What Capitalism Truly Costs

From the point of the view of the public, we do not see all of the issues that come along with getting a product for a cheap price. We are actually extremely excited about a “bargain” or “steal” for a good deal. When in reality, it is a steal. It is stealing from not only the people involved in the labor used to make the product that you bought, but also from the environment in general. The major culprit to this negative feedback loop affecting the Earth is capitalism. Humans in this world are so concerned with the prices of everything and saving the money they get rather than putting it back into the economy or truly paying for the products that they purchase. There is no such thing as a good deal, people are just suffering the consequences in other places. People need to care about the externalized costs associated with production because of the effects that they have on people and the environment.

Moreover, one reason that people need to care about the externalized costs of their products is because of the effect that they can have on people in other areas. For example, in this reading from class, there was a story about how a woman named Rosa Moreno lost both of her hands while she was on the job and the machine used to cut metal fell on top of both of her hands and no one could get it off. Then, to make her situation even worse, the corporation offered her such a small amount of money that she would not be able to provide for her family. It is because of the world that we currently live in that they were so consumed with the success of themselves and the profit that they were making to even provide this woman with the money they she deserved after the accident that was most definitely not her fault. Furthermore, as mentioned in this article from class, someone was contemplating all of the externalized costs of a single radio and finally reached how much people are affected. There are so many parts to the production of technology and the people working with the machines were faced with the costs of increased rates of cancer and asthma as well as the loss of clean air in the area where they both live and work. These costs affect the whole lives of these people just for us to have cheap radios.

Another point that is worth noting is why people should care about these costs. There is now information about it out now and people are beginning to see the facts of these costs; however, they also need to know why it not only affects those people directly from the costs but also themselves in the long run. This company put out an article that discusses how they calculate the true costs of the foods they sell and they also have tabs of information that show how by doing this they are helping so many people across the globe. What they are doing is quite the opposite from the average citizen. This society is so consumed with having the best and the newest item that people do not seem to realize the effect that getting rid of technology and appliances before you need has on the environment. The image above is from a landfill full of cars that people have gotten rid of. If today’s society was not so concerned with the newest item then these landfills would not fill up nearly as fast. The negative effects of electronic waste are so awful and need to be slowed down if we want to be able to preserve precious land like parks and national forests. Just because people in certain areas and of certain socioeconomic status have the privilege of buying the newest phone when it comes out or that they can get the best new car when the model comes out does not mean that this is the best thing for the environment and people need to realize that when they make the choices that they do.

Another factor for people to consider is how these externalized costs of production are affecting the surrounding environment. The food production industry is one of the largest and also one of the most harmful and wasteful. This article about the true costs of food discusses all of the issues associated with the food production industry and gives people the facts on how our food is actually more expensive than it is being sold for in the local supermarkets. She pointed out that $20 million goes to subsidies for this industry and additional tax money is needed because of the harsh effects it leaves. This production causes the need for cleaning polluted drinking water, dead zones in the oceans and infertile soil as just the top three issues along with other general mess and disrupted land.

Finally, the effects that externalized costs of production have on both the people that work in the area of production and the environment of not only the surrounding area but in general are finally getting out to the public. It is a small step in a good direction but for people to move from just knowing that there is an issue to doing something about it will take some more education and hopefully just a little bit of time. As a society, we all need to care about the effect on the Earth because we all live here. There is no magical divide for some people to not have to deal with the issues of the environment and once everyone starts to see that then they might make some small changes to their lifestyles.

 

The True Cost of Goods

It’s not too hard to realize that the world is driven by the profit motive, the never ending human want to get more.  This is due in part to Capitalism, the economic system that drives profit maximizing down our throats. Capitalism is an economic system characterized by the private ownership of production, distribution, and the exchange of goods.  It exists as a worldwide system, making global capitalism a vital part to many economies around the world. Over time this has become a problem, as the externalized costs of global capitalism take their toll on our world. Externalized costs are the true cost of a good to society.  These costs can be both positive and negative, but tend to have a negative impact on our world. As global capitalism has taken over the world, increased profits have become the negative external costs of capitalism and are taking a toll on the environment around us.

