28. The Wastemakers

0:00Chapter 28 The Wastemakers People have long suspected that a basic business practice is to purposely manufacture products which are inferior. Businessmen, it is assumed, do not want to turn out high-quality, long-lasting products. Instead, they manufacture shoddy products with built-in or planned obsolescence. When these products wear out, they must be replaced. Thus, manufacturers stay in business and prosper. This idea, always with us, even if somewhat below the surface, received an unneeded but widely publicized shot in the arm several years ago with the publication of Vance Packard's book, Wastemakers.

0:53The theory of built-in obsolescence is fallacious, and with the advent of the ecology movement and the neo-Malthusian zero-population growth adherence, it is more important than ever to lay the fallacy to rest. According to the overpopulationists, we have, or are soon going to have, too many people in relation to the earth's resources. In the view of the environmentalists, we are, that is, the free market system is, presently wasting the resources we have. In the view of still others, built-in obsolescence is a tragic, totally unnecessary component of this waste.

1:38Taken together, these groups pose an intellectual, moral and even physical threat to a healthy and sane economy. It is important to begin this critique by noting a truism. Either it costs more to build a product in the proper way so that it does not wear out before its time, or it does not. A product is shoddy because the manufacturer instructs the workers to turn out inferior merchandise or because it is cheaper to make it that way. A true example of built-in obsolescence is the case where no cost-saving is gained by making an inferior product.

2:25It is as if a time bomb were placed in an otherwise sound piece of merchandise. The consumer does not know it, but the object is scheduled to self-destruct. This practice clearly is wasteful. In economic parlance, society is forgoing higher-quality goods which have no alternative uses. Such behavior, however, will not take place in a private enterprise market economy because it is not survival-oriented. Businessmen who engage in planned obsolescence of this sort will decrease their profits, increase their losses, and eventually go bankrupt. Some customers will surely stop buying from a firm which sells inferior quality merchandise at standard prices, and patronize other firms which sell standard quality merchandise at the same standard prices.

3:24The firm in question will lose customers without any compensation in the form of lower costs, and the other firms will gain the customers lost by the waste-making company. But the fear which many consumers have is not that one businessman will manufacture products with built-in obsolescence, but that all manufacturers will. In that case, it is supposed, the consumer would be trapped. What would the consequences be if all the manufacturers in an industry agreed, via a cartel arrangement, to turn out low-quality products in order to increase replacement sales? It seems clear that every manufacturer who was a party to the agreement would be powerfully tempted to raise the quality of the goods he was making.

4:20In other words, to cheat on the agreement. Because if all the others were turning out products of the same poor quality as they agreed to do, and he made products which were only slightly better, he would gain customers and increase his profits. Given the profit motive, which was the incentive for the cartel, the members are not likely to honor the agreement. Second, there will be great temptations for businessmen outside the cartel agreement to enter the industry. By turning out products even slightly better than those turned out by the cartel manufacturers, they will attract customers and profits.

5:05Paradoxically, the forces tending to break up the cartel would become stronger as the cartel became more successful. For the stronger the cartel, the greater the decrease in the quality of the product. The lower the quality, the easier it would become to attract competitors' customers. Even a slight increase in quality would accomplish this. Advertising also hastens the process of breaking up cartels which try to restrict quality. In fact, advertising tends to prevent their formation in the first place. Advertising builds up brand names with attached goodwill. The brand name stands for a certain level of quality. If a firm allows the quality of its product to deteriorate, it loses the goodwill it has spent millions attaining. Independent rating agencies like Consumers Union also tend to prevent cartels from forming and to break them up if they do occur. By By keeping strict tabs on the quality of merchandise, such rating agencies keep the public apprised of even slight deteriorations of quality.

