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Business. Nonfiction. HTML: From the shuttered factories of the rust belt to the look-alike strip malls of the sun belt---and almost everywhere in between---America has been transformed by its relentless fixation on low price. This pervasive yet little examined obsession is arguably the most powerful and devastating market force of our time---the engine of globalization, outsourcing, planned obsolescence, and economic instability in an increasingly unsettled world. Low price is so alluring that we may have forgotten how thoroughly we once distrusted it. Ellen Ruppel Shell traces the birth of the bargain as we know it from the Industrial Revolution to the assembly line and beyond, homing in on a number of colorful characters, such as Gene Verkauf (his name is Yiddish for "to sell"), founder of E. J. Korvette, the discount chain that helped wean customers off traditional notions of value. The rise of the chain store in post-Depression America led to the extolling of convenience over quality, and big-box retailers completed the reeducation of the American consumer by making them prize low price in the way they once prized durability and craftsmanship. The effects of this insidious perceptual shift are vast: a blighted landscape, escalating debt (both personal and national), stagnating incomes, fraying communities, and a host of other socioeconomic ills. That's a long list of charges, and it runs counter to orthodox economics, which argues that low price powers productivity by stimulating a brisk free market. But Shell marshals evidence from a wide range of fields---history, sociology, marketing, psychology, even economics itself---to upend the conventional wisdom. Cheap also unveils the fascinating and unsettling illogic that underpins our bargain-hunting reflex and explains how our deep-rooted need for bargains colors every aspect of our psyches and social lives. In this myth-shattering, closely reasoned, and exhaustively reported investigation, Shell exposes the astronomically high cost of cheap..… (more)
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The book argues that cheap, poor-quality items push well-made items out of the market, and that workers willing to work for what little money is available to pay them make better paying jobs harder to come by. Her implied solution is that we should all insist on quality and insist on paying more for it, and that all our lives will be better off in all aspects if we have fewer, but better things.
Two questions nagged at me as I read Shell's relentlessly haranguing book, however: 1) why should consumers be *forced* to buy expensive items? Sometimes cheap will do (remember those chartreuse shoes you had to buy for your best friend's wedding? $29.99 at Payless vs. $300 Manolo Blahniks?). Sometimes it's even preferred. 2) Just because the consumer willingly forks over more for an item, what guaranty is there that the money will go into the pocket of the workers, rather than into the hands of the company executives or stockholders? At one point Shell seems to dismiss the idea of buying locally from the manufacturer when possible, but this - which may also be pricier - seems to be more likely to get money into the hands of the "workers" than agreeing to give the Tommy Bahama company a few more dollars per shirt, expecting they will use the money to raise the wages of workers in China.
In the main, I do agree with many of Shell's premises. Unfortunately by the end of the book, which was so long, so shrill and strident, I found myself resisting her arguments and wanting to go on the offensive to defend my right to buy cheap things. That, as well as believing that the problems of the world go well beyond cheap lobsters and uncomfortable particleboard sofas, kept me from giving this book a better rating.
Things are not cheap where it counts, and those things that are cheap are not sustainably so. Chapters 4 to 9 reveal the hidden costs - to skills, wages, the environment, human rights & culture - of cheap.
Let me add another statistic not cited by the author: In 2007, 62% of all bankruptcies were medical ; 75% of these medical debtors had health insurance. Staggering.
You would need half a dozen books or more to do this subject justice (for example, Eric Schlosser's Fast Food Nation represents a fuller treatment of the issues raised in chapter 8, "Cheap Eats"). Thankfully, Ellen Ruppel Shell provides extensive footnotes and references for those wanting to explore, say, the fascinating insights gained from the psychological studies of consumer behaviour in the excellent chapter 3, "Winner Take Nothing".
But is there a solution? How to arrest price's race to the bottom, dragging living wages and the environment with it? Even if the huge economies of the developing world do become bastions of democracy and rule of law, there is still human nature to contend with (again, see chapter 3).
By way of a remedy of sorts, Shell takes her cue from Adam Smith's ideal of "enlightened self interest" , and gives us the closest to a working example - on a large scale - in Wegmans Food Market. The key to company profits seems to be investment in well remunerated and looked after staff, which in turns attracts and keeps customers. Qualities beyond the number on the price tag that support wages and profits. And I love the idea that not all Wegman stores strive to be identical in look and layout.
A more subtle point is made which, again, is worthy of further exposition. In contrast to the local marketplace of Smith's time (but still in existence in local markets such as the example of Haymarket on p. 220) -
"Discounters shroud their offerings, selling virtually identical products as different brands, and B-grade versions of national brands. Or, like IKEA, they hide shoddy construction - and questionable practices - with clever image making and design. The cheaper the goods, it seems, the harder retailers work to keep us from knowing about them, And the more narrowly we focus on price, the easier we are to fool."
I must agree with her on IKEA - on my first and last visit to an IKEA store, a particle board storage shelf snapped in two under gentle pressure from my hand.
Enlightened self interest, in other words, is impossible in a world of commerce where it is difficult to know where a product came from or the conditions under which it was manufactured. Therefore, if consumers cannot buy based on knowledge of product, then price alone becomes the determinate.
An excellent read, even if the ideal marketplace of Smith seems unattainable. Perhaps the user generated revolution of web 2.0 will assist in greater product awareness amongst consumers. Or does the promise of instant gratification via online bargains just compound the problem?
Either way, I hope this book stimulates some serious comment from the economists and consumers alike.
And it is remorselessly American in a very parochial way.
Some may find this book too tedious to read, as both the psychology of consumer shopping and the process of mass manufacturing are explored in great detail. However, if you can process all of the research Shell has included in this work, Cheap provides a clear argument defending its thesis that "Discount Culture" does indeed have a much "Higher Cost" than most consumers ever consider. Shell should be commended for the level of research and the number of interviews Cheap has synthesized into this volume, as well as a good balance of anecdote without attempting to emotionally sway readers with such evidence.
Although not the goal of her work, two very difficult issues should be considered as the reader concludes Cheap. First, globalization is not an infinitely progressive process. Outsourcing low-skilled production to low-wage countries "seems to make some sense." However, "the assumption that America is the land of endless innovation begs a critical question: Can the majority of us be--or do we want to be--constantly creative or inventive? Even if this unlikely prospect were the case, Americans hold no monopoly on entrepreneurial zeal, creativity, or intellectual firepower. . . . Despite the hopeful projections of globalists, the demand for even the most skilled workers is not endless, and the idea that more and more Americans can reinvent themselves into ever more challenging work is a pipe dream" (211-212).
Secondly, the enormous discounters must be held more accountable to the public by regulatory agencies, whether governmental or independent. Better ways to stabilize costs must be instituted, because if low price (and therefore higher profits, either through margin or volume) is the only goal of discounters, the environment, low-wage nations, and even the consumer will all crumble under the weight of global discounters' market influence.
Also the book is ignoring the price mechanism and psychology for online sales and prices. Ellen doesn’t even try to analyze the differences between the traditional buying process and the new different online process. I purchased this book hoping to find this type of analysis. Not only I work in e-commerce, I also believe the psychological mechanism activate by the online shopping and purchasing (e.g. on Amazon) are different from the mechanism governing the traditional retail shopping and purchasing (e.g. Walmart).
Interesting information about the psychology of pricing, the long history of discounting--which goes much farther back than I expected, and of the devastation
Too bad most people don't think about the consequences of their consumption
When I go into a discount chain and see the mountains of chatchy ornaments that American buy and toss so freely, I think about the third world children who manufacture these things who must wonder what kind of beings we must be.