Externalized costs exist as hidden costs of the goods we use everyday.  These are the costs not shown in that dollar value on the pricetag, they are the costs to society.  They don’t only cause harm to human health, but also harm wildlife, the environment, and social organizations.  While society has become much better about talking about these costs, we still haven’t done much to prevent them.  This chart even shows the constant decline in air quality:

1980 vs 2017 1990 vs 2017 2000 vs 2017 2010 vs 2017
Carbon Monoxide -84 -77 -61 -13
Lead -99 -98 -94 -80
Nitrogen Dioxide (annual) -63 -56 -49 -21
Nitrogen Dioxide (1-hour) -60 -50 -35 -14
Ozone (8-hour) -32 -22 -17 -5
PM10 (24-hour) -34 -30 0
PM2.5 (annual) -41 -18
PM2.5 (24-hour) -40 -10
Sulfur Dioxide (1-hour) -90 -88 -79 -66

 

This decline in air quality can be largely attributed to the increase in faster, cheaper, and dirtier modern production of goods.  In addition to harming the environment, these air pollutants are related to various diseases and sicknesses. A study about coal pollutants in this article even says, “A Harvard University study, which assessed the life cycle costs and public health effects of coal from 1997 to 2005, found a link to lung, cardiovascular, and kidney diseases—such as diabetes and hypertension—and an elevated occurrence of low birth rate and preterm births associated with surface mining practices”.  These are only some of the health risks associated with modern pollution. As global capitalism creates larger markets and stresses increased profits more, the true costs of production are increasing and damaging the earth more.

Externalized costs don’t just appear out of nowhere, they’re produced as a result of a decision made by firms.  These decisions are made to increase profits by any means possible with the cheapest production and the fastest distribution.  One example of this is the video we watched in class about Walmart’s intense supplier regiment. The video interviewed workers that were laid-off by a business in the United States after Walmart dropped their contract.  As the economists and Walmart executives explained, they simply could buy the same goods in Asia at a fraction of the cost. In my opinion, this is the epitome of global capitalism. Simply put, capitalism seeks out the cheapest possible goods, no matter the costs.  The only problem with that is the non-monetary costs. The externalized costs are increased greatly when production moves to less developed nations, or nation’s with less social and humanitarian based laws. As this article we got in class states, “Who paid for that $4.99 radio? Some people paid with the loss of their natural resources. Some paid with the loss of clean air, with increased asthma and cancer rates. Some workers paid by having to cover their own health insurance. Kids in Africa paid with their future: a third of the school-age children in parts of the Congo now drop out to mine metals for electronics”.  These undeveloped nations have little to no child labor laws, laws controlling work hours, work conditions, and laws controlling pollution and waste.  This allows firms to produce their goods at a greatly reduced monetary cost since their laws and regulations allow longer work days, and they’re able to pay their workers less.  This has resulted in a great deal of externalized costs affecting these nations, specifically nations in and around Asia. As stated in this article, “In 2010, 40% of the world’s premature deaths caused by air pollution were in China, the world’s largest emitter of carbon dioxide…The University of Hong Kong’s School of Public Health reported more than 3,000 premature deaths in the city in 2013…A poll by the U.S. Pew Research Center found that 47% of Chinese citizens thought air pollution to be a “very big” problem in 2013 (up from 31% in 2008)”.  The deaths labelled in this article are direct costs of modern day production in these Asian nations.  Capitalism has created a craving for increased profits, but as we can see these increased profits to one side cost the other side their lifestyle and in extreme cases maybe even their life.

Externalized costs exist in every economy, not matter the structural or social aspects of it.  While global capitalism creates some of the largest and greatest affecting externalized costs, it may be argued that not all of these costs are direct effects of global capitalism.  Some say that externalized costs can be attributed more to humans and society than to Capitalism. They believe that these costs are created in any economy and are due to firms simply not caring about the effect they have on our planet.  While this is partly true, it doesn’t cover all the information. Without global capitalism we would have significantly less international production. If most goods we used were produced in our home nation’s, we would have a drastic difference in externalized costs and global pollution.  To only touch on the subject, the nation’s using the most goods that create the largest externalized costs have the most intense labor and pollution laws. This essentially means that if global capitalism didn’t exist and international production was minimal, we would have smaller externalized costs.  The only problem is that global capitalism very much exists, and drives the world as we know it, creating externalized costs everywhere it goes.

 

What are the true costs of Capitalism?

Since the start of capitalism, capitalists have been trying to find ways to save money- cutting costs every chance they get. Capitalists have been increasing profits by externalizing costs elsewhere. Large companies use underdeveloped countries to extort resources and using other countries to manufacture their products. Companies do this because it is much cheaper to manufacture their products outside the United States. One of the United States biggest culprits of outsourcing is Apple. If Apple was forced to make all of their products in the United States, the price of the iPhone alone would sky rocket. According to an article in Forbes  if Apple decided to move manufacturing to the United States the new cost of the iPhone would be somewhere between $30,000 and $100,000 dollars. This is because the shift to domestic manufacturing would drastically affect the supply chain, and it would affect the company’s ability to mass produce the iPhone. Outsourcing has a negative impact on the environment and the economy, however, it also forces large companies to keep their manufacturing overseas.  

