[Consider] The Perfect Price

We are often gripped by the obsession that we must buy more cheaply. Sometimes we even feel satisfied simply because something was cheap, even when it was not urgently needed at all.That remains true even when not buying it at all would actually be more profitable. When income stays the same, getting essential goods a little cheaper can create the feeling that one's income has effectively gone up.That is why some people even argue that large discount stores help ease or compensate for income inequality.

According to Perfect Price, as of 2003 Americans spent 33% less on clothing than their parents' generation, 52% less on home appliances, and 18% less on groceries. What is more striking is that the savings from buying cheap consumer goods still were not enough to offset price increases in nondurable goods and services. Long-term housing payments rose by 76%, health insurance by 74%, and taxes by 25%. Childcare costs, which were almost negligible in the 1970s, also rose sharply.

In the 1970s, even when only one parent worked, about half of household income went to fixed costs. Thirty years later, even with dual incomes, most households spend three quarters of their income on fixed costs. Put differently, once middle-class families buy the essentials, they have less money left over for things like T-shirts and lettuce than families did in the past. For low-wage households, the situation is even worse.

Low wages create a vicious cycle and exploit workers throughout the supply chain. Low-wage workers become low-income consumers. Stores arise to satisfy them, and those stores are filled with goods they can barely afford. It is a brutal and terrible strategy.In the end, one group of workers consumes another while corporate management sits back and watches the slaughter.And we, too, can be consumed at any time.

Globalization may benefit us as consumers, but it is clearly a loss to us as citizens and workers.As efficient corporations succeed through cutting-edge technology and low-wage labor, whether someone lives in the American Midwest, Germany's Ruhr Valley, Latin America, or Eastern Europe,ordinary middle-class workers and employers alike lose their footing. This is also why middle-class income growth fails to keep pace with productivity growth in the United States.

The Korean saying “you get what you pay for” captures this dilemma precisely.We often imagine that companies can cut profit and lower prices, but in reality those lower prices are frequently achieved by reducing quality or cutting workers' wages. It feels good in the short term to buy the same product more cheaply, but relentless lowest-price competition worsens labor conditions and quality of life for working people. It can also lead us to spend even more money on cheap products that do not last.

Spinach provides only 30 calories for a dollar. That makes spinach an extremely expensive food. Lettuce, cucumbers, and tomatoes are no exception, and strawberries even less so. Yet for one dollar you can get a thousand calories of pizza or twelve hundred calories of Oreo cookies. M&M's, which supply three thousand calories for a dollar, can seem absurdly cheap. But some scientists warn that because of these cheap foods, the next generation in America may become the first generation to die younger than their parents.

If someone begins selling watered-down milk cheaply, the shopkeeper selling real milk at a fair price loses out. As more people forget what real milk tastes like and seek cheaper milk instead, the honest shopkeeper closes the store.Just as bad money drives out good money, bad milk drives out good milk again and again.We are becoming increasingly accustomed to products that are cheap but poor in quality, like watered-down milk.

The more consumers focus only on price, the more likely they are to be deceived.Today, poor-quality clothes, unreliable electronics, shaky furniture, and suspicious food are becoming standard. We may spend less money than we once did on excellent products, but that does not mean we are buying cheaply in any real sense. As bad products drive good ones out, the market for excellent products shrinks and those products become even more expensive.

The ideology of “always the lowest price” rests on a diminished way of life. It pushes not only garment workers in Mexico, shrimp-farm workers in Thailand, and toy-factory workers in China, but all of us, toward that diminished life. Building business plans on the exploitation of unstable low-wage labor, exhausting resources and destroying the environment in order to cut costs,and demanding such extreme cost reduction that producers must cheat in order to avoid bankruptcy is not innovation.

The book does not offer a clean solution to price competition either. Instead, it ends by saying that once we understand what such competition produces, change becomes possible. We can set our own standards of quality and keep them, demand that companies disclose the true cost behind what we buy, and resist the externalization of those costs onto others.

We can strongly insist on sustainability, minimize the use of disposables, and call for transparency. We can revive craftsmanship again. Once we are no longer slaves to cheapness, we can choose freely what we really want. As individuals and as a society, we can pay attention to what truly matters. It was never cheap in the past, and it will not become cheap in the future either.