Nowadays the word “shoddy” means something that is cheap and poorly made and liable to come apart. The origins of the word date back to the 19^th century. “Shoddy” (a noun) was a type of fabric made by grinding up old woolen rags and mixing them with fresh wool. (“Mungo” was similar but of somewhat higher quality.) The shredded stuff was re-spun and re-woven into new material. The process was invented in England in 1813. Rag sorters picked through and sorted dirty, grimy rags according to quality and color.  The grinding process created enormous amounts of dust.

Shoddy made clothing much less expensive. But some manufacturers cheated their customers by supplying super-shoddy, er shoddy. During the American Civil War there was a huge demand for woolen cloth for uniforms. Suppliers out to make a quick buck supplied shoddy shoddy that was of such poor quality, soldiers’ uniforms fell apart after a few wearings.

sources: 

http://www.maggieblanck.com/Land/Shoddy.html

http://www.archive.org/stream/technologyquart05techgoog#page/n99/mode/1up

photos:

Top: Tim Green from Bradford (Shoddy & Mungo) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Bottom: Brady National Photographic Art Gallery (Washington, D.C.) (1858 – ?), Photographer (NARA record: 1135962)