent of the global workforce is now Chinese. Given such enormous firepower, China inevitably sets the norm for wages and working standards in the global supply chain. American corporate interests have chipped away at those standards and wages in order to maximize profits and influence, as well as to serve their shareholders. The chronic disregard for workers' rights in China's foreign-invested private sector threatens wages and working conditions around the globe, including the hard-won gains of American workers. This helps explain why incomes for 90 percent of Americans have remained essentially flat in the US since the 1970s. The environmental degradation also comes back to haunt us--Chinese made furniture--half of all furniture in the world is made there--has stoked a cut and consume cycle that is eating through the world's forests at an a rate unprecedented in human history. Deforestation accounts for over 18 percent of global carbon emissions--more than the entire global transport system or the global industrial manufacturing sector.
The weaker the rule of law, the fewer the protections, the more corrupt and abusive the system, the lower the price. And that's the system we're buying into when we buy into those "everyday low" prices, be they at Wal-Mart or IKEA. Megan, you said in an earlier post that there are worse things threatening America than the obesity epidemic. I agree, but I don't think that living with grandma's furniture--ugly as it might be--is one of them. The more we know about how and where and of what our consumer goods are made, the wiser our purchasing decisions will be, on both a personal and a political level. This is not to suggest that we should all rush out to buy weighty, expensive stuff--far from it! In fact, some very inexpensive and portable old standbys--like boards and cinder block book cases for wandering graduate students--might well be worth considering over the far more expensive--and only superficially more tasteful--IKEA option.
Thanks, Megan, for the opportunity....I look forward to responding to more of your thoughts on CHEAP.
Best,
Ellen
What's the Matter With IKEA: A Dialogue With Ellen Ruppel Shell
This week, I'll be having an email dialogue with Ellen Ruppel Shell, whose new book, "Cheap", argues that cheapness is often no bargain.Dear Ellen, You and I certainly share one thing in common: we both hate IKEA furniture. It is not much of an exaggeration to say that my current life's ambition is never again to spend four hours messing around with an allen wrench and seventeen feet of badly veneered particleboard. I hate the way Ikea furniture looks, its tendency to fall apart, and most of all, the homogenezation of our national homes. A visit to an Ikea warehouse brings home what progressives like, and libertarians hate, about Scandinavia: it's the Kingdom of Lagom, where everyone has exactly the same, perfectly adequate, stuff. As you point out in your book, Ikea furniture is not quite as adorably minimalist as its marketing implies. Making a whole bunch of disposable furniture places certain stresses on natural resources, not all of which are renewable, or, arguably, even legal. But despite my aesthetic, personal, and environmental aversion to Ikea furniture, I have to acknowledge that there is a lot to be said for really cheap, really disposable furniture. Without it, household formation would be a lot more difficult, which is one of the reasons people used to live at home or in furnished rooms where the furniture was often uglier, flimsier, and even more uncomfortable than the most hideous Ikea creation. I hate futons with a passion, but I'd rather sleep on one than the sagging iron bedstead that I had to share with a friend the summer I worked as a maid in a Catskills hotel. Every night, we clung stuporously to the sides, but every night, we eventually lost our grip and plummeted together into the central furrow, waking ourselves up enough to crawl out and repeat the process. This sounds very colorful now, and was already an anachronism when it happened, in the early 1990s. But before super-cheap furniture, beds like this, and broken couches, and tables that shook and chairs that broke, were a standard feature of many households--especially low-income ones. Disposable furniture also greatly enhances mobility. Since I went to grad school in 1999, I've moved at least seven times. My last two moves have required movers precisely because I have more "real" furniture--too much for me to shift by myself, or impose on friends. Each time, the movers have cost me thousands. Of course, as I've gotten older, I have less reason to move, and more reason to acquire substantial furniture. But for people in school, or just starting their professional lives, keeping their permanent possessions down to a minimum makes it a lot easier to pick up and move to Paris for six months, or strike out for more hospitable labor markets. Since many economists believe that labor mobility makes a substantial positive contribution to economic growth, this is worth considering as a benefit of the disposable lifestyle. (I suppose one could argue it is also a cost to community formation . . . but America has long maintained a quite vibrant civic society in the face of unusually high labor mobility). There's also the fact that disposable furniture lets us get rid of our decorating mistakes. A flip through a book like James Lilek's Interior Desecrations provides a vivid reminder of just how much hideousness we might be living with, if we changed out our decor on the same schedule as, say, the Victorian middle class. Grandmother's attic was a graveyard of furniture abominations with astonishing lasting power--I myself went off to my senior year of college with a Johnson-era dining set, upholstered in horrible brown printed vinyl fabric, including a chair skirt that some enterprising manufacturer had actually pleated for extra appallingness. The world became a nobler place the day we finally tipped it into the landfill. But had it not been for Ikea--and the broader trend towards cheaper, mass produced furniture--it would probably be gracing my dining room yet. My mother endured a mid-Victorian oak pedestal dining table handed down from an aunt for almost forty years, hating it every day, but unable to bring herself to get rid of something with so much good wear left in it. Of course, these days, you can sell your mistakes on Craigslist. But unless it's a high-quality antique, used furniture fetches only a fraction of what was paid for it, even if it was expensive originally. That's why people used to keep their furniture forever. But it didn't mean they liked their frumpy, thirty-year-old furniture; they just lived with it. And the resale value of used furniture may decline even further because people are increasingly worried about bedbugs--another horror of the "lasting furniture" era that we've largely forgotten about. Bedbugs are on the rise in urban areas, at least in part because of changes in pesticide use, but also because of travel, and possibly because Craigslist has made it easier for bedbug-infested owners to sell their furniture. So I'll close by saying that I think it's easy to romanticize a past in which goods were more durable. Many of them weren't--we're under the illusion that furniture and homes were alwas just "built better" back then, because the houses and chairs we still have with us today are the ones solidly built enough not to collapse. But some certainly were--and this had drawbacks as well as benefits. Being surrounded by lovely furniture hand-crafted by dedicated artisans sounds lovely. Living with Mom and Dad (or in a rooming house) until you're thirty, because you can't afford to set up house, not so much. But you've thought a lot about these issues, so I know you'll have some ready answers for my objections. I'm looking forward to them. Best, Megan
Dialogue: Ellen Ruppel Shell on Our Obsession With Cheap
This week, I'll be having an email dialogue with Ellen Ruppel Shell, whose new book, "Cheap", argues that cheapness is often no bargain. Dear Megan,
It's great chatting with you about my new book, "Cheap: The High Cost of Discount Culture." Today's International Herald Tribune does a fairly good job of sizing up the themes, but CHEAP builds the case that our Faustian pact with low price consumer goods has contributed to the worst recession in decades. I argue that the economics of cheap cramps innovation, contributes to the decline of once flourishing industries and deepens income disparity. I give evidence that marketers have created a false dichotomy between price and quality by squeezing out the middle ground and leading us to believe that quality of almost any kind must by definition be overpriced. And I suggest that by understanding this, and taking action, consumers can gain control over a system that has until now misled us into making choices that come back to haunt us--both personally and politically.
As an experienced economics reporter with a degree in business, I know you'll have plenty to say about all this--and I welcome your thoughts. Can't wait to get started.
All best,
Ellen
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