Note 2 for CSM 401 with Professor Pentecost at UA
Note 2 for CSM 401 with Professor Pentecost at UA
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Notes Chapter 2 The Consumer Movement Let s look now at the history of the Consumer Movement To get us started we need to get a grasp of an important concept What is the item in Figure 1 What is it supposed to do Figure 1 Consumer products aren t always simple basic or visibly functional You were correct if you guessed raisin seeder While most products once were fairly self explanatory many items now are not EARLY ECONOMISTS VIEWS Adam Smith and John Stuart Mill They advocated 4 Ideas 1 Buyer and Seller stand at arm s length that is they face each other each attempting to get the best deal they can 2 The Buyer is as knowledgeable about the goods as the Seller 3 The Buyer could using his own senses judge very well the quality quantity and value 4 The Buyer expects the Seller to puff up the goods put them in their best light even to misrepresent the products somewhat The theory was that given all this if the Buyer is deceived that is just too bad Or if he allows his emotions to rule his reason that is his own fault These early economists said that by allowing economic forces and interests maximum freedom everything will work out fine Let the Buyer Beware was the rule of the day Theory of the Invisible Hand This means that the consumer in pursuing his own best economic interests is promoting the Public Interest even though that is not his intent Smith author of the Wealth of Nations said The buyer is led by an invisible hand to promote an end which was no part of his intention by pursuing his own interests he frequently promotes that of society more effectually than when he really intends to promote it John Stuart Mill excludes consumer protection from the admissible functions of government He said that Consumer Education is the answer ENVIRONMENT BEGINS TO CHANGE 1860 TO 1900 FIRST ERA OF THE CONSUMER MOVEMENT Characteristics of the era before 1890 39There was a small range of available products reliance on shopkeepers to provide goodquality and virtually no protection against price gouging 39It was a time of rapidly growing society and industrialization caused an influx of people into cities Specifically 1 Industrial output increased 5 times 2 Employment increased 5fold 3 Population doubled Imagine if our population doubled what kind of a shock to our society would that be 4 Population living in urban areas went from 20 to 40 5 National network of railroads was completed Railroads made it easier to move goods creating the possibility for the first time of NATIONWIDE markets 6 A few manufacturers recognized the opportunities of a nationwide market and began to advertise in new masscirculation magazines Such rapid and dramatic changes resulted in new and unfamiliar problems 1 Urban poverty 2 Public housing 3 Ghettos 4 Hazardous working conditions 5 Sweat shops 6 Child labor People began to band together to fight these problems In 1872 the first consumer protection law was passed the Mail Fraud Act Local Reform Organizations began to spring up between 1890 and 1900 The first M Consumers League formed in New York and prepared a white list of shops which paid fair wages had reasonable hours and had decent sanitary working conditions A few years later the first National Consumers League formed and we saw the environment begin to change Another problematic issue was food The new nationwide rail network and development of refrigerated cars opened up a whole national market to food processors and meat packers They could now move their products all over the country to sell BUT they had no knowledge of food preservation and safety If that wasn t reason enough for concern preservatives were used excessively formaldehyde was added to canned meats to preserve them and copper was added to canned peas to make them green Yum All of this gave rise to a previously nonexistent need for Pure Food and Drug Laws Bills were repeatedly introduced as early as 1892 but all died Then someone lit a fire under politicians Upton Sinclair s The Jungle was published and was an expose of working conditions in Chicago meat houses The book highlighted the lack of federal inspection To read visit The Jungle Skim chapters 3 and 5 Two independent investigations bore out Sinclair s charges As a result the Federal Meat Inspection Bill was introduced in the Senate and was passed 3 days after it was introduced without a dissenting vote The bill was signed by the President on June 30 l906 and went into effect the next day As a result of Sinclair s book meat sales dropped by half it appeared that European markets might be lost and the packers began to realize that strengthened federal inspection was the only way to save their reputations The momentum created by the meat inspection issue caused the Pure Food and Drug Act to be passed that couldn t get passed earlier It also was signed into law on June 30 1906 and provided