Dialogue: Ellen Ruppel Shell on Our Obsession With Cheap

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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

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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