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.

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.