Apple and other large companies have been outsourcing for decades. By doing this these companies are able to mass produce their products much cheaper than they would be able to do domestically. Outsourcing is negatively affecting the environment, causing 2.2 trillion dollars in environmental damage every year. Outsourcing is also negatively affecting the United States economy by bringing millions of jobs overseas, away from American workers. While outsourcing is hurting the economy and environment, without it, the world of commerce would be drastically different than it is today. This is prime example of externalization, how business increase profits by off-loading its indirect costs.  

If Apple moved their manufacturing to the United States, this would affect the supply chain. The United States does not have the resources to have an effective supply chain. Meaning that because America lacks very specific types of jobs like tooling engineers, China is full of them. Tooling is extremely important, a tooling engineer designs machines that are essential for manufacturing . Because the United States does not focus on growing the tooling industry companies are forced to look to countries like China who have been growing the tooling industry for the past thirty years. If Apple were to move their manufacturing to the United States, it would essentially stop the supply chain. It would take the U.S. years to create the machines needed to produce Apple products and even longer to train new tooling engineers. If Apple had started by manufacturing their products domestically instead of outsourcing this wouldn’t be a problem. Apple would already have the tooling engineers and machines needed. Instead Apple chose to outsource to China, which contributes to economic and environmental problems domestically and globally.  

Cheap labor and efficient in China allows Apple to meet the supply demand of their products. Moving manufacturing to the United States would limit the annual numbers of iPhones manufactured from 100s of millions a year to 1 million every year. This would drive the price of the iPhone over 30,000 dollars. The United States can not compete with the efficiency of manufacturing in countries like China. Forcing Apple to keep their business overseas. If Apple were to move back to the United States it would take decades for the company to be able to mass produce iPhones at the scale it can in China. Because of how scarce the iPhone would become, Apple would essentially go out of business. Which could be considered a good thing. It would mean one less company outsourcing and one less company contributing to economic and environmental issues. However, in reality if Apple goes out of business, another company will simply replace it. Outsourcing puts large companies in a trap. Once companies have started outsourcing bringing their companies back to the United States is debatably impossible, the company would either go out of business or be set back years. This forces companies to keep their manufacturing overseas.  

The only real way to combat capitalism and what it is doing to the environment is through the government. If governments were to enforce the idea of manufacturing domestically, it would clearly have a negative impact on large companies like Apple. While it would put most out of business, the companies that survive would help boost the American economy. Companies would also have to follow United States environment policies, which are at a higher standard than developing countries. This would help the world combat climate change.   

Capitalism has driven large companies out of America and overseas in search of a higher profit at the cost of cheaper manufacturing. This results in the loss of jobs in the United States creating a negative impact on the American economy and has a negative impact on the environment. Outsourcing has trapped countries overseas because bringing their business back to the United States would mean risking going out of business.  

While it is clear that it would be better for United States economy and the environment if Apple and other large companies produced their products in the states, it is not as simple as just moving the companies back to the U.S. It would cause the majority of these companies to go out of business and cause the rest to rebuild their empire. Because of this companies will not willingly bring their businesses back to the United States on their own. Instead the government needs to force the companies to come back to the United States. Even though it would drastically change the consumer market in the long run, it will eventually return to how it is today. Eventually the United States would catch up to the efficiency of manufacturing that China has. However, the United States will never have a chance to grow unless its companies come back. The only way to reverse the negative effects of outsourcing is to bring manufacturing back to the United States despite the possible negative effects on large companies. Moving manufacturing back to the United States, will be much better for the environment and economy in the long run.

The Battle of Capitalism: A Struggle Between Profits and Welfare

One of the key driving forces of our economy is profit. The central goal of companies in a capitalist economy is to make the most profit, whether that is economically efficient or not. Large companies find many ways in which they can increase profits. Unfortunately, a lot of the strategies that result in the largest increases are the ones that push large prices onto other peoples and societies. These prices are called externalized costs, meaning they are costs to other people, governments or the environment. The externalized costs of a profit motivated economy have significant impacts on the environment, both directly and indirectly. This blog will focus on how these costs affect the environment specifically through threats to biodiversity (variance of life in the world, particular habitats, or ecosystems).

