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,