Review by Loyd Eskildson

"America has been transformed by its relentless fixation on low price," says Shell in her overstated introduction. Results include blighted landscape, escalating debt, stagnating incomes, and a host of other socioeconomic ills. Problem is that humans have preferred cheap (assuming serviceable) from Day One, and America did quite well doing so, until about 1980.

What's changed? Free Trade, China, NAFTA, and the WTO. American Free Trade proponents say that outsourcing dirty, labor-intensive manufacturing jobs is good so we can focus on what we do best - innovation. Shell points out that not everyone can be an innovator, and that Asians are working their way up into that area as well. However, she fails to also point out that manufacturing is not all mindless, labor-intensive work - manufacturing expertise provides a leg up on product and material design (for manufacturability) and process engineering. Thus, Asian TV CRT-tube makers easily moved into new technologies of plasma, LCD, and now LED displays. Overall, the U.S. now has a negative trade balance in high-technology items.

Shell also runs through the basic Adam Smith/David Ricardo rationale for Free Trade, but fails to note that their theory involved but a few select items with comparative advantage - not a situation involving general comparative advantage almost across the board. Nor did Shell bring up Smith's caution about Free Trade excesses increasing a nation's vulnerability - eg. being shut out of a vital skill (eg. ship-building).

True, much of what appears to be cheap is illusionary because externalities are ignored - eg. pollution caused in the product's manufacture (the cost of gasoline ignores substantial pollution and global warming, degradation of our balance of payments, and added military costs), or "slave labor" conditions endured by the producers. (The latter point is debatable since those working do so voluntarily - eg. it is superior to not working.)

Far too much of Cheap is taken up with a bland history of early merchandisers, and makes too much of pricing psychology. (The latter is well addressed through information available through Consumer Reports, and patronizing retailers with a reputation for integrity, willingness to accept returns, and low prices.) The overall result is pages of pointless meandering.

Cheap: The High Cost of Discount Culture (Penguin Group/ Jul 2009) by Ellen Ruppel Shell

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