NOTE TO READERS
xiv
with cheap stuff we may have forgotten we own:
According to the Self-Storage Association, a Virginia-based trade group with more than six thousand members, one in ten United States households rented self-storage units in 2007, up from one in seventeen in 1995. Nearly sixty thousand storage facilities in the U.S. satisfy that demand, annually generating $20.1 billion in revenue.
xiv
key economists have endorsed this view:
Paul Volcker, chairman of the Federal Reserve under Presidents Jimmy Carter and Ronald Reagan and chief economic advisor to President Barack Obama’s political campaign, worked tirelessly to keep prices in check, as did his successor, Alan Greenspan.
INTRODUCTION: GRESHAM’S LAW
1
attractively packaged but inferior in content
: Alan W. Watts,
The Book: On the Taboo Against Knowing Who You Are
(New York: Collier Books, 1996), 75.
2
family spending on basic expenses grew $4,655
: See, for example, Harvard Law Professor Elizabeth Warren’s testimony before the U.S. Congress Joint Economic Committee, “How Much More Can American Families Be Squeezed by Stagnant Wages, Skyrocketing Household Costs, and Falling Home Prices?” July 23, 2008.
2
corporate profits doubled:
See, for example: “American Corporate Profits: A Turn for the Worse,”
The Economist,
September 11, 2008.
3
the world has been turned on its head:
quoted in Chris Farrell,
Deflation: What Happens When Prices Fall
(New York: Harper Collins, 2004), 18.
3
have been trending downward for decades
: Food prices increased sharply in 2007 and 2008, but, adjusting for inflation, remained below 1984 levels. Fuel prices spiked radically, but, adjusted for inflation, were not much higher than they were at the previous peak, in 1981. Of course, by the end of 2008, the price of oil had dropped substantially, and food was not far behind. By way of historical perspective, it is interesting to consider 1918 when the nominal price of gas at the pump was 25 cents, equivalent to $3.52 today, a real price that according to economists was not exceeded until the spring of 2008. At the same time, increased fuel economy actually lowered the average cost of driving a car between 1972 and 2008, although some Americans continued to choose low-mileage vehicles. For specifics on this it is helpful to have a look at Inflation.
data.com
(
http://www.inflationdata.com/inflation/images/charts/Oil/Gasoline__inflation __chart.htm.
3
24 percent less on owning and maintaining a car
: Elizabeth Warren, “The New Economics of the Middle Class: Why Making Ends Meet Has Gotten Harder.” Testimony before the Senate Finance Committee, May 10, 2007.
3
tarnish the reputation of their own brands:
Anne D’Innocenzio, “Retailers Slash Prices, but At What Cost?” Associated Press, September 2, 2008.
4
the central experience of life in the bazaar
: Clifford Geertz, “The Bazaar Economy, Information Search in Peasant Marketing,”
Supplement to the American Economic Review,
May 1978: 28-32. Geertz, an anthropologist, spent decades observing bazaar life in Morocco and Indonesia.
4
sell for more than thirteen times their production price:
See Dana Thomas,
Deluxe: How Luxury Lost Its Luster
(New York: Penguin, 2008) This delicious exposé of the real cost and decline of luxury reveals—among many, many other things, that the average markup of a handbag is ten to twelve times its production cost. A Vuitton bag, however, is marked up as much as thirteen times.
5
in the same terms as he to them:
Clifford Geertz, “Bazaar Economy.”
6
illustrates the problem with a thought experiment:
George A. Akerlof, “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,”
Quarterly Journal of Economics
84, no. 3 (1970): 488-500.
CHAPTER ONE: DISCOUNT NATION
7
or generate even as much power as a horse:
Robert Kanigel,
The One Best Way: Frederick Winslow Taylor and the Enigma of Efficiency
(New York: Viking, 1997), 95-96. Kanigel shared his thoughts on the importance of mass manufacture on price over a drink at the annual meeting of the American Association for the Advancement of Science in Boston.