for Preventing the manufacture sale or transportation of adulterated misbranded or poisonous foods drugs medicines and liquors and for regulating traffic therein So years of effort scandal and a strong President finally resulted in laws being passed to combat these problems in what we now view as the First Era of the Consumer Movement SECOND ERA The Consumer Movement may be defined 2 ways 1 efforts of individuals and groups to solve consumer problems generally OR 2 refers more particularly to the activities in the 1930 s that has continued through today The consumer environment continued to change Incomes rose gradually in the 1920 s while prices remained relatively stable In 1907 8 of homes had electricity and after the war 50 had it Think of this you know how drastically electricity has affected your life because you know how drastically your life is affected when the power goes off THINK of that dramatic change taking place in the lives of HALF the people in this country during that short period Sales of new and complicated products like cars refrigerators vacuum cleaners and radios were brisk Think of the early economist s view in this new environment Do you think their validity might be changing possibly Should it still just be Let the Buyer Beware and leave it at that People were flooded with advertising from billboards electric signs newspapers magazines and radio Consumers had little or no information to go on except the deluge of wild advertising that they were experiencing Have you ever noticed those old advertisements on the tables a Wendy s and how unbelievable they were That is what advertising was like during this time In 1927 Stuart Chase and FJ Schlink wrote Your Money s Worth It was a Book of the Month Club best seller that attacked advertising and called for scientific testing to provide consumers with needed information Just think how we would feel if all we had to go on when purchasing a product were the claimspromises nothing to back it up There was so much reader response that Schlink formed Consumer s Research Inc in 1929 to perform largescale testing work Other testing laboratories Macy s Sears Good Housekeeping appeared in the late 1920 s that tested its advertisers products for accuracy of claims Then came The Depression There was no money to spend and no demand for consumer goods Wear it out use it up and make it do was the theme of the day By the l930 s there was a need for an UPDATED Pure Food and Drug Act Court decisions and new technology had weakened the old law A New Bill was proposed that would extend the powers of the Food and Drug Administration FDA to advertising and place cosmetics under FDA control The FDA dramatized the need for a new law with an exhibit of dangerous patent medicines unsafe cosmetics and adulterated food The media dubbed the exhibit the Chamber of Horrors In 1935 FDR gave lip service to a new bill but never gave it his full support For more visit Milestones in Food and Drug Law The American Chamber of Horrors by Ruth Lamb was published in 1936 This book put the FDA s case in print and carried it to a larger audience One Million Guinea Pigs by FJ Schlink was written about this time He said that Americans are Guinea Pigs because they offer themselves for experimental testing by purchasing unproven products His book was the most popular consumer book ever written The elixir sulfanilamide tragedy gave new impetus for Congressional action In 1937 a liquid form of a new sulfa wonder drug was introduced on the market As a capsule this drug was safe but not everyone could take it The new liquid form killed 100 people These eyeopeners resulted in a new section being added to the bill which required new drugs be proven safe to the FDA before they could be marketed Other changes had been made to the Bill that gave advertising responsibility to the Federal Trade Commission FI39C Business realized that further opposition to the bill would damage public relations The bill updating the Food and Drug Act of 1906 passed in June 1938 Notice the effect that SCANDAL had on getting Congress to act Businesses concerned about the impact of the consumer movement commissioned the Gallup Poll 1940 Findings showed that 14 polled had read the Guinea Pig books 12 had changed buying habits as a result of what they read 15 had read reports of one of the product rating services Consumer s Research Inc Consumer Reports 12 favored compulsory grade labeling 12 favored stricter advertising laws less than 12 favored the establishment of a new cabinet department to represent consumers All of this added up to show that the consumer movement needed to be respected and was having an impact The Consumers Union was founded in 1936 It did product testing and published results in what is now Consumer Reports Magazine The term muckrakers was coined to describe the press who exposed graft and corruption of business and government in the early 1900 s In the 1940 s World War II diverted attention from the consumer movement