The Price of a Bargain: The Quest for Cheap and the Death of Globalization
Stay up to date with the latest headlines via email.
Adapted from The Price of a Bargain: The Quest for Cheap and the Death of Globalization (Palgrave Macmillan, 2009)
They emerged from the darkness and gathered like pilgrims, lining up beneath floodlights in the parking lot. Well before midnight, the first shoppers had already settled into chairs and under blankets for the long, cold vigil that was being staged outside nearly every major discount outlet across America.
But only one mall would be remembered in the years to come. By 1 a.m., hundreds had gathered in front of the Wal-Mart at Long Island’s Green Acres Mall. All were there with a singular purpose. They had come for $9 DVDs and $5 Hannah Montana dolls that Wal-Mart had advertised in local flyers; others wanted the $25 microwaves and, most of all, 42-inch LCD televisions that had been marked down to $598. Everyone had a game plan for the store’s 5 a.m. opening, because when big-box stores open on the first Friday after American Thanksgiving, shopping becomes a competitive sport. Above the crowd of shoppers, in five-foot-high letters, was the promise emblazoned on nearly every Wal-Mart in the world: Satisfaction Guaranteed. As in previous years, most retailers opened for only a brief period during the early morning and offered only limited supplies of aggressively discounted products, so shoppers had come to expect lineups. This morning was different. As Naked Augustine recounted, when she arrived at Green Acres Mall at 2 a.m., the line was already two thou-sand people long. Having studied Wal-Mart’s flyer, she was keen on the Hot Wheels Barbie Jeep advertised at more than 50 percent off. As she and a friend discussed shopping strategy, there was a violent surge from behind. “It got scary out of nowhere,” says Augustine. “The crowd in the back just pushed.” Someone grabbed her pocketbook off her shoulder, ripping her coat open. Others were punched and pushed to the ground; scuffles broke out.
Above the growing melee, someone had posted a handwritten sign: Blitz Line Starts Here. As the rowdy crowd counted down to five o’clock, the fights and pushing continued. Some shoppers, already injured, left the scene. There were broken arms, bruises, and head injuries. Inside, the eight security guards assigned to the front door began to worry. On that morning of November 28, 2008, bargain-hungry crowds were staring down guards and doormen across America. Gunshots were fired at a Toys “R” Us store in Palm Desert, California, and two people were killed. Reports of fighting, damaged property, and vandalism filtered through the news. “They’re more aggressive,” one seasoned Wal-Mart shopper told the New York Times. “I’ve never seen anybody fight like this. This is crazy.” Facing a potentially bottomless recession, record numbers of shoppers turned out at ungodly early hours to save a few dollars on Christmas toys for their kids, stock up on necessities, or score a luxury television or stereo before things got worse. In the end, an estimated 172 million people – just over half of North America’s total population – would go shopping that Black Friday weekend.
If people had any chance of maintaining their standard of living and enjoying the consumer riches they had become accustomed to during the holiday season, they would need bargains – and lots of them. Retailers did not disappoint. With offers of up to 70 percent off – virtually giving products away in a calculated effort to bring in traffic – Black Friday 2008 marked the very pinnacle of discounting, one of the greatest consumer payoffs of all time.
“Five, four, three, two, one!” Beneath the blue and white Wal-Mart sign at Green Acres, the entrance doors opened a crack. The crowd surged forward with a force that knocked one of the doors off its hinges. One security guard used it as a shield against the torrent of people that streamed into the store. The door crumpled, its glass smashed, and people and workers began to fall inside Wal-Mart’s foyer as more than two thousand manic shoppers rushed in. There were screams and panic as people poured over several fallen shoppers, security guards, and broken glass.
