by SS&SS

Executive Summary

The first half of In Cheap We Trust details the nation’s history of saving versus spending, beginning with America’s first colonists and ending with today’s society of consumers. The second half of Weber’s book ties America’s current economic problems into its effects on the environment, giving specific examples of what some people are doing to make a difference. The last chapter of the book investigates the psychology of being cheap.

The novel begins with a look into the lives of the Puritans. The Puritans were expected to uphold values of modesty and frugality, but the New World presented so much potential prosperity that it made self-denial difficult. They were constantly conflicted between their faith and the temptation to enjoy their wealth. Benjamin Franklin is often seen as the virtue of thrift personified. He believed that Americans should live within their means, saving for the future to ensure their independence and happiness. Other examples of famous savers and thrift advocates include Hetty Green, Thomas Eddy, the transcendentalists Henry David Thoreau and Ralph Waldo Emerson, Booker T. Washington, and John Henry Thiry.

American housewives of the nineteenth century underwent a gradual transformation from producing everything their families needed to buying more of what was needed. This change required that women learn how to spend and save. Lydia Maria Child, Sarah Josepha Hale, and Catherine and Harriet Beecher Stowe all wrote household manuals that guided women in their new lives as consumers.

The Jews and Chinese are the two groups in America most labeled as being thrifty and cheap. The author explains that even though these stereotypes have been around for centuries, they were only strengthened when the Jews and Chinese immigrated to America.  Native-born Americans felt threatened by their success, fearing that their commercial skills and unusually low standards of living would lead to a loss of their own opportunities. As untrue as some of these stereotypes are, the Jews and Chinese did use their good understanding of money to become the most successful ethnic groups in the country. And just like other Americans, they’ve also strived for wealth and extravagance in addition to mere freedom and independence. 

During World War I and World War II, the country’s leaders called on Americans to support their soldiers by saving. They knew that the increase in production and wages during wartime would tempt American consumers to spend. To finance the war and prevent Americans from using the raw materials needed for supplies, the federal government issued war bonds. This campaign for thrift kept Americans watching their finances and resulted in a stable economy. Unfortunately, this stability did not hold between the wars. After World War I, Americans became so optimistic about the Roaring Twenties economy that when the stock market plunged on Black Thursday, no one was prepared. Nothing would really lift the country out of the Depression until World War II. By the time the second war ended, economists realized they didn’t need to worry about another post-war depression. Americans had earned more, saved more, and were more eager than ever to spend. And when experts like John Maynard Keynes theorized that consumption drives a good economy, the American value system completely changed. It was no longer wise to save; a true patriot should go shopping. The country would take this pro-consumption view all the way to the new millennium, and few would question it until the 2001-2002 recession.

Economists have since said that consumption is overstated as the engine of economic growth. Saving is also key because investment spurs production, wage growth, and jobs. Oddly enough, the nation’s savings rate continues to decline while the reasons to save are only growing. With Social Security expected to decrease and medical costs expected to increase drastically in the future, the younger generations will need savings to support themselves during retirement. But Americans continue to spend. Weber presents several reasons why this may be the case, the primary ones being that money is too accessible and that opportunities are too great.

On the whole, Americans don’t realize how much the country’s consumer-driven society is directly harming the environment. Lauren Weber envisions an “eco-cheap” economy, an economy in which people consume less, reducing resource use and waste. In a truly “green” world, consumers take advantage of thrift stores and garage sales as a way to save valuable resources. However, there are some Americans who have discovered that “low-cost, low-impact living” saves money, helps the environment, and even leads to a higher quality of life. The author has actually met some of these people and shares their stories in her novel.

After studying the work of Sigmund Freud and some of today’s top behavioral economists, Lauren Weber tries to address her own question of why some people seem innately cheap. Once she finds a close enough answer, she then provides several reasons why being a “tightwad” is not necessarily a bad thing.  Finally, Weber poses one last question: can adults learn to be frugal or is cheapness a trait that’s developed at a young age? Many writers are saying that thriftiness is completely learnable, and they’re offering tips to get people started.  