President Trump recently addressed the United Nations and claimed that the US has the “fastest growing economy in the world”, as seen in this New York Times article. While this is an exaggeration, we do have one of the fastest growing, and many people rarely stop to ask the cost from which this growth is coming. Efforts to increase profits and boost the economy for one company or entity leads to a lessened quality of life for others. By this I mean, to increase profits, companies either directly or indirectly contribute to the destruction and harm to our environment.

These externalized costs can be shown in many ways. For example, the world’s population of vertebrates has decreased rapidly since globalization became popularized. The main threats to biodiversity are also debated, but the ones generally agreed upon are habitat loss, pollution, invasive species, and overharvesting or overexploitation. These contribute the profit motive of our economy because they are the least expensive ways of attaining or disposing of resources. An example would be companies dumping waste into rivers. Because they are not economically responsible for the damage they are causing to the environment, this is the cheapest disposal of waste they have.

Large companies from core (powerful) countries use globalization as a way to externalize costs by continually extracting raw materials from periphery (weaker) countries. In many cases, this leads to deforestation and the collapse of smaller ecosystems. The picture below is an example of this deforestation in the Amazon Rainforest from an article by multiple professors and students at Penn State University.

These cases of deforestation result in losses of habitats. Other causes of these losses of habitats are mining, agriculture, industrial activities, and water extraction. The type of habitat loss demonstrated by the visual above is called Habitat Fragmentation, or large losses of a habitat but not an all-around loss.

Pollution is another externalized cost of capitalism and the need it creates to make the highest profits possible. Toxic substances and chemicals are released into the environment as waste from production processes and can have fatal impacts on entire species. Even natural substances can become toxic in large amounts or high concentrations in small areas. Bioaccumulation is a process through which pollutants become more and more condensed in animals’ tissue and then these pollutants travel through the food chain and contaminate other animals. For example, when a killer whale consumes fish that have received these chemicals, the whale also takes them on in high concentrations. Any animal high up on the food chain is at risk for these contaminants, including humans.

The issue of invasive species occurs when animals and plants move into new areas. This can effect the occupying species in harmful ways. The new species can be parasitic to the resident ones or can be predators upon them. They can also bring new diseases and microbes which could cause depletion of the species and modify habitats. An example of this could be, the frim borders between countries interrupting migratory patterns of wildlife. The wall that president Trump continually refers to and the fence that is currently on the border between Mexico and the US are not only impractical but harmful to the ecosystem. The animals that attempt to cross the border while following typical migration patterns are derailed by these barricades          and are forced into new areas which can cause an invasive species issue.

Over-exploitation is another cost of capitalism externalized onto other places and species. Examples of over-exploitation are “targeted hunting, gathering, or fishing for a particular species as well as incidental harvesting” as shown in this article. Especially with species that are delicately balanced, slight over-exploitation could lead to the breakdown of that population. Also, if the species that collapsed is a primary predator to those lower on the food chain, it can lead to an overpopulation of prey in the ecosystem.

All of the cases explained above are consequences of capitalism and the push on companies to drive prices down and profits up. More often than not, multiple of these side effects occur at once, attacking ecosystems from many sides and resulting in increased or expedited destruction.

Some organizations have attempted to curb this product of capitalism by devoting time, energy, and money into biodiversity conservation efforts. In this report by the Overseas Development Institute, the arguments for conservation are summarized, but the specific economic argument is that profits would increase because the “output from land is greater when biodiversity is conserved”. Also, through the destruction of biodiversity, “unknown biochemical and genetic resources” that could be beneficial and of value are being destroyed.

However, some believe that threats to biodiversity are not valid and the efforts to counteract these losses are a waste of time and money. Their argument is that, while protection for the environment is necessary, it is not enough to make a difference. The main cause of threats to biodiversity, as stated in this BBC article, is that human consumption is exceedingly high for the resources this planet has to offer. Their primary issue with the conservation efforts is that they focus too much on protected areas and not on the root cause of over consumption.

Capitalism, and the influence it has on our society, have brought along with them many costs that are then externalized in order to drive prices down and increase profits. In many cases, these costs are imposed on the environment. While this may not immediately affect the welfare of humans, habitat loss, pollution, invasive species, and over-exploitation have serious consequences. These factors are limiting resources and are leading to collapses of ecosystems and species. If this loss is not stifled, eventually it will lead to a mass extinction which humans might not be able to survive.

