Frugal People Will Suffer Least

I recently finished reading Thomas Friedman’s Hot, Flat, and Crowded: Why We Need a Green Revolution and How It Can Empower America. It’s a very good book if you’re interested in the environment, but it’s also a good read if you ever wonder what a “green economy” might look like. He covers a lot of ground, but the part that struck me the most was his argument that in the future we (as in everyone, not just Americans) will have to pay the true cost of the goods we consume instead of the artificially low prices we’ve become accustomed to. And that means that life will get a lot more expensive.

We’ve become accustomed to buying cheap goods that don’t reflect the true costs of their production. The prices we currently pay don’t reflect the true costs of the labor, materials, natural resources, and fuel that go into the products. Not to mention the environmental costs of these goods. The prices we pay don’t begin to compensate for the resource depletion, waste production and disposal, and hazardous materials involved in production. As a result, we have a wide choice of cheap things that are easy to consume, dispose of, and buy again. Friedman argues that, in order to keep consumption at a sustainable level and to encourage responsible manufacturing and disposal processes, we will soon start having to pay the true costs of the items we consume. That’s going to get expensive, fast.

Think about something simple like a DVD. At a quick glance, the disc itself is composed of various plastics, resins, metals, and polycarbonates. Then there are some dyes for the label. The case is made of polypropylene and the artwork and inserts are paper with dyes and inks spread upon them. To make this DVD, the metals have to be extracted from the ground, processed, and made ready for the DVD application. Chemicals have to be mixed into plastics and the plastics have to be molded into cases and readied to become discs. The DVD itself requires a large amount of heat to seal all the layers together. The paper for the inserts is created from trees in a process that requires a tremendous amount of water and energy. The entire manufacturing process uses a lot of resources, energy, and labor. Now think about doing enough of all of that to make millions of one title. Then multiply that by the hundreds of thousands of titles on the market at any given time.

Yet for all the resources and labor required to make this DVD, you only pay around $15 per DVD (less if you shop on the bargain shelves). If you factor in all the resources and labor that are used to produce that DVD, the resource depletion, the cost to replenish the renewable resources, and the costs associated with the disposal or recycling of that DVD, the price should probably be closer to $100 per DVD. Yet we don’t pay that because we don’t currently have to. Manufacturers are allowed to gobble up resources without worrying about replenishing them or paying for the amount they use. They aren’t required to provide for the eventual disposal of the DVD. The manufacturer doesn’t have to pay to replace the resources they use. Heck, in some countries they don’t even have to pay the laborers anything approaching the true cost of their labor. As a result, manufacturers can charge way less for these items than they really cost to produce.

But if the “green economy” takes hold, manufacturers will probably be held accountable for at least some of these costs. They will likely have to pay the real cost of the resources they use and pay something toward renewing some of those resources. They will have to provide for the disposal of the item, either by taking it back for recycling or paying taxes that will go toward municipal waste improvements. They won’t be allowed to ship their waste overseas where it is cheaper to dispose of things. When that happens, they will have no choice but to increase the price of their products to cover their costs. Items that we take for granted as being cheap, such as electronics, DVD’s, CD’s, and appliances will become a lot more expensive. Things that we currently have in every home may become out of reach luxuries for the “average” citizen.

This is disturbing news for some. To tell them that a TV or Blu-Ray player may become unaffordable sends them into a spasm of fear. “What will I do?” they wonder. But remember: It wasn’t that long ago when items such as these were luxuries and only for the well-to-do. Not everyone had a TV or even a car. Most people did their laundry at the laundry mat because not every home had a washer and dryer. Things were just too expensive for everyone to own them.

Frugal people know this. Many frugal people have kept their consumption of cheap goods to a minimum. They may not have been doing it to be “green” or to make a statement about sustainable growth. They may have simply limited their consumption to save money or space in their lives. Regardless of why they have limited their consumption of cheap goods, frugal people will have the least amount of trouble adjusting to a new economy where we have to pay the true cost of our goods.