The 10 Concrete Things Practicing Managers Should Take from this Book

Are your employees charging non-business related expenses on the company card?

Have a fire-and-brimstone preacher condemn them for their materialistic ways. 

Trying to run a cost-efficient business?

Hang a scary portrait of Benjamin Franklin in the break-room.

Just because a potential hire is Jewish or Asian does not necessarily mean they will be excellent company accountants or financiers.

There’s just a high probability they’ll be excellent company accountants or financiers.

Employees still not watching costs closely enough?

Tell them there’s a war going on.

Consider going back to a traditional pension.

Nobody wants to work until the day they die.

Trying to encourage employees to keep their own personal savings?

Start a system that allows employees to have a fraction of their paychecks directly deposited into savings.

A cost-conscious business is often an eco-conscious business.

Unless you’re cutting corners in the wrong places.

Find a perfectly edible half-eaten tuna sandwich in the break room trash?

That’s just plain wasteful. Dive right in and get it.

If a potential employee admits to being cheap, there’s a chance they’re also highly organized and driven.

They might even be difficult, obstinate, and anal-retentive.

In this country, there is always at least one thing that will motivate any employee to do their job.

Whether they spend or save, Americans love money.

Full Summary of In Cheap We Trust

Ch. 1: “The Crowd Approved the Doctrine, and Immediately Practiced the Contrary”

Lauren Weber opens her first chapter with the story of how Benjamin Franklin came to write his 1758 edition of Poor Richard’s Almanack. In its preface, she notices one particular parable: a crowd of shoppers are waiting to get into a market when “Father Abraham” approaches them to give them useful advice. He asks them to pay attention to their “outgoes” as well as their incomes by saving money for the future. His final bit of advice is that everyone heed his advice, at which point “the crowd approved the doctrine, and immediately practiced the contrary, for the vendue opened, and they began to buy extravagantly.” The preface, also known as The Way to Wealth, became tremendously popular in America because everyone believed it was good, practical advice. Weber adds that Father Abraham’s best advice may have been the part about acting on it. The next portion of the chapter details the first Americans’ battles with spending. Puritanism, led by John Calvin, held deeply rooted values of modesty and frugality, which often conflicted with the Puritans’ temptation to prosper in the New World. In fact, Calvin’s followers found it almost impossible not to prosper, accumulating wealth that they were not allowed to enjoy.  While preachers like Cotton Mather “bemoaned the turn to materialism”, many were growing tired of humble living and self-denial. Even the Quakers found these same virtues difficult to uphold in America. The last bit of the chapter is dedicated to the life of Benjamin Franklin, son of a candle-maker and one of seventeen children. Ben Franklin began his printing career apprenticing for his uncle’s paper, sometimes publishing some of his own writings under a different name. Soon he was running his own printing firm in Philadelphia, producing his own almanacs and newspapers. Franklin also developed an avid interest in science and civic affairs. Once he retired, living well off of his income, “he distinguished himself as a philosopher, statesman, and diplomat.”  Throughout his life, Benjamin Franklin had always been concerned with America’s growing international trade economy, fearing that American spending on European products would steer savings away from investments at home and ultimately put their freedom at risk.  Franklin felt that the development of an American middle-class would be what separated America from tyrannical European monarchies because it would mean fewer households in the extreme upper and lower classes. Unfortunately, though many Americans liked Franklin, they enjoyed international trade because it meant cheaper, higher-quality products.   Franklin finally found the opportunity to bring Americans back to frugality when King George and the British Parliament passed the Townshend Duties, which taxed a lot of their exports. Americans responded with boycotts, and newspapers urged everyone to save their money by making their own products. To Franklin’s relief, this led to a period of American frugality: all of the much-loved European luxuries were given up. But Franklin hadn’t yet learned that Americans were never meant to be under-consumers, for as soon as the Revolutionary years ended, they began spending again. Benjamin Franklin died at age 84 in 1790.