Eyewitnesses in the crowd would later recall that security guard Jdimytai Damour, thirty-four, was one of the first ones trampled to the floor. The temp worker had been recruited for door duty on Black Friday, along with several other workers who were employed by a service contractor that Wal-Mart had outsourced. Damour had already been working at the store for about a week in maintenance; like most others on duty that morning, he had no training in security or crowd control. He was built like a linebacker – six-foot-five, 270 pounds – but when the doors opened, he was quickly overrun after attempting to push people back. He had been protecting a young woman, Leana Lockley, who had also fallen. “I was screaming that I was pregnant, I am sure he heard that. . . . He was trying to block the people from pushing me down to the ground and trampling me,” the nursing student recounted. “Mr. Damour was to the right of me, he was on his knees. I could look at him eye to eye, and he was trying to push them back, and the crowd pushed him down, and he fell on top of me.”
Inside, shoppers guarded the televisions; others swarmed the toy section. Damour died on the concrete floor between two vending machines, just inside Wal-Mart’s entrance and only a few feet from where the greeters usually stand. While a small crowd had gathered around the horrible scene, many continued to shop. The store itself did not close until well after the paramedics had given up their attempts to revive Damour and police had begun to investigate the circumstances of his death. Nassau Police later described it as “utter chaos” and estimated that Damour had been “literally stepped on by dozens, if not a hundred, people.” Damour’s co-workers stood and said a prayer for him.
For better and for worse, ours is the age of the bargaineers – the engineers of bargains – whose factories extend from rice paddies to suburban basements everywhere. Each year we are drawn to their doors by the millions. And if it’s not Wal-Mart that reels us in, then it’s its big-box brethren – Costco, Home Depot, Best Buy, IKEA, Tesco – or smaller fish like the local dollar store. There are never single, isolated bargains. Most of us stalk value on a serial basis, sometimes in full contravention of common sense. Row upon row, aisle upon aisle, this realm of affordability, selection, and discount is a dominant force in today’s world. By 2008 Wal-Mart’s $405 billion in annual revenue surpassed the gross domestic product of Saudi Arabia, underlining the degree to which affordable consumerism has come to dominate global trade.
It’s all part of a global shopping marathon that helped turn the world’s developed nations into consumer economies. By the time Wal-Mart became the world’s largest company in 2002, consumer spending comprised roughly 70 percent of all employment and economic activity within developed nations. Economists call this the service economy, and it is anchored largely by economic activity in finance, technology, and retail and wholesale trade, as well as all the other non-manufacturing business in media, entertainment, airlines, hotels, and restaurants. Personal savings were all but eliminated in the process, and by 2006 the average American household spent more than it earned – the lowest savings rate in seventy-three years, equaled only during the Great Depression, when nearly one in four adults were unemployed. By 2009, America’s personal savings rate had barely budged at 3.6 per cent, reflecting a deeply over-spent economy that was having trouble sustaining recovery, while China’s stayed high at 38 per cent, reflecting its status as an emerging world power.
Here’s the dangerous truth. Western economies are now as dependent on consumer spending as they are reliant on crude oil. If either shoppers or crude stopped moving the economy along, the result is the same: big trouble, sudden crisis.
Some are now even predicting a third depression, a period of economic failure deeper and more troubling than anything anyone has seen since the 1930s. “Unemployment — especially long-term unemployment — remains at levels that would have been considered catastrophic not long ago, and shows no sign of coming down rapidly,” wrote economist Paul Krugman in June 2010. And it has everything to do with the reality of millions of troubled households, and major governments who have become massively overspent and can no longer easily maintain the equilibrium of economies driven by consumption.
How did this happen? Unlike the Great Depression, the erosion of household fortunes and the massive accumulation of personal debt weren’t merely a symptom of economic crisis but an integral part of growth itself. In this economy, one dominated by retailers, financial services, and offshore manufacture, the overextension of shoppers fuelled broad-based prosperity – not just in America but around the world. Leveraged on inflated housing prices and generous credit card limits, this unprecedented bonanza of consumer liquidity hit like a gusher of oil. As shipping traffic and trade deficits boomed, American retail spending increased 43 percent per capita between 1992 introduction and 2005. Other Western nations followed suit with service-dominated economies that long ago eclipsed traditional industry and agriculture – including Canada, which saw a 50 percent increase in retail sales between 1994 and 2007. Americans haven’t been the only ones spending their way to prosperity: during the early 2000s, countries such as Italy, Britain, Canada, and France actually outpaced the United States in growth of consumer debt.
