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Shifting the global economy towards sustainability
How the Global Economy Works Today	Why the Global Economy Behaves As It Does	Turning the Global Economy Towards Sustainability

‘Americans import Danish sugar cookies, and Danes import American sugar cookies. Exchanging recipes would surely be more efficient.’ – Herman Daly

Externalities

Externalities is the term given to the many social and environmental costs that are not included in the price paid by the consumer of industrially-produced goods and services.

Example

Referring back to the example of mudslides associated with oil palm production in Indonesia, discussed above (Externalities), the price paid by the consumer for the many goods that include oil palm does not include the very real costs associated with:

long-term damage to the soil through the application of chemical fertilisers and pesticides
the poisoning of water-ways as a result of the run-off of agricultural chemicals used in palm oil production
the impact on local communities of the lowering of water-tables (often taking them below the reach of community wells) to feed the water-hungry palm oil plantations
the displacement of local communities to make way for the plantations, for the dams that irrigate them or for the roads and airports needed to transport the harvested palm oil
the poisoning of agricultural workers as a result of exposure to chemical fertilisers and pesticides
the loss of tree-cover and top-soil on the hill-sides
the costs associated with the devastation of communities affected by the mud slides
the greenhouse gas emissions associated with fossil fuel use at every stage of the process: ploughing the land, fertiliser and pesticide application, building of dams and other necessary transport, storage and processing infrastructure, building of the wholesale and retail infrastructure, etc.

These are real costs that are born by real people, communities and ecosystems. However, they tend to be out of sight, on the other side of the world and so it is easy to overlook them. They apply, of course, not just to palm oil but, in differing degrees, to more or less all inputs and processes associated with industrial production systems.

Were externalities to be internalised – that is, were the true social and ecological costs associated with industrial products to be included in the price charged to the consumer – there would be a sharp increase in the costs of these products.

Drought
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Mud slide

Scrap tyres