Ch. 2: A Nation of Savers

The Guiness Book of Records credits Hetty Green with being the “World’s Greatest Miser” because she lived her life well below her means. She became interested in finance as a child, opening her own savings account when she was just eight years old. Green achieved millionaire status by multiplying her inheritance through “steel-willed dealings in railroads, real estate, and finance”. Thomas Eddy, another important figured highlighted in this chapter, was a wealthy New York insurance broker who tried to reform America’s lower classes by opening the Bank for Savings in the City of New York, one of the very first savings banks in the country. Eddy believed that his bank would not only teach the poor to save but also offer “long-lasting moral improvement”. Banks like Eddy’s were well-intentioned, but they may have been incorrectly based on the assumption that poverty was caused by a lack of personal responsibility, as opposed to a capitalist market.  While poverty emerged as a growing problem in post-revolution America, many held that same conservative theory that people were just “idle and ill of spirit”. The poor simply needed to be taught how to be thrifty. By 1820, there were ten savings banks with .1 million in funds. By 1899, there were just under a thousand in the country, with over billion. Thanks to the completion of the Erie Canal in 1825, America then entered a “market revolution” that gave people all over the country access to the international economy. Consumers now had choices. Companies merged, big factories replaced small businesses, employment went up, and incomes grew. This era marked the beginning of the ideology that America was a place of opportunity and upward mobility. Americans still felt that frugality led to success, but they were no longer satisfied with mere “happiness and independence” as Franklin had been. They wanted to get rich. Due to this recent turn toward extreme materialism, the “transcendentalists” Ralph Waldo Emerson and Henry David Thoreau wrote about self-discipline and simple living. They believed that if one led a more simple life, he or she would have more time and energy to devote to intellectual exertion and public service. The transcendentalists directed their writings toward the upper-classes, encouraging them to question their own spending. Still, most Americans only admired the transcendentalist philosophy; they didn’t actually act on it. Booker T. Washington became a guiding light for the freed slaves after the Civil War. He knew they would only be prosperous if they put their money in savings. As the principal of the Tuskegee Normal and Industrial Institute in Alabama, Washington taught his students that hard work, frugality, and honesty would lead to their prosperity. The post-Civil War American economy was booming, but the creation of a “leisure class” and consumption-driven society had not killed thrift as a virtue yet. John Henry Thiry, a Belgian immigrant and New York City book dealer, first noticed the severity of American materialism in his sons, who he felt were growing up to be pleasure-seeking spenders. Thiry believed that American children were no longer being educated on how to save their money, and so he began the Thiry System, a school savings bank movement in which children were taught how to save and deposit their spare change into a bank account. Thiry believed that his system would not only teach them about savings, but hopefully save them from the “moral dangers” and corruptions of society. Simon William Strauss held a similar belief that he could help cure the country by encouraging savings. Strauss began the American Society for Thrift in 1914.

Ch. 3: “What Use Can a Woman Have for Arithmetic?”

