The Economics of Everyday Things - Cashmere (Replay)

Episode Date: December 23, 2024

Once a luxury good, the soft fiber is now everywhere — which has led to a goat boom in Mongolia. Zachary Crockett tugs at the thread. SOURCES:Myagmarjav Serjkhuu, manager of the Mongolian Sustainable Cashmere Platform for the United Nations Development Programme.Carolyn Yim, designer and owner of Ply-Knits. RESOURCES:"Sandstorms and Desertification in Mongolia, an Example of Future Climate Events: A Review," by Jie Han, Han Dai, and Zhaolin Gu (Environmental Chemistry Letters, 2021)."How Sustainable Cashmere Is Reversing Land Degradation in Mongolia," by Mariana Simões (United Nations Development Programme, 2021)."Exploding Demand for Cashmere Wool Is Ruining Mongolia's Grasslands," by Kathleen McLaughlin (Science, 2019)."From H&M to Gucci, Fashion Rethinks Cashmere, Citing Environmental Harm," by Matthew Dalton (The Wall Street Journal, 2019)."2018 Annual Cashmere Market Report," by Marco Spina (The Schneider Group, 2019)."How This Brand Made a Cashmere Sweater for $75 Ethically," by Esha Chhabra (Forbes, 2018)."Pastoral Nomadism in the Forest-Steppe of the Mongolian Altai Under a Changing Economy and a Warming Climate," by D. Lkhagvadorj, M. Hauck, Ch. Dulamsuren, and J. Tsogtbaatar (Journal of Arid Environments, 2013).

Take a trip to the Gobi Desert region of southern Mongolia and you'll see vast expanses of arid land. Endless, it's endless open space. That's Miigmarjav Sertsu, Miiga for short. She spoke to us from Mongolia's capital, Ulaanbaatar. You can see sunset. It's just like you're watching sunset in the ocean. You can see the sand dunes and the camels, birds. You can see something else, too. Goats. Lots and lots of goats. The country is home to

around 27 million of them. They outnumber people eight to one. These goats are critically important to the Mongolian economy and to the apparel industry. That's because once a year, they produce a substantial share of the world's cashmere. When you touch it, it's very soft. Some people say it's like a baby butt. It used to be that you could only find cashmere in high-end clothes, like a $2,000 Loro Piana turtleneck. Today, it's everywhere. Direct-to-consumer companies like Quince and

Everlane sell $60 cashmere sweaters by the truckload. That's good news for the folks in Mongolia who make a living raising goats. Cash Kashmir is a primary income source for herders. It's also an important pillar of the country's economy. But it's come at a cost. For the Freakonomics Radio Network, this is the economics of everyday things. I'm Zachary Crockett. Today, cashmere. If you are a goat in Central Asia,

every winter you grow a second coat of hair underneath your outer coat. It's soft, it's fluffy, and it's around six times finer than human hair. This wool is called cashmere. The softest is on the belly and the little areas under the arms and the chin. Carolyn Yim runs PlyKnits, a boutique knitwear company based in New York and Hong Kong. Her family has been in the textile business for three

generations. I think the reason it's so prized is because it's beyond a functional product. It is a good that is associated with luxury and an elevated sense of style. That association, she says, a lot of the association is with old money cashmere. The cashmere is worn at Ivy Leagues and the cashmere sweaters with cigarette burns into it. And then in the 2000s, there was a lot more democratized cashmere that started to happen. And that's when we really started to see that everyone wanted a cashmere sweater.

These days, around 30 to 40 million pounds of raw cashmere are harvested each year all over the world. In Afghanistan, Tibet, Iran, Australia, and New Zealand. But 90% of the world's supply comes from China and Mongolia. In Mongolia, where Miga lives, herding was once a collectivist enterprise. But when the country's communist system was replaced by a democracy in 1990, the goat herds were privatized, and families flooded into the herding business. Today, tending to cashmere goats is Mongolia's largest profession. We have over three million population and one-third of the population are herders.

Miga manages the Mongolian Sustainable Cashmere Platform for the United Nations. In short, she spends a lot of time working with herders. While goats in neighboring China are raised on farms, Miga says Mongolian herders are nomadic. They migrate across vast distances, sometimes hundreds of miles, in search of food for their goats. They are land connected people. They love their animal and livestock. They also love their nature. Early in the morning, they herd the animals and take them out to the pasture.

They move a lot. They always go seeking for better pasture for their animals. The cashmere is harvested with metal combs every spring and weighed out in grams. That's the standard used for international trade. On average, a goat might produce 250 grams of raw cashmere each year. The price that it fetches is governed by its color

and its quality. But in general, Miga says that one goat might yield around $10 worth of cashmere. That means that it takes a herd of 500 goats to earn Mongolia's median household income of $5,000. Most herders breed new goats to ensure they have a sustainable cashmere business each season. In the springtime, they collect the cashmere. Then when it comes to slaughter season in November or early December, they slaughter the animal and sell the meat to the market.

Mongolia has seen tremendous inflation over the past 30 years. An item that cost the equivalent of a dollar in 1993 costs around $95 today. So even with supplemental income, it's hard to make ends meet. Economic return is not sufficient enough to cover their financial demands. Herder family, for instance, have five children, four of them gone to the school, and the herders have to pay all the expenses in the capital city which is now very expensive. In theory, herders could make more money if they sold their cashmere directly to processing mills. But their options are limited by Mongolia's geography. It's a vast country. You can imagine how much effort needs to be to collect all the raw material.