By all accounts the 1950s was a quiet decade Consumer Reports circulation grew from 50000 in 1944 to 12 million in I950 However there were occasional flareups In 1957 Vance Packard wrote The Hidden Persuaders which charged that the public was being manipulated by advertisers without knowing it This showed that given the right issues the public was still concerned with consumer issues THIRD ERA 196039S AND EARLY 197039S More consumer protection laws were passed between 1965 and 1975 than 1860 1965 The reason for all this activity was the political climate It was a liberal political environment LB Johnson who was a liberal won decisively over Barry Goldwater a staunch conservative We also elected what could be described as the most Liberal Congress in our history Senate liberals included Hubert Humphrey George McGovern McCarthy Warren Magnuson and Ted Kennedy Do you know these names Classic liberals who believed strongly that government should take a large role in many Issues The environment was particularly ripe for consumer issues There was a growing perception that product quality standards had declined Many consumers complained about car failures and poor automobile warranties New techniques for revealing product hazards developed and we discovered carcinogens in common foods and drugs and smoking s role in lung disease Politicians loved the consumerism issue When President Kennedy delivered his Consumer campaign speech in 1960 the welcome it received was far greater than even he had anticipated Remember the Right to Know the Right to be Safe the Right to Choose and the Right to Be Heard Opinion polls showed broad but not necessarily deep public endorsement of his initiatives those 4 rights In 1966 and 1967 costs of war in Vietnam were straining the economy and the federal budget Politicians saw consumer issues as low cost issues that appealed to voters that is as opposed to poverty programs and the like and for that reason they appealed to the President s agendasetters and other politicians Consumer issues were homey usually simple concepts and had a broad general appeal Everybody wanted the credit for the passing of consumer laws The activity of the 60 s took place with the emergence of five groups that converged at once Many members of the Senate House and Congressional staff were consumer advocates Labor and private notfor profit folks like Ralph Nader took an active role in pursuing consumer interests Aggressive journalists brought many consumer issues to light So it was in this environment that the consumer movement began to pick up momentum again In 1962 Kennedy sent his famous message to Congress outlining the Consumer Bill of Rights He chose Esther Peterson to draft the message She was a strong labor leader and urged legislative action to strengthen Food and Drug laws Again reaction was slow to call for legislation until the news of the thalidomide case reached the public Thalidomide was a drug that caused birth defects in more than 10000 babies around the world Word of the case reached the public in June and legislation to expand the powers of the Food and Drug Administration passed in August There was also a surge of interest in consumer education at about this time Subjects taught in school began to include buymanship techniques money management and usage of consumer credit Meanwhile circulation of Consumer Reports continued to grow In 1964 President L B Johnson created the White House Special Assistant for Consumer Affairs position A very outspoken Esther Peterson was appointed to the position During these years businesses began to hire Consumer Affairs Professionals CAPs to represent both consumers and their employers These professionals were effective in getting businesses to respond favorably to consumers CAPs were appointed to high level positions within Corporations The Society of Consumer Affairs Professionals was formed SOCAP Also formed during this time was the Consumer Federation of America Membership was made up of 200 consumer organizations Much Legislation was passed 1 Truth in Packaging 2 Truth in Lending 3 Poultry Inspection 4 Pipeline Safety 5 Fraudulent Land Sales 6 Hazardous Appliance Legislation According to Time magazine Ralph Nader was almost solely responsible for the passage of some of these There was also the Highway Safety Act of 1966 Again the story was the same Scandal Congressional hearings were held in 1965 on tire and auto safety yet there was not much response Ralph Nader published Unsafe at Any Speed in 1965 In his book he attacked the lack of auto safety standards and he indicated General Motor s Corvair particularly He said that under certain conditions the tires of the Corvair would tuck under causing the driver to lose control GM hired a Washington law firm to look into the matter The lawyer in turn hired a private detective agency to trail Nader on a fishing expedition in hopes of finding something to discredit him Nader charged publicly that he was being harassed by GM GM s