Unfortunately, I think the lesson from recent history seems to be that outside of highly-regulated industries, customers and businesses will accept terrible quality as long as it's cheap.

Yes, every slack is optimized out of systems. If something has an ounce more quality than would suffice to obtain the same profit, it must be cut out. It's an inefficiency. A quality overhang. If people buy it even if it's crap, then the conclusion is that it has to be crap, else money is left on the table. It's a large scale coordination issue. This gives us a world where everything balances exactly near the border where it just barely works, for just barely enough time.

True but there is a limit, there are still levels of quality

Nah, there is a quality floor that consumers are willing to accept. Once you get below that, where it's actually affecting their lives in a meaningful way, it will self-correct as companies will exploit the new market created for quality products.