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Excerpt From 'Cheap: The High Cost of Discount Culture'

The waning years of the last millennium brought profligate spending in a time of reduced means. There were more tempting outlets for disposable income than ever before, and more payment schemes and forms of credit with which to buy them. President George W. Bush’s stirring call to spend after the fall of the Twin Towers in New York City on 9/11 seemed surreal to those Americans who recalled President Carter’s 1979 “sweater speech,” in which he donned a cardigan and asked Americans to turn down their thermostats to conserve energy for the sake of national prosperity and security. National leaders cranked up mass consumption through tax cuts and other spending stimulants, while taunting countries such as Japan where the culture promoted saving over spending. With the real price of many consumer goods only half of what they were a century ago, Americans worried less about accumulating debt than about the lost opportunity of not buying. Obsessed with “getting ours,” we sometimes failed to notice or acknowledge the real price we paid for all those marvelous bargains.

In a carefully constructed consideration of Wal-Mart’s impact on the retail sector, Arindrajit Dube and his colleagues at the Institute for Research on Labor and Employment at the University of California at Berkeley focused on 1992 to 2000, the years when the chain expanded outside the South and into major metropolitan areas across the nation, growing from 1,800 to 2,500 stores. By the end of the 1990s more than half the counties in the country had at least one Wal-Mart, with three-quarters of the newly built stores located in urban counties. Dube found that the opening of a Wal-Mart store lowered wages and benefits in the surrounding region by up to 1 percent, with grocery store workers losing about 1.5 percent of their income. At a national level, the study found that thanks to Wal-Mart the total earnings of retail workers declined by $4.5 billion, with most of these losses concentrated in metropolitan areas. Dube acknowledged that Wal-Mart made low-priced goods available to these workers and to their neighbors, but pointed out that since wage and benefit savings are not the main part of the cost advantage for the company it could (conceivably) “continue to pass on most of these savings while paying higher wages and benefits.”

Former Wal-Mart CEO Lee Scott did not agree. Wal-Mart, the nation’s largest employer with 1.8 million employees worldwide, is not in the business, he said, of providing secure jobs on which to build a life or necessarily a career. “Some well-meaning critics believe that Wal-Mart stores today, because of our size, should, in fact, play the role that it is believed General Motors played after World War II. And this is to establish this post-world war middle class that the country is so proud of. The facts are that retail does not perform that role in this economy.”

Technology, globalization, and deregulation have made competition a death march. Many companies have had no choice but to reduce costs almost continuously. Since payrolls are the single largest expense of most businesses, jobs, benefits, and wages are the obvious places to cut. This means fewer jobs and even fewer secure, well-paying jobs with benefits, the sort of jobs that Americans once built their lives on and now seem to believe the country can no longer sustain. And there are other places to cut as well: quality, safety, environmental responsibility, and human dignity. As citizens we recognize this “collateral damage,” deplore it, and frequently decry it. But as consumers we habitually downplay and ignore it. We rail against the exploitation of low-paid workers in Asia as we drive 20 minutes to the Big Box to save three bucks on tube socks and a dollar on underpants. We fume over the mistreatment of animals by agribusiness but freak out at an uptick in food prices. We lecture our kids on social responsibility and then buy them toys assembled by destitute child workers on some far flung foreign shore. Maintaining cognitive dissonance is one way to avoid a world of contradictions, and on an individual basis there’s much to be said for this. But somehow the Age of Cheap has raised cognitive dissonance to a societal norm.

From Cheap by Ellen Ruppel Shell. Published by arrangement with the Penguin Press, a member of Penguin Group (USA), Inc. Copyright © Ellen Ruppel Shell, 2009.