Conscious consumerism, part II

Karl Marx was the one who said that the world is governed by money (or so I am given to understand, having never read his writing.)

Today we'll have a somewhat depressing gallery that buttresses this argument.

A recent article about carbon intake. The article's main point is that the majority of the world's carbon dioxide is still produced for Americans.

The case of Congo's coltan. Coltan is a metal. It is in high demand in the electronics industry. And like many in-demand natural resources, it has become a "conflict mineral." For those who don't find this troublesome, arrow over to this article on Jezebel, or this report by John Prendergast of the Enough Foundation.

Let's be clear - the "sexual massacre" going on in the Democratic Republic of the Congo is not caused by cell phones, or even by our demand for cell phones. Child labor is not created by our demand for cheap Chinese clothing. And global warming is not created by our demand for, well, anything. (Ok, maybe it is.)

In economics, we dryly refer to these production-related social ills as externalities. One of the biggest debates in economics is how to measure and account for externalities. Can we measure the productivity lost when an innocent woman is brutally raped, thereby putting an end to her labor and taking away one of her family's means of support? Can we measure the opportunity cost when a child is denied an education (long-term human capital development) and instead forced to work in a factory to plug a short-term gap in family income? I sometimes think that if the true value of these externalities were taken into account, the price of most consumer goods would climb so high that Warren Buffett would buy three and the rest of us would go without.

But how is it possible that such overwhelming externalities exist at all? Shouldn't externalities be small things, on the side? Isn't that what the term "externality" implies?

As these examples demonstrate, there are massive externalities attached to the production of most American consumer goods. (I am singling out Americans because we are the world's biggest consumers)

In order to address that bigger question, we have to return to another term that economists like to toss around: information asymmetry. As any first-year econ student call tell you, most of the world's market distortions (things that just shouldn't be) come about because of information asymmetry. Asymmetry exists when one party to a transaction knows more than the other. It is a classic conundrum in insurance sales, it has been blamed for the recent Wall Street crash as well as several economic crises before that.

The problem isn't that Americans consume too much (That's a symptom rather than a cause). The root problem is that we have no idea where 99.99% of our consumer goods actually come from. It's understandable, considering how exhausting it would be to track all this, and the true costs aren't always reflected in the price.

Let me give an example: I just ate a Subway sandwich for lunch. I know that the sandwich and everything related to it came from Subway. But where did the vegetables come from? The bread? The seeds that were used to plant the wheat that became the bread? The materials in the napkin that came with the sandwich? I have absolutely no clue.

This is what's behind the entire "buy local" movement in the United States - a desire to return to the long-ago time when people knew where most of their goods came from. As the world economy has matured, the gap between producer and consumer has widened so drastically that most of our goods might as well have been produced on another planet.

How can we change this? Because as the Congo example demonstrates, it MUST be changed. If you honestly believe that it's all right that women are so horribly murdered every day (or you think it's not your problem since you listen to NPR and the UN should take care of it), stand up, leave the room, and reserve your seat in hell right now. Because things are not going to improve unless consumers demand that they improve.

How can we make that demand? As Prendergast suggests in his report, we should put pressure (political and economic pressure) on the manufacturers of electronic goods to certify their equipment, just like we did with diamonds. (Writing to the President, Senators and Representatives could help) Although such a regime would result in costs (both hidden and explicit) to the manufacturers (costs which would be passed on to the consumer to some extent), it might also capture some of the true social cost of production.

But certifications can also be faked. Which brings me to point two: we should also (here's the rub!) consume less. Recycle more. Acknowledge that there are costs involved with production that are not reflected in market price. (Although, as Karl Marx would say, a cost isn't real until it's reflected in market price) I realize that some people will find this anti-economic - after all, production is growth and growth is quality of life, right? In some ways, it's an ideological debate. I'd argue that the quality of life increase that accrues to a person who buys a diamond ring (and all the people associated with the production of that ring) is at least balanced by the quality of life decrease for the millions of women and children who suffer as a result of war and conflict. But we could argue this all day.

How to make the world a better place for both consumers and producers - that is the question. It's complicated. The United States, for example, has suggested imposing a tariff on all goods imported from carbon-intensive countries (ie China, India, Brazil) as a protectionist measure. Sure, it looks like it protects the consumer, but it could also inhibit economic growth in developing countries.

There is a middle way, but more of us will have to ask for it. We have to take responsibility without giving in to guilt. Otherwise, nothing will change.