 

Externalized Costs: A Capitalism Crisis

Global capitalism has allowed giant businesses to control the economy of the world. It has made it possible for companies to expand their businesses to multiple parts of the world through globalization. Globalization has allowed American businesses to move overseas to manufacture their products at lower costs. It has made it cheaper for businesses to manufacture, produce and sell products at a price that allows them to maximize their profit. Have you ever bought something for a very low price and realized it was from a foreign country all the way across the world? How is it so cheap if it has traveled all the way from China? Global capitalism and externalized costs have made it possible for companies to sell their products at cheap prices while still maximizing profit. A major example of this can be seen in McDonald’s signature Big Mac. How exactly does a huge company like McDonalds get their products to the lowest retail price possible? The answer: externalized costs.

Externalized costs are how companies make profit. They minimize their spending by cost externalizing, which is basically a fancy term for the company offloading “indirect costs” on society or the environment. The easiest way to think about externalized costs is to think of them as effects caused by businesses when they “cut corners”. Externalized costs of capitalism tend to be hidden from the public eye. Companies hide their externalized costs because most of the time, the truth would be detrimental to the reputation of their business. Some major externalized costs of global capitalism include pollution, taking advantage of people and poor working conditions in other countries, cruelty, and health care.

Marion Nestle is an author for Food Politics, where she published her article, Food is Cheaper Because Costs are “Externalized”. Nestle’s article explains the externalized costs that go into bringing the crops from the field to the dinner plate. Nestle breaks down externalized costs into four categories: human costs, environmental costs, safety costs, and health care costs. The article explains how costs are externalized in each category and how it negatively impacts certain aspects of life. Below is an image representing the external costs of a McDonald’s Big Mac as explained in the article, Each Time McDonalds Sells a Big Mac.

As the image shows, a big mac from McDonalds costs more than its retail price of $4.56. The image breaks down McDonald’s externalized costs into health care, subsidies, environment, and cruelty. This image is a great example of externalized costs because it points out that the true cost of a Big Mac is $12, however, the hidden externalized costs of McDonald’s company allows them to get the retail price down to $4.56.

Pollution is another huge example of an externalized cost. Pollution is an externalized cost because instead of dealing with waste in ways that are environmentally friendly and sustainable, companies are getting rid of their waste in the cheapest ways possible in order to maximize profit. Examples of this could be a company dumping their waste into a nearby river instead of spending money to have it disposed of properly. The article, Talk About Externalized Costs, talks about this issue. As pointed out by the article, “[Businesses] are shoving a whole range of costs – from pollution to climate change to water depletion – onto communities around the world”. It is estimated that the world’s top corporations, “contribute $2.2 trillion in environmental damage”. Other forms of pollution, such as waste from shipping packaging, use of gasoline, plane emissions, etc. are also forms of externalized costs and are extremely detrimental to the environment.

Another example of an externalized cost is taking advantage of people and poor working conditions in other countries. Businesses move their factories overseas in order to take advantage of the minimum wages in other countries. A prime example of this comes from the article, I Lost My Hands Making Flatscreens I Cant Afford. In the article, Rosa Moreno explains how both of her hands had to be amputated due to a work related incident. She was working with dangerous machinery six days a week, for $400 a month. The work she was doing involved extremely dangerous machinery, but she had no choice, she needed to support her family. Could you imagine working 6 days a week and only making $400 a month? I couldn’t. It’s not livable, which is why the government of the United States implements things such as minimum wages. However, other countries don’t have these laws implemented, so workers in these countries work for a few dollars a day. Being that there isn’t a minimum wage implemented, American businesses move overseas to take advantage of workers in foreign countries. Why would American businesses run their factories in the United States where in some states, minimum wage is as high as $11 an hour, when they could go overseas and pay their workers less than a dollar an hour. Below is a cartoon that brings to light the horrible working conditions of sweatshops in other countries of the world.

The tag of the t-shirt points out the cruelties of sweat shops, making it known that some of the externalized costs include “sweat and blood”. The bottom of the tag notes that the t-shirt was made in Pakistan, which only adds to the point of the article that the t-shirt was produced in a sweat shop. Another article that talks about these sweatshop conditions is, American Businesses Taking Advantage of Sweatshop Labor, on The Channels. The article goes into depth about the harsh and cruel working conditions in factories in other countries and talks about how much American businesses are profiting from sweatshop labor.

To be sure, some people disagree that externalized costs are a bad thing. Some arguments for externalized costs are that it keeps the economy flowing. It is argued that without externalized costs making prices cheaper, that people wouldn’t be able to afford all of the goods they need, and thus, will stop spending money. However, if businesses became less globalized, and began producing products solely in their country of origin, theoretically, minimum wage would increase, so that the consumers can afford the products.