activity did cause a reaction where mere publication of the facts about the Corvair did not GM s President was summoned before a Senate Subcommittee and twice apologized for the investigation These events had the effect of making Nader famous OVERNIGHT As a result the Highway Safety Act was passed later that year AND was much stronger than originally proposed A group called Nader s Raiders evolved They were student volunteers who aimed investigate operations of government agencies in Washington Ralph Nader is one of our most dynamic consumer advocates Go to httpwwwnaderordhistorv bollierhtml and read the eight hyperlinked chapters included in exam The 1970 s and 1980 s saw a decline in Consumerism Why There were several reasons for the decline For one there was no spokesperson The economy was a disaster with doubledigit inflation and high unemployment Interest rates were over 20 on home mortgages so few people could buy homes Consumers were becoming overwhelmed with all of the things they had to worry about a general loss of innocence political unrest assassinations etc The public began to realize that too much reliance on regulation didn t always produce the fairest most competitive or most responsive marketplace An evolution away from government interference began People began to develop a belief that consumers should accept some responsibility for themselves During the Reagan years there was a concerted effort to a cut the size of the Federal Government b shift control to local levels of government c reduce some of government s restraints of business deregulation EX airlines trucking and telephone industries Business began to get involved in the political process Though it seems hard to believe now business pretty much stayed out of the political process before the 1970 s However by the 1970 s regulation had gotten the attention of business Business began to feel the impact of the implementation and enforcement of all the new legislation There were very real constraints real paperwork burdens and real costs involved with compliance So companies began to seek to lobby for drafting of legislation that was more probusiness rather than hoping that the consumer issues would go away Business realized that it had to get involved in the political process if this government encroachment were to be resisted Companies began to make political action a high priority In 1972 the Business Roundtable was created It was unique in that it was and is made up of Chief Executive Officers The CEO s did direct lobbying and policy formation themselves The National Federation of Independent Businesses was created about this time with the sole purpose to lobby Congress TODAY39S CONSUMER MOVEMENT Consumers today have better access to information to make informed choices For instance if we want to know about the crash test ratings of an automobile we can visit the National Highway and Traffic Safety Administration NHTSA online However without regulation there wouldn t be a NHTSA Although Eliot Spitzer made strides for the consumer as New York s Attorney General there are thousands of lobbyists at work to promote favorable treatments for their industries Individual ProblemSolving Opportunitiesquot Most retail businesses have liberal return policies if a customer has a problem with a product or even just changes his mind after buying a product on impulse Many businesses will do whatever it takes to have you walk away happy because they know you ll talk about a negative experience and they hope you ll talk about a good one Good customer service and good customer relations is good for business Today s consumer movement is more nonconfrontational than it once was There is a more mature consumer attitude and a more mature business attitude This is a result of lessons learned over the years Students with sellerservice experience what has been your experience as to business approach to customer service or treatment What s the attitude toward service is it part of your training Students as Buyers or Customers do you sense a service or customer orientation The focus on customer care is a direct result of consumer movements of the past and lessons learned from them What seems to make consumer movements successful Economic Conditions If the economy is suffering people are less free with money and are more aware of what and where they are spending Scandals and Crises Examples include Upton Sinclair s The Jungle leading to the Pure Food and Drug Act of 1906 Sulfa Drug Tragedy providing the impetus to strengthen the Food and Drug Act in 1938 The GM investigation of Nader leading to the Highway Safety Act of 1966 Rachel Carson s Silent Spring sparking the environmental movement Charismatic People like John F Kennedy Ester Peterson and Ralph Nader Active Government Organizations For example the FDA plays a vital role to protect the food that comes into the United States Active Private Organizations such as the National Consumer League and American Association for Justice