People have always been suckers for a bargain, but the pressure to deliver cheap prices has become a key driving force of our consumer economy. The prices of many things, from clothes to household appliances, have consistently fallen in recent decades. More and more of us have been able to buy the things we want and fill our houses with consumer goods, often enriching our lives in the process.
The trouble is, “the affordability of cheap goods and services is an illusion”, says sociologist Michael Carolan. They’re often very expensive – it’s just that the full costs have been externalised and snipped from the price tag. That could be through paying low wages in a faraway country, running down a non-renewable resource, or polluting the atmosphere. The full costs of our cheap stuff will need to be paid. If we aren’t paying, future generations will, or somebody in a poorer country.
It does cost us too, indirectly. Companies offering us cheap prices may be funding those deals by socialising the costs – passing them onto wider society. As I mentioned last month, if a company pays wages that are so low that their employees have to claim benefits, aren’t they are essentially using a taxpayer subsidy to keep prices low? We’re paying less on the ticket price of an item, but topping up that price through our taxes instead.
What’s more, all those cheap prices offer a hollow form of happiness. The economic model that gives us cheap prices with the one hand takes away things we value with the other. Supermarkets offer cheap food, but depress wages and open to a net loss of local jobs. Affordable motoring brings freedom to travel, but erodes community and destabilizes the climate. It’s also a system that creates bigger rewards for a small section of society. “Cheap has become a substitute for equality of income” says Carolan. “Cheaponomics creates a false sense of hope, which makes large income inequalities tolerable.”
Instead of pursuing low prices at all costs, Carolan suggests we focus on ‘affordability’. That’s in the broader and older sense of the word: “Just as the sun affords plants the energy to grow, we ought to want an economic and social system that affords people and nations the capabilities to develop and enhance their overall well-being.” Drawing on the work of Amartya Sen, affordability is about enabling, about capabilities and holistic wellbeing rather than the shallow freedoms of consumer choice.
That doesn’t mean higher prices, and the author wards off that obvious criticism early on and repeats the point often. To attempt to price in those damaging environmental or social practices implies that they can continue, if they can be priced at all. A much more fruitful approach is to forget about ‘more’ or ‘less’ consumption, or more or less government, and talk about ‘different’. Carolan is interesting in collaborative consumption and the circular economy, two concepts that will be familiar to regular readers. He talks about the sharing economy, peer to peer networks, and access rather than ownership. He’s skeptical about GDP growth as our yardstick for progress, and suggests there are real benefits to a shorter work week. Again, familiar themes on the blog here.
It’s a wide ranging book, and Carolan has a real eye for the killer fact, extrapolating from case studies to wider issues. As a university professor and speaker, he has taught and lectured on this material extensively. He’s had a lot of arguments about it all, refining and clarifying his thoughts into a coherent and robust message.
That said, there are places where his enthusiasm for his theory gets the better of him, leading to overstatements and sweeping generalisations. “’Value added = ‘costs socialized’” he writes, “that’s an equation you will not find in any economics or business textbook.” Well no, because it’s clearly untrue. Likewise when he compares the recent history of the car industry and the computer industry and pours cold water on the IT revolution: “I am not convinced Silicon Valley really has anything over Detroit other than perhaps having had greater success at socialising costs”. Really? Somebody had better update the Steve Jobs Wikipedia page.
Cost socialisation is a reality and Carolan’s is a useful perspective. He unpacks an underlying and overlooked dynamic of the consumer economy, and brings together social and environmental concerns in some new ways. But I’m not convinced that Cheaponomics holds as an over-arching theory of consumerism in the way the book suggests.
The Earthbound Report 
It was some time in 2008, as the economic crisis hit us, that I began to curate all the theories for improving capitalism. One was described as Conscious Capitalism and it has created something of a following here and in the US.
A leading advocate is Dr Raj Sisoda, who spoke last month at the Conscious Capitalism on the purpose of business, which as it turns out , is the same thing argued 18 years ago,
http://www.p-ced.com/1/node/288
Im last months conversation about profit and wages I mentioned the term predistrbution, Ed Milband engaged a new guru last week as Polly Toynbee reports:
“Axelrod is well-tuned to Miliband’s thinking and the way it started out with a strong intellectual framework; as Obama warns, predatory capitalism seizes too many commanding heights against the interests of the people. Responsible capitalism means companies paying fair taxes and fair wages: investing in the future, not warping reward towards the top few. ”
it should be obvious that this is not Milband’s thinking
From your reviews I still think that the main problem with this books is to focus on socialised costs but not the socialised benefits. Supermarkets don’t just offer cheap food but convenience, breadth and quality. In allowing shoppers (mostly women) to do a weeks shop in 1 hour rather than having to go from shop to shop several times a week they are actually a feature in women’s emancipation. I can make a similar case with the motor car.
If you only look at one side of any equation you will get the wrong answer.
Maybe, but there are two things to bear in mind. First, everyone already shops at supermarkets and drives cars, so a book extolling the virtues of them is kind of pointless. We all understand the benefits, have considered the options and gone for the convenience. Is there anything to say there that we don’t already know?
Second, the book is about externalities, and the freedom and mobility of a car is entirely priced in. That’s what we’re paying for. Same with supermarkets. We’re paying for the convenience, and we bear that in mind in making our decision about where to shop. Carolan is interested in all the things that we don’t consider in making our choices.
If you write a book just looking at the negatives, without discussing the positives then that can lead the reader to erroneous conclusions like thinking that we should stop new supermarkets and go back to small shops.
Given Carolan’s clearly weak grasp of economics he is also going to getting a lot of externalities wrong (like the low wages in a far away country is a benefit given the alternative was no wages for them). Or arguing for higher wages and at the same time wanting lots more jobs in little shops (which can’t pay higher wages because the productivity can’t be higher).
There’s nobody in the world thinking “a supermarket has just opened down the road. I wish there was a book telling me what’s so good about them, so that I could make an informed choice about whether I shop there.”
Same goes for cars, or television, or any other aspect of the status quo. It’s the things we don’t see and don’t discuss that need to be highlighted.
Odd because it does seem to need to be pointed out here a lot.
STOP EXTENDING THOSE HUGE TAX BREAKS The Debt will climb from 75% of GDP to 99% by 2040 if we continue to extend them. Would you believe GE has had one since before WWII? The cost of Extenders is about 50 Billion. We need action such as increasing the Minimum Wage to at least $10 per hour. Unfortunately, people earning that little mnimum wage are not the only ones struggling for a living. Workers in the so called Middle Class are having trouble paying their bills and putting somthing aside for retirement as the wealthiest Americans reap most of the gains from the productivity of workers. Everyone needs a chance to prosper as we did WWII-1980. We taxed wealth and income to pay off debt and middle class bought homes, educated children and had health care coverage. Let us get back to building a prosperous Middle Class. Clarence swinney-author-Lifeaholic– work for a Life not just a Living. My 4 criteria for a good lifeâHealth-Family-Work-Finances