Whether they were pioneers, farmwives, or homesteaders, eighteenth and nineteenth century American women worked hard to produce everything for their families. Once these families started moving into cities, they joined the working class, increasing their incomes and their standards of living. At this point women didn’t have to make everything themselves; they could now buy some of it. So in a sense, women went from producing the nation’s products to consuming them. But many wondered if women were equipped to make financial decisions and handle the household’s money. Samuel Smiles, author of Thrift, said “Some may say, ‘What use can a woman have for arithmetic?’ But when men marry, they soon find this out.” Because urban women did not know how to spend, some rural women who grew up with thrift wrote housekeeping manuals and cookbooks to help guide women in their new lives as consumers. Lydia Maria Child, an abolitionist and writer, wrote the The American Frugal Housewife, a best-selling cookbook meant for those “not ashamed of economy.” Child’s book offered housewives all kinds of tips and tricks for saving money. Alongside these recipes and suggestions, Child also inserted some of her own negative feelings toward spending beyond one’s means. A critic of Child, Sarah Josepha Hale also promoted thrift, but more as a virtue than as a necessity. The Good Housekeeper was similar to Child’s, but it was instead aimed more toward middle and upper class women. Catherine Beecher and Harriet Beecher Stowe, sisters and both famous authors, co-wrote The American Woman’s Home, another home instruction manual.Their writing focused more on regaining the woman’s self-respect, since the industrial revolution had brought on a general attitude that women were no longer as useful as they once were. The Beechers presented housework as a “domestic science” that required some of the same skills (like efficiency and organization) that men used in their places of work. Catherine Beecher continued this work by opening the Hartford Female Seminary in Connecticut, a place where girls could be formally educated on cooking, cleaning, and on what later became the field of home economics. The emergence of “Home Ec” as a field led to the belief that science could solve anything. Theories like Frederick Taylor’s “scientific management” and inventions like the assembly line were soon developed. By the late nineteenth and early twentieth century, women handled the household money more than ever, finding that mass production had truly made buying less expensive than producing. A growing advertising industry recognized that women ran the family budget, and so they stepped in to bring women and companies’ products together. As retailers made their goods more and more accessible, buying decisions became more difficult. It was then that home economics altered into the study of making informed purchases and training women to be educated consumers.

Ch. 4: Cheap Jews and Thrifty Chinese

Of the many ethnic and national groups that have been labeled thrifty, cheap, or money-obsessed, the Jews and Chinese remain the most stereotyped. Psychologists have said that stereotypes like these usually stem from the insecurity and fear of those creating them. It is possible that this is what happened because one can easily see how these stereotypes have been strengthened by fear. When the Jews first started immigrating to America after 1825, Americans welcomed their good understanding of money and commercial skills. But it wasn’t too long before their “shrewdness” became a bad thing. Native-born Americans were threatened by the Jews ability to handle money, fearing that their success would result in the loss of their own property and job opportunities. Americans felt that Jews were “money-grubbers”, often depicted in racist dime novels as overtly poor but secretly rich. This prejudice showed that Americans were genuinely afraid of the Jews having too much control in the economy. By about 1877, many of the 250,000 German Jews that lived in America had succeeded in founding or expanding a business. As it became more obvious that this success resulted from honest hard work, Americans began labeling them as “vulgar and ostentatious” social-climbers that were trying to invade on high-society American culture.  It seemed like the Jews couldn’t win: they were miserly, but then they were ostentatious. “These elements couldn’t quite be reconciled; instead, they remained muddled together.” The Chinese posed a similar threat. During the Gold Rush, many of the Chinese immigrated to California with the intention of making a fortune and returning home.  When some of the Chinese decided to settle in America instead, businesses more than tolerated them because they would work for very few wages. But when the economy hit a downturn in 1857, the Chinese were to blame. Americans accused the Chinese of taking their jobs because they required such a low standard of living and worked for nothing. They were also accused of bringing crime and disease into the country. Many Americans worried that their altogether different culture would “undermine American traditions” and basically kill the American dream.  Much to their relief, Congress finally passed the Chinese Exclusion Act of 1882, excluding only Chinese laborers. Soon after the Act was passed, the “Jews of the East” who had already settled in America went from being known as cheap laborers to shrewd businessmen. They had gone from poor and degraded to shrewd and opportunistic, which were again contradictory stereotypes. Today these stereotypes still exist, probably because the Jews and Chinese have established themselves as the most successful ethnic groups in the country. However, the motive behind their “cheapness” was never any different from other Americans. They too wanted more than just freedom and independence: they wanted to get rich. And like other Americans, they have swung from frugality to extravagance and back.