6:24Finally, even if all members maintain the agreement and no outsiders step in, the restriction on quality is still more likely to fail than to succeed, for it is impossible for all manufacturers is to restrict quality to exactly the same degree. The ones who restrict quality least will inevitably gain better reputations, more customers and increased profits. The market will continue to be a testing ground, weeding out companies which produce inferior goods. Failing the test means bankruptcy. Passing the test means survival. It seems clear then that in a free market, cartels cannot be maintained.

7:15But they can be maintained and built in obsolescence with them if the government steps in. For example, when the government sets up guild-like restrictions on entry into an industry, cartels are encouraged because competition is discouraged. Thus the interests of those already in the field are protected. Whatever agreements they may have made with one another can be maintained. If they have agreed as a matter of policy to restrict the quality of production, that policy has a chance to succeed. The effects of government participation can be seen in many fields. for Medicine. The government, at the behest of the American Medical Association, has succeeded in banning the use of acupuncture. Acupuncture practitioners threatened the positions of licensed doctors, and the AMA, which functions as a cartel, exerted great pressure against them. This was, of course, in line with its general policy of keeping doctors' salaries is high, regardless of the quality of service. In the same way, psychologists and psychiatrists, with the help of the government, harass practitioners who are in competition with them. They are

8:39seeking to ban all those, encounter group leaders, etc., whom they themselves have not licensed to practice. The government has also, at times, prevented the operation of the internal Federal forces which tend to break up cartels. The railroad cartel is a case in point. Member companies of the railroad cartel agreed to cut back on the quantity of service in order to force prices up. But as could have been predicted, with higher prices there were fewer passengers. Each railroad began to try to attract the customers of the other railroads by cutting A third way in which the government contributes to the problem of built-in obsolescence is to reduce the cost of waste-making cartels.

9:28This would, of course, have destroyed the cartel. As it happened, the price-cutting took the form of price rebates. But instead of allowing this practice to continue and thus ruin the waste-making cartel, the government prohibited railroad rebates, and the railroad industry has not recovered yet. built in obsolescence is by propping up companies which, because of the low quality of the goods they produce, cannot survive the competition of the market. Many of the subsidies that the government makes available to businessmen serve only to support businesses which are failing because they have been unable to serve their customers. Let us now consider the second alternative, the case where it costs more money to increase the quality of the product.

10:22Here the analysis is just the opposite. This kind of planned obsolescence occurs on the unhampered market every day, but it is by no means wasteful or senseless. It is part and parcel of the choice of quality offered to consumers. Consider the following hypothetical list of the cost of automobile tires and the life expectancy of each tire. Tire brand A costs $10 and its average longevity is 1 year. Tire brand B costs $50 and has an average longevity of 2 years. Tire Brand C costs $150 and has an average longevity of 5 years. When purchasing tires, the consumer is given a choice between higher quality and higher priced tires, or lower quality and lower priced tires. Of course, the $10 tire is not expected to last as long as the $150 tire.

11:31It was made in such a way that it will wear out sooner. This might be termed built-in obsolescence. But where is the waste? There is none. The manufacturers of cheap tires are not taking advantage of a helpless consumer market. They are not trapping people into buying low-quality goods. They are manufacturing what people want. If some manufacturers of low-quality tires were convinced by the ecologists that their products were wasteful and stopped producing them, the price of the low-quality tires still available would simply rise, because the demand would continue to exist while the supply decreased.

12:17This would in turn set up irresistible pressures for manufacturers to get back into, or enter The lowly paper plate can serve to further illustrate the point that built-in obsolescence is not wasteful when low-quality products are cheaper to make than high-quality products. Who would ever think of blaming paper-plate manufacturers for built-in obsolescence? Yet there is the same quality-price combination of choices in plates as in the tires. One can buy, at increasing prices, paper plates, plastic plates of varying quality, ceramic and clay-baked plates, on and up through plates of the finest quality china. It is indeed It is strange that people blame built-in obsolescence for breakdowns in their cars and not for the rapid deterioration of their paper napkins.

