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Updated: May 10, 2010 18:39 IST

Easier to get fooled when the focus is on price

D. Murali
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Our practice of scouring the world for cheap resources and cheap labour is not sustainable, writes Ellen Ruppel Shell in ‘Cheap: The high cost of discount culture’ (www.landmarkonthenet.com).

‘Everyday low prices’ are built on everyday crumby lifestyles, not only for Mexican cloth cutters and Thai shrimp farmers and Chinese toymakers but for all of us, she rues. “There is nothing innovative about building business plans on the backs of an insecure, low-wage workforce, about depleting resources and polluting environments to cut costs, about squeezing producers until they fail or quit or cheat.”

Knowing that our purchases have consequences, we can begin to enact change, the author urges. “We can set our own standard for quality and stick to it. We can demand to know the true costs of what we buy, and refuse to allow them to be externalised. We can enforce sustainability, minimise disposability, and insist on transparency. We can rekindle our acquaintance with craftsmanship…”

Bad bargains

What looks like a bargain can really be just a bad loan, the author cautions. Examples cited in the book begin with how cheap ‘no money down’ mortgages with low introductory interest rates seemed like a good way for more people to get into the housing market, until the ‘teaser’ rates gave way to higher rates, loan holders defaulted, and thousands of homes went on the block.

“Cheap flights are enticing, but delays and cancellations cost us plenty, as do the noxious fumes pluming through the crowded sky. ‘Too cheap to fix’ electronics seem less attractive when their life span only briefly exceeds that of their warranty and their broken innards leak heavy metal into our landfills.”

The author warns consumers of discounters who shroud their offerings, and 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 prices, the easier we are to fool.”

She bemoans the fact that just as bad money drives out good, as per Gresham’s law, and comes to stay, so too have shoddy clothes, unreliable electronics, wobbly furniture, and questionable food become the norm. With good stuff driven out by bad, ‘the market for quality goods shrinks, making the good stuff all the more costly.’

Stretching morality

Cheap undermines us, gives us less control over our lives, and weakens our resolve, laments Ruppel Shell. “It cloaks concerns of ethics, sustainability, and social responsibility in a shroud of unaffordability.” And she finds that, businesses rationalise their behaviour by insisting they are ‘within the law,’ even while stretching morality to the breaking point.

Factors that made low price possible include massive innovations in distribution and information exchange, computer-driven supply chain wizardry, and streamlined transportation systems. But when price is the only distinguishing characteristic among products, competition does not necessarily lead to the innovation of better products or to stronger more highly evolved industries, she argues. “Often it leads where we wish it would not go: to a price war that discourages the very creativity, entrepreneurship, and invention that we revere.”

More dangerously, discounters, armed with enormous power, have set de facto wage and benefit standards, subordinating the manufacturing sector, the author notes. And, manufacturers who innovate get penalised!

When competition is mostly about price, the risky innovation takes a backseat to cost cutting, she explains. “Laying off workers and hiring cheaper ones is one sure way to enhance the bottom line. Another is to scour the world for low-wage workers, especially those in countries with lacklustre enforcement of environmental and workers’ rights regulations.”

The book wraps up with the reassuring message that the Age of Cheap is a passing era. “With even China shuttering its factories and laying off millions of its workers, we have no choice but to find an alternative route to progress,” recommends Ruppel Shell.

Worth a read without waiting for the ‘sale’ season to buy ‘Cheap’!

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