Almost everything we buy is too cheap
Wanna know a secret?
Economists don’t care about the planet or the environment! Their ideas actually make environmentally responsible development impossible. While the rest of us know that what we are doing to the world is not sustainable, modern-day economists are pushing us further in the wrong direction. They make us under-price the world’s resources and use them on the cheap. They encourage us to abuse nature for profit, ruin ecosystems without considering their value, and think that species and resource depletion don’t matter. This thinking led to the coronavirus pandemic too.
If we want to protect the world for future generations, we need to ditch modern economics.
All hail the new God
Traditional economic theory has been sacrificed to the God of Growth. In classical economics, the price of whatever we buy should reflect the costs – ALL the costs. What we pay for raw materials – oil, copper, zinc, coal – should reflect not only the direct costs of getting them out of the ground but also the indirect costs – the environmental costs incurred during their extraction and use, for example. The price should also account for the loss of these resources to future generations. If not, then part of the cost of our using them today is paid by someone else – our children.
When a logging company clears part of the rainforests, neither the company nor its customers pay the full cost. They don’t pay for the loss of animal habitats, for the destruction of plants not yet studied, or for the ruin of valuable ecosystems. Modern economic thinking, with its desire to drive down prices and “externalise” costs, consigns those costs to society, to the environment and to future generations.
Similarly, when a factory making plastics releases toxic waste into a river, it doesn’t include the damaging effects of this in the price it charges its customers. So the plastic is cheaper than it should be. The consumers using the plastic are subsidised by those living downstream, who pay part of the price through illnesses caused by polluted drinking water. The poisoned aquatic life pays part of the cost too.
In classical economics, the logging company or the plastics manufacturer are said to receive “unearned” profits from their actions. They make a gain that they should not. The consumers of the wood or plastic benefit unfairly too, because what they buy is cheaper than it should be. This gives them an incentive to buy even more and not to value what they have.
Time for a change
This problem has been overlooked because we have been led to think that classical economics and today’s economic ideas are the same.
But they are not.
Rather than paying properly for our resources, we have been held hostage by modern economic theorists and corporate libertarians, by those demanding less regulation, by those who say that government interference should be minimized, and by those who believe that economic growth is a useful measure of human development.
As a result, we are using the world’s raw materials too fast and on the cheap, letting future generations, wider society and the environment pay part of the price. This is why a bus ride to the airport costs more than a flight and why a pair of glasses costs more than a washing machine. The same thinking lies behind outsourcing jobs from the rich world to Asia, and companies failing to pay people enough to live. They are driven by the desire to maximise short term gains, regardless of the long term consequences.
That is not the economics of Adam Smith.
We need to put a stop to unearned profits and rethink how we use, allocate and price the world’s resources. It’s really quite simple. We need to protect the planet for our future.