Traders from China travel through the far reaches of Mongolia on motorbikes, collecting bags of cashmere from herders. These middlemen clean the cashmere and sell it to mills for around $100 per kilogram, more than twice what they paid for it. A portion of this raw cashmere stays in Mongolia where it's knitted into goods by local companies. But 80% of it ends up in China. Miga wishes Mongolians could do more of that work themselves. Mongolia don't fully benefit from the cashmere industry because of this insufficient processing capacity in the country. So how does all this cashmere get turned into sweaters, scarves, mittens, and even underwear?

That's coming up. Once cashmere is collected from herders, it makes its way all over the world. Some higher-end brands like Loro Piana export the material to Italy where it's knitted in local factories. But most Mongolian cashmere ends up in China where full-scale milling operations turn it into yarn. It goes through a process called carding which draws the fibers out into strands. It is like a really really long Santa's beard. It's really nice and fluffy. Carolyn Yim, the third generation knitter,

has visited the factories in China many times. This then is taken into the spinning machine where the hair is twisted in two ways, kind of like a DNA structure that becomes twisted and twisted until it becomes a really long yarn and that is finally then put onto the cone and becomes usable for knitting. By the end of this process, the cashmere is about 50% smaller. So it can take a lot of goats to make a single article of clothing. At the end of the production cycle, each sweater takes about one pound of yarn.

If you're just measuring grams, it's about five or six coats for one sweater. ["The Gifts of the Sun"] Yim's company, Plyknit, uses this yarn to produce all kinds of cashmere goods, cardigans, leggings, shirts, most of which cost a few hundred dollars a piece. But not all cashmere is created equal.

The gold standard is pure white, with strands that are 14 microns wide and 36 millimeters long. And buyers like Yim have to develop a sixth sense for sniffing it out. I think over time, my sensitivity with my hands And buyers like Yim have to develop a sixth sense for sniffing it out. I think over time, my sensitivity with my hands has really grown. It's sort of like being a perfumer with a nose. A really good cashmere sweater will feel peachy or creamy plush,

whereas a bad cashmere sweater is dry, cardboardy, papery, thin. Cashmere goods were once a luxury, produced in small batches and priced out of reach for most consumers. But in recent years, cashmere has entered an era of mass production. A new crop of companies sells 100% cashmere sweaters for well below $100. Supposedly by buying the material directly from herders and cutting out the middleman. But Yim says some brands keep prices down by using less material or by making their sweaters from lower quality fibers. You're taking not just the hair from the belly, you're taking areas that you wouldn't have before to make up for that demand and then using methodology afterwards, such as different ways of bleaching. I think this is happening a lot now, even with high end brands.

The luxury cashmere sweater today is not the same as what it was 20 years ago. ago. Mongolia has responded to this boom in demand by cranking up cashmere production. Since 1990, the country's goat population has exploded from 5 million to 27 million. That's had an impact on the landscape. Goats consume up to 11 percent of their body weight in grass, shrubs, and weeds every day. They eat close to the roots, preventing plants from regrowing. Their sharp hooves damage topsoil. Scientists have found that overgrazing has contributed to the degradation of 70 percent of Mongolia's grasslands. Miga says Mongolian officials have attempted a number of things to combat these issues, including livestock taxes to fund revegetation.

They know that the land is the foundation for everything, their livelihood and their animals. They're not stupid. They are willing to pay that money and they realize the issues. In northern China, measures have been more drastic. Most herding operations have been confined to farms. In recent years, the Chinese government has a very particular approach to how the flocks can live. The goats are in corrals so that they are not roaming around free.

And the region faces an even graver threat, climate change. Most of Mongolia's landscape is made up of dry lands that are prone to becoming deserts. Temperatures are up, rainfall is down, and factories that produce cashmere garments are under pressure to adapt new sustainability standards. Environmental permits can cost hundreds of thousands of dollars. Yim says that in some major production hubs in China, these costs have put up to 50% of small to medium-sized knitwear manufacturers out of business in the last five years. Even the most diligent operations are struggling to comply.

I do not have the hoobers to claim I have 100% sustainability because it's completely impossible. Together, increased demand, overgrazing, and climate change mean that cashmere is getting worse. I'm unable to find the quality that we had 20 years ago. In Inner Mongolia, the cashmere fiber width has been steadily increasing, and that's not a good thing. You can't just increase yield of goat hair so quickly to meet up with demand. These are prickly issues for something as soft as a baby's butt. But Mongolians like Miga are invested in creating a sustainable future for the trade. Because cashmere is more than a material used to make really soft sweaters.

It's a part of the country's identity. This nomadic way of herding practice has been in the country hundreds, hundreds of years. The international demand is going up. The country has to control in terms of impact, environmental impact, social impact, and also economic impact for that commodity. That's lots of challenges. For the economics of everyday things, I'm Zachary Krakat. This episode was produced by Sarah Lilly with help from Lirik Bowditch and mixed by Jeremy Johnston. In Mongolia, they wash it with just shampoo or with detergent and it's just everybody

wears it. The Freakonomics Radio Network, the hidden side of everything. Stitcher.