13:33But in both cases there is higher quality merchandise available at higher prices. The choice is the consumers. There is no more sense in complaining that low quality cars break down than there is But isn't low quality in and of itself wasteful because it uses up our resources? Even if built-in obsolescence is not a problem in paper plates, aren't paper plates themselves wasteful because they use up wood?

14:26One problem with this way of looking at the matter is that it assumes that lower quality products use up more resources than higher quality products. To be sure, the lower the quality of the product, the more likely it is that replacement and repair will be necessary. But on the other hand, higher quality products use up more resources at the outset. The issue is really one between a high initial outlay and small subsequent outlays for a high quality product, versus a low initial outlay and greater subsequent outlays, repairs, replacements for low quality products. In a free market, the consumers decide between these alternatives.

15:17Products are made which are least wasteful in the view of the consumers. If consumers decide that given rapid changes in fashion, it is wasteful to buy clothing that lasts for five years or more, manufacturers will find it more profitable to produce less durable, less expensive clothing. If the market called for it, manufacturers would offer clothing made out of paper. Similarly, if consumers wanted cars that would last longer, producers would offer such cars. They would offer them at a higher price if consumers wanted these with all the present frills and comforts. If the consumers preferred, the manufacturers would offer them at the same price as lower For example, if wood were to fall into short supply, its price would be forced up.

16:29As a consequence, consumers would buy fewer products made of wood. Producers would tend to substitute other materials for wood wherever possible. Cabinets, furniture, boats, etc. would be made of other, less expensive materials. New, possibly synthetic materials would be developed. Greater care would be taken to recycle the suddenly more valuable used wood. Old newsprint, for example, would be chemically treated and reused with greater efforts. The increased price of wood would provide incentives for entrepreneurs to plant more seedlings and take care of forests more intensively.

17:15In short, given a dearth of one or even several resources, a free economy automatically adjusts. As long as its adjustment mechanism, the price system, is not interfered with, other cheaper and more plentiful resources will be substituted, and those in short supply will be better preserved. But what would happen, it may be asked, if not just one or several, but all resources were in short supply? What would happen if we depleted all our resources at the same time? This is the stuff from which science fiction is made, so we will have to indulge in a bit of science fiction ourselves to deal with it.

18:01But we will stop short of assuming that everything magically vanishes from the face of the earth. In that eventuality, we would have nothing helpful to suggest. In order to make sense of the view, we will not assume that all resources suddenly disappear, For that the earth suddenly shrinks and shrivels away, but that economic resources get used up and turn into ashes, waste and dust. For example, we will assume not that coal disappears entirely, but that it gets used up and replaced by ashes, dust, pollutants and chemical derivatives of the burning process. We will also assume that all other resources get used up in the same sense, that is, that they become useless to us.

18:55To deal with this horror, two things must be borne in mind. First, there is good reason to believe that new sources of energy will be discovered or invented as present sources are depleted. There are no reasons to assume that this will not be the case. The human race has passed from the Stone Age to the Bronze Age to the Iron Age. When coal sources were depleted, oil was used. After oil, there will be other sources of energy, possibly nuclear. To ignore this technological phenomenon would be to hopelessly distort the issue. In the second place, we must realize that the direct and indirect source of all energy is the sun. It is the source of every type of energy presently used and it will be the source of whatever types of energy our technology may produce in the future. But the sun itself will not last forever. When it goes, humanity goes, unless we are technologically advanced enough to either re-energize the sun or relocate on another planet with a younger sun. Whether

20:11Whether we will have a technology competent to accomplish this when the time comes depends on choices we are making now. If we exploit the resources of the earth, use them, find replacements for them and learn from such exploitation, our technology will continue to develop. If we do not, and are motivated by fear and have no faith in our ability to meet challenges, We will hoard the resources we have at present and we will not grow any further. We will be waiting, ostrich-like, for the sun to go out and the world to end, having foregone the advanced technology that only increased population and exploitation of the resources of the earth makes possible.