8
for firepower in the latter half of the eighteenth century:
Merritt Roe Smith
, “
Eli Whitney and the American System of Manufacturing
,”
in Carroll W. Pursell (ed.),
Technology in America: A History of Individuals and Idea.
(Cambridge, Mass.: The MIT Press, 1990.) Professor Smith, historian of technology at the Massachusetts Institute of Technology, is arguably the world’s expert on the colonial munitions trade. He was kind enough to discuss the history of mass manufacturing with me at length.
8
peace of mind if not survival
: See, for example, George C. Neuman, “Hunting Guns in Colonial America,”
American Rifleman,
http://www.nrapublications.org/TAR/Colonial.asp
. Neuman explains that hunting in England in the 1700s was legally restricted to the gentry. Land was scarce and valuable in England, and only landowners were allowed to own guns to prevent commoners from poaching. In the North American colonies, by contrast, land was readily available to all and Neuman wrote that the possession of guns was “universal as hunting with a firearm was a primary means of survival.” Interestingly, this class distinction remains today. In the United Kingdom, hunting is a sport of the elite, while in the United States, hunting is often more strongly associated with the middle and working classes.
8
often with the help of an apprentice
: Readers with an interest in witnessing this process might view the excellent documentary
The Gunsmith of Williamsburg, The Story of a Master Craftsman
, produced by the Colonial Williamsburg Foundation (1969). It is truly remarkable to watch master gunsmith Wallace Gusler fashion a gorgeous flintlock rifle out of iron and brass with what appears to be little more than a hammer, files, and the heat of a forge.
8
what the average person of the time made in a month:
Interview with historian Merit Roe Smith.
8
“both arms and ammunition are much wanted”:
Neil York, “Clandestine Aid and the American Revolutionary War Effort: A Re-Examination,”
Military Affairs
43, no. 1 (February, 1979): 26-30.
8
imported from France were of high quality
: Ibid., p. 29. York writes that France, hoping to benefit from Colonial turmoil, joined with Spain to supply the American army with 21,000 muskets and 100,000 pounds of crucially needed gunpowder in March 1777.
8
arms industry felt pressed to do better:
Joel Mokyr,
The Lever of Riches: Technological Creativity and Economic Progress
(New York: Oxford University Press, 1992).
8
yet another war with England
: The Jay Treaty of 1794 negotiated by Chief Justice John Jay averted war between the United States and Great Britain by settling several previously unresolved issues from the American Revolution.
9
“his title as father of mass production
”: See Edwin A. Battison, “Eli Whitney and the Milling Machine,” in Eugene S. Ferguson
,
ed.,
Bibliography of the History of Technology
(Cambridge, Mass.: Society for the History of Technology and MIT Press, 1968), 299.
9
and its corollary, mass production
: David Hounshell,
From the American System to Mass Production
,
1800-1932
(Baltimore, Md.: The Johns Hopkins University Press, 1985), 28.
9
“much better as it is quicker made
”: Ibid., 28.
9 “
any other pistol of the twenty thousand
”: From Houshell (op cit) as quoted in S.N.D. North and Ralph H. North,
Simeon North, First Official Pistol Maker of the United States: A Memoir
(Concord, N.H., 1913), 81.
10
led to an emphatic boost to the slave trade
: The Eli Whitney legend has come under scrutiny over the past few years, and there is some dispute over the role of his gin in the transformation of the history of the South. Notably, historian Angela Lakwete, author of
Inventing the Cotton Gin: Machine and Myth in Antebellum America
(Baltimore, Md.: The Johns Hopkins University Press, 2003), argues persuasively that the “invention” of the cotton gin was a complex process involving many players that began hundreds of years earlier in India and China, and that they were used in the South prior to Whitney’s invention.” That said, it is widely agreed that the automation of the cotton production process significantly boosted the demand for cheap labor and rejuvenated the waning slave trade.
10
and other “dry goods” was well under way
: David Brion Davis,
In Human Bondage: The Rise and Fall of Slavery in the New World
(New York: Oxford University Press, 2006), 184-86.