Frugal people aren’t dependent on a lot of cheap crap in their lives. They limit their gadget purchases to only what they really need, not what’s cool, and they save up the money to purchase those. They may have one TV, not five. They know how to live in a world where every material want cannot be easily satisfied. They can often repair what they already own so they don’t have to buy another. They know how to accomplish things the “old fashioned way” so they aren’t dependent on gadgets and gizmos. They know how to repurpose items to extend their lives. If the cheap crap evaporated tomorrow, chances are they could keep going for a while without a severe impact on their life.

Contrast this with the guy who has five TV’s in his house, is dependent on his GPS to get to work, and has to have a mobile phone so he can text his friends (and look cool with his bluetooth headset stuck to his head). He has to have his iPod on in order to work out and, rather than repair his washer when it breaks, he simply buys another. He also has to buy a new car every two years because he can’t be seen in anything older than that. Take away the cheap goods and this guy will probably have a nervous breakdown.

When we have to start paying the real cost of items, frugal people will suffer less. They know how to save up for big purchases, something that will probably become essential again and that people have forgotten how to do. They’ll be able to extend the lives of the items they already own while saving up for new ones. Since they aren’t dependent on these things for daily life, their lives will be less impacted. Since they know alternative ways to accomplish things, they won’t be the ones standing around scratching their heads at the thought of line drying clothes instead of using a dryer. Frugal people will be the ones wondering what all the fuss is about when people are crying about how expensive things are.

Yes, we’ve become accustomed to cheap goods. It’s become commonplace for people of almost any income level to be able to afford appliances and electronics. We’ve let the cheap crap take over the mundane tasks we used to know how to do like read a map, entertain ourselves, and write letters. We’ve been spoiled and haven’t had to think or do for ourselves for years. But should it have been that way? Probably not. Prosperity is good, but we let things become so cheap and ubiquitous that it’s going to be a hard adjustment when prices rise steeply. A lot of people are going to have to rethink their daily lives and their consumption patterns. What is now commonplace may become a luxury again, making for some uncomfortable times for some. But if you’re a frugal person, you’ll already be ahead of the game and be spared a lot of the pain that others will experience. There are a lot of skills people will need to relearn when the cheap goods are gone, but you already know some of them. You might even forge a career teaching people how to do and think for themselves again.

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13 Responses to Frugal People Will Suffer Least

  1. Merch says:

    Wow. I don’t know where to begin. The price you pay for a DVD or any other item includes the raw materials, the processing of the raw materials into the finished good, fuel and transportation costs, taxes, management, labor, and the case of some companies health care and retirement. If the items are produced in the US, it included the cost of proper disposal of waste.

    The reason things are so cheap is technology that is used to produce the item and economies of scale. To produce 1 DVD is extremely expensive but to produce millions is a lot cheaper.

    You do mention the end life of products and I will agree that companies do not look at the end life and recycle of there products. However, there are companies that do this exclusively. They take items directly from consumers and recycle them for a profit.

    If DVDs went to $100 a piece, it would be temporary. A replacement product would be introduced that would bring the price of movie down to an acceptable level. To assume that all the prices of goods would skyrocket is naive.

  2. eden says:

    “If the items are produced in the US, it included the cost of proper disposal of waste.”

    No, it absolutely does not. The CONSUMER has to pay for someone to take away their trash, and then that trash is either sent to the dump (not sustainable) or to 3rd world countries where the poor sift through the garbage while getting poisoned by the heavy metals.

    “includes the raw materials”
    No it does not. Many countries subsidize raw material extraction (including the US) by leasing government land at extremely low prices ($1 / acre for 100 years), or in many developing countries by taking the land of the poor or minorities.

    Throughout the entire article the author was not arguing that the costs of resources are not reflected in the price of items – but that the TRUE cost of resources are not reflected.

    “A replacement product would be introduced”
    In this scenario (if resource costs were true costs) everything physical would cost more. Your replacement product would be a solely electronic movie file.

  3. Traciatim says:

    Merch, while your first point is true it does have limits. The ‘True Cost’ can be masked greatly. Take the same DVD example:

    1) Complete manufacture in USA. The cost to drill the petroleum to make the plastic casing and the cost to get the metals will be higher as employment, environmental, and transport costs will be higher due to the wages in the USA and regulations. The equipment to make the DVDs and people who run it will cost more, and the disposal fee will have to be paid up front. True cost, about 5 bucks per DVD.

    2) Go somewhere with little to know environmental regulation to get your materials, press your DVD’s using unregulated industry that tosses their garbage in the drinking water of the next town . . . True cost, still 5 bucks, actual cost to company, a dollar, subsidized cost due to lack of caring for consequences of actions . . . 4 bucks per DVD.

    The company can price the DVD cheaper than the original example, and all the peopel will flock to Walmart to get it on sale because it’s been ‘rolled back’. That’s what is being described when ‘true cost’ is mentioned. Sure it’s cheaper to make and sell, but who had to sacrifice to make up the difference in cost?

  4. Mike says:

    I guess it depends on your definition of “true”.

    The real cost is absolutely less than what you pay, otherwise it would not be profitable for a company, corporate or individual to produce and sell the product. The problem is that “green” economies are artificial at best, and an outright scam at worst – think cap & trade. People will not (and should not) pay extra for such artificial concepts as carbon footprints. Let the free market decide what is fair.

  5. Like those above, I disagree with much of the content here. Yet I was drawn to the post because I agree that, whatever happens in the economy, frugal people will suffer least.

  6. TheFrugalCynic says:

    In this economy the frugal people won’t suffer the least, they’ll just be the last to capitulate.

  7. ThiNg says:

    Post #1 was on the money with “economies of scale”. If you have to make one car on your own, the cost is huge, but in mass production the cost becomes less.

    All of the examples in your article (cars, washing machines, etc.) became cheaper once the hit the mainstream market.

    My first 17″ LCD monitor was $1500, my new 24″ was less than $500. Items which are not mass produced are still expensive (you should see how much the hand made watch my father-in-law got me cost!). That doesn’t mean the real cost for all watches should thousands of dollars.

    There is a major logic ‘jump’ in your article. It’s difficult to take that same leap when I read it.

  8. audrey says:

    use, reuse, lend, borrow etc. I for one do NOT buy cd’s dvd’s etc. I use Netflix to watch movies, I download music from the internet etc. I do admit that I am one of those people that uses an iPod to workout and I am dependent on it. Cut me some slack I’ve been working out for 30 years, it doesn’t get easier! Consider me one of the frugal ones though people have been making fun of my efforts to conserve and recycle for years. At least I’m having the last laugh.

  9. Cindy M says:

    I agree with much of what you say and appreciate the article, Jennifer. But go, Audrey. They make fun of me also (I don’t even own a car anymore), but I could care less what anybody says, and it’s great to have that attitude. Who BUYS frickin DVD’s? Good movies are free on the net, check it out. Or new TVs? Please. Sorry all, guess I better find another forum, maybe the dumpster divers? (No, I would probably not eat dumpster food but yeah, have found some great things that way and it’s fun). Anyway, when it comes to any kind of entertainment, I actively search out freebies or that which are nearly so. How much time do I actually have for entertainment, anyway?

  10. Jen says:

    Andrew Bacevich on a past Bill Moyers show on PBS, speaks to this issue. One of the things that keeps the costs cheap is our military around the world. He is from the military, and knows about what which he speaks, so check him out, listen to his interview.
    China is a communist country, and can pay their people what they choose to, as little as they want to.

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  13. Lisa says:

    Hi! This article has a lot of truth to it. My family farmed for several generations & if people had to pay the true cost of food, most would starve. The government uses price supports & artificial price control on everything in USA. We,ve been living in a fairy tale for years and it’s about to end. The farmer receives the same price or in some instances less than 1950’s prices for crops. For instance in the 1970’s tomatoes sold for $5 for 10 pound basket wholesale, still thesame now. Most farm families work two jobs just to keep the farm & not able to do it even then.

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