Monday, October 4, 2010

Bringing the externalities back in...

A few days ago, a friend sent me a link to a new webshop, selling fair-trade, organic clothing. I really liked the selection, but the prices were double if not more than what you would find in an average retail store, and, at first glance, too far a stretch for my budget.

But it has been gnawing at my conscience ever since... because, while though the groceries I purchase for my family are 90% organic, fair-trade, animal-friendly etc., the economic 'recession' in our household (after a major renovation, so no complaints) has driven me to downscale my taste in clothing, towards the mainstream retailers. And these of course have to keep their prices down, somehow...

And it's that 'somehow' which concerns me.

Because if the retailers, and therefore the customers, aren't paying the full price of a product, then who is? As we see in the many recent scandals surrounding various retailers, the price is being paid: in the form of child labor (eg H&M, C&A), environmental damage (eg Nestle/KitKat), human rights abuse (eg Walmart), and so forth.

Charles Perrow wrote a beautiful article about this, called 'A society of organizations' (1991). In this almost 20-year old paper he describes the adverse effects of the increasing tendency of 'large organizations' to absorbe many dimensions of society. He calls the negative side-effects 'externalities', to describe this tendency among producers and purchasers to devolve responsibility for the full production chain, and the effects of competition based merely on price. In other words, externalities describe the "social costs of activity that are not included in the price of the goods or services, but absorbed by non-owners. This makes rational pricing and thus rational choices by citizens difficult. The price of the good does not reflect its true cost, and those who subsidize the cost are generally the poorer and weaker parts of the population" (1991: 733).

So what have we learnt in the 20 years since this article was published? Not much apparently. But thanks to the speed at which information is now shared, and the increasing 'greenification' of the public debate, awareness is slowly increasing about the problems associated with these 'externalities'. It is time to rethink our purchasing behavior.

Perhaps I will go back to the webstore, after all, and start paying the full price of the products I need...