11
“quality range for which it was originally designed
”: Edgar Augustus Jerome Johnson et al.,
The Journal of Economic History
(Baltimore, Md.: Economic History Association at Johns Hopkins University, 1954), 367. In this compilation an essay by John Sawyer, “The Social Basis of the American Manufacturing System,” credits this quote to the trade publication
Management Accounting.
12
its first grand department store:
See, for example: Harry E. Resseguie, “Alexander Turney Stewart and the Development of the Department Store, 1823-1876,”
The Business History Review
39, no. 3 (Autumn 1965): 301-22; and LeRoy Ashby,
With Amusement for All
(Lexington: University Press of Kentucky, 2006), 118.
12
“by the improved condition of persons employed”:
John Wanamaker, “The Evolution of Mercantile Business, Corporations and Public Welfare.” Addresses at the Fourth Annual Meeting of the American Academy of Political and Social Science, April 19-20, 1900.
Supplement to the Annals of the American Academy of Political and Social Science
(May 1900), 123-34.
12
the working and middle classes feel rich
: William R. Leach, “Transformations in a Culture of Consumption: Women and Department Stores, 1890-1925.”
The Journal of American History
71, no. 2, (September 1984).
12
when the
Titanic
sank
: “Radio” by David Sarnoff as told to Mary Margaret McBride,
The Saturday Evening Post
, August 7, 1926, 141-42.
12
putting smaller merchants out of business:
As described by Malcolm P. McNair in his essay “John Wanamaker, On the Department Store, 1900,” in Daniel J. Boorstin ed.,
An American Primer
(Chicago: The University of Chicago Press, 1966), 637.
14
those out of favor paid more
: A. T. Stewart, proprietor of a huge dry goods store in New York City, is thought to have instituted one of the first fixed price policies in 1846. Stewart was far more explicit than Wanamaker in his association of fixed prices and cheap labor. Of his salesclerks he once said, “Not one of them has his discretion. They are simply machines working in a system that determines their actions.” Stewart was quoted by Harry E. Resseguie in his article cited above: “Alexander Turney Stewart and the Development of the Department Store, 1823-1876.”
14
lowest possible prices to attract customers
: See Malcolm McNair’s essay on Wanamaker in Daniel Boorstin’s
An American Primer
. Also, for an exhaustive account of Wanamaker’s life and career, see Herbert Erskowitz,
John Wanamaker, Philadelphia Merchant
(Cambridge, Mass.: Da Capo Press, 1998).
15
became the cornerstone of his business
: See Karen-Plunkett Powell,
Remembering Woolworth’s: A Nostalgic History of the World’s First Five and Dime
(New York: St. Martin’s, Griffin, 2001), 28-43.
15
goods had to be continually added
: T. F. Bradshaw, “Superior Methods Created the Early Chain Store,”
Bulletin of the Business Historical Society:
17, no. 2 (April 1943): 35-43.
15
but make a bigger show:
Quoted in T. F. Bradshaw,
“Superior Methods,”
41.
16
Hailed as the “Napoleon of Commerce”:
Alan R. Raucher, “Dime Store Chains: The Making of Organization Men, 1880-1940,”
Business History Review
65 (Spring 1991): 130-63.
16
king of American mass production
: See “A Short Biography of Frank W. Woolworth” in the Woolworths Virtual Museum.
16
our clerks ought to know it
: John K. Winkler,
Five and Ten,
110.
16
as much as $50,000 annually
: Alan R. Raucher, “Dime Store Chains,” 145.
17
were constantly forced to grapple
: Ibid., 138.
17
as well as in their personal lives
: Fred B. Barton, “The Company Point of View,”
Chain Store Age
5 (December 1929): 36-38 ff.
17
Woolworth demanded marble:
Robert A. Jones, “Mr. Woolworth’s Tower: The Skyscraper as Popular Icon,”
The Journal of Popular Culture
7, (1973) no. 2: 408- 24.
17
money on everything you buy from us
: See John E. Jeuck, “Richard Warren Sears Cheapest Supply House on Earth” in Daniel J. Boorstin, ed.,
An American Primer,
552.