The shift from production to consumption during the late twentieth century represents a transformation in consumerism, trade, and society not seen in several generations. Where Henry Ford changed history with the invention of the assembly line in 1913 the quest for cheap reworked everything from global commerce to local economies in order to squeeze out untapped resources and savings.
The global financial crisis of 2008 was the first large-scale acknowledgement that unsustainable consumer debt lies at the core of Western economies. And with empty malls and bankrupt retailers piling up at the end of the millennium’s first decade, it’s clear that, in an age of climate change and energy anxiety, consumers themselves are a diminishing resource. After they posted the weakest holiday sales in more than forty years, big-box stalwarts such as Linens ’n Things and Circuit City were brought down by bankruptcies in 2008 and double-digit sales declines and profit losses continued to erode businesses and governments worldwide. By the end of 2008, the wave of retail store closures across the United States had reached 6,100, according to the International Council of Shopping Centers, with a fifth of all enclosed malls already failing. Only Wal-Mart, and a few other discounters and dollar-store chains, managed improved growth as conditions deteriorated.
The thronging crowds on Black Friday 2009 didn’t save the economy, not because too few returned to keep shopping – in fact, 2009’s Black Friday saw an impressive 192 million return to stores and websites – but everyone was buying less, on average, according to the National Retail Federation. By 2010, store closures had stabilized but consumer spending paused in April 2010 as conditions became more difficult, and consumer confidence sagged. Nevertheless, America’s trade imbalance grew, as shoppers demanded deals from their favorite big box stores, which meant that America was becoming even more dependent on globalization than ever before. For example: outgoing empty shipping containers at the Port of Los Angeles – the most literal representation of America’s trade imbalance with China -- increased an amazing 57 per cent between 2008 and 2009, with stable growth in empty outgoing containers into 2010. “In an economy like this one, every retailer wants to be a discounter,” said Tracy Mullin, of the National Retail Federation.
Yet economies that cannot create value within their own economies inevitably run into trouble; global discounting as pioneered by Wal-Mart is one of value destruction mechanisms that is eroding the stability of our status quo; oil dependence is another; China’s withering commitment to subsidizing our economy with cheap labor is yet another. All this combined with a global financial system prone to crisis does not bode well for today’s leading nations. “Both the United States and Europe are well on their way toward Japan-style deflationary traps,” warns Krugman.
Krugman, like many others, advocates that there is only one way to avoid greater economic crisis: further public spending to restart the economy, despite billions already spent in the wake of the 2008 economic crisis salvaging national and international banking systems. Thing is, America’s GDP to debt ratio is already nearly 100 per cent, marking it a debtor nation on a massive scale. Having splurged on things like bank bailouts and wars over the last decade, America may be inerasably short on resources to address the jobless recovery that inspires people like Krugman to predict a looming depression. America’s estimated $1.1 trillion deficit in 2010 was deemed a “national security threat” by the Brookings Institute in June 2010, yet America cannot afford to ignore unemployment further.
This is the paradox: further massive deficits could, in fact, affect currency and America’s ability to engineer its own solutions, yet America can hardly afford to ignore the structural unemployment that is pushing millions of people out of the economy and out of their homes. In no small way, this is how America will likely lose its status and standard of living in the 21st century.
It’s more than just big-box anarchy on Black Friday, although that fateful day in 2008 marked a turning point. After the wild-eyed hordes had hauled off their Samsung TVs, after the garbage, blood, and glass were cleaned up, and after all the recrimination and blame for the senseless death of Jdimytai Damour had passed, certain facts remained.
First, the golden age of affordable consumerism was short and poignant in its brilliance. We will very likely never shop this hard again.
And second, our whole system of cheap, from shipping to consumer credit, is leveraged in ways we are only just beginning to understand – and broken in ways that may not be easily fixed.