Ch. 5: “Use It Up, Wear It Out, Make It Do, or Do Without”

Before the United States officially entered World War I on April 6, 1917, Frank Vanderlip was made chairman of the War Savings Committee. Vanderlip called on all Americans to start saving, offering war bonds, thrift stamps, and savings certificates as a way to raise money for war supplies and keep Americans from using up the raw materials needed to make those supplies. George Creel, head of the Committee for Public Information, attempted to persuade every American to buy these bonds through his illustrated advertisements and Four Minute Men. Teachers were asked to get their students involved, and National Thrift Week was created to teach children how to use their savings accounts. Herbert Hoover, the country’s wartime director, had the Food Administration begin Wheatless Mondays and Meatless Tuesdays. American housewives were asked to sign pledge cards, promising to carry out the Food Administration’s “war against waste” in their households. The National War Garden Commission promoted growing backyard vegetable gardens to save money on food. Vanderlip hoped that all of his campaigning would fund the war and bring about a new tradition of frugality. But many began to worry about the post-war economy, fearing that a sudden drop in demand for army supplies and a country of thriftier consumers would lead to a recession. Fortunately, it never took much to convince Americans to spend, and they spent. As the country moved into the Roaring Twenties, the increased production capacity of the war years released a wide variety of innovations and consumer goods that completely changed everyday life for Americans, giving them more free time than ever before. “Movies, jazz clubs, country drives, and vacations to Miami rose up to fill the leisure time made possible by labor-saving inventions.” And savings deposits and thrift were steadily declining in popularity. Everyone became more optimistic about their personal finances, businesses, and the overall economy. Consumers wanted to invest in the stock market and spend their profits on guilty pleasures. Unfortunately, good economic times could not and did not last forever. On October 24th 1929, the stock market plunged. By the following month, the industrials index had been cut in half. The unemployment rate went up to 25%. Consumer spending came to a halt. Businesses were unable to pay their bank loans, and 40% of the nation’s banks collapsed. Americans were suddenly forced to return to lives of self-denial. In hindsight, many realized that a lack of economic policies may have been the primary problem. Until then, economists had believed that recessions were “natural and self-correcting.” John Maynard Keynes, a British polymath, believed that “demand was the engine of growth.”  Keynes claimed that consumer spending was the only way companies would continue to hire workers and increase production. This was taking a completely different view from what economists had thought before: that only savings made business investment possible. The idea that saving was actually bad for the economy was deemed the “paradox of thrift”, the paradox of course being that thrift was a private virtue but a public vice. In 1932, Americans elected the Democrat Franklin Delano Roosevelt. Under his presidency, Roosevelt passed the New Deal, which created government programs designed to employ Americans. But Keynes’ economic theory and FDR’s New Deal is not what finally lifted the country out of the Great Depression. After the Japanese bombed Pearl Harbor and America finally joined World War II, employment quickly shot up with production demand. Americans had money to spend and were eager to spend it. Roosevelt knew that the only way he could get Americans to save for the war was by mandatory rationing, so he created the War Production Board to limit access to certain resources. Posters and pamphlets all over the country read “Use it up, wear it out, make it do, or do without.” War bonds were used once again. Both economists and Keynes agreed that during wartime, consumers needed to save and let government spending pick up the slack. When many Americans followed suit and saved for the war, leaders and economists again worried that all the saving would cause another post-war depression. But Americans had changed: consumption had replaced thrift as a virtue, and spending was officially equated with patriotism.

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Biography

David C. Wyld (dwyld.kwu@gmail.com) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/. He also serves as the Director of the Reverse Auction Research Center (http://reverseauctionresearch.blogspot.com/), a hub of research and news in the expanding world of competitive bidding. Dr. Wyld also maintains compilations of works he has helped his students to turn into editorially-reviewed publications at the following sites:

Management Concepts (http://toptenmanagement.blogspot.com/)

Book Reviews (http://wyld-about-books.blogspot.com/) and

Travel and International Foods (http://wyld-about-food